Whenever the manipulators need to boost the markets, they just crash the Dollar.
And what a dive we've had! As you can see from Dave Fry's Chart, the Dollar is down 7% since last summer and down 2.5% this year and that keeps stocks and commodities 2.5% higher – because we buy them with Dollars.
Keep in mind, at the same time you are buying IBM shares for $200, someone is buying the same shares for 20,400 Yen and another guy is buying them for 340 British Pounds and yet another guy is buying them for 280 Euros.
It's obvious that, if the value of the Pound or the Yen or the Euro changes, the price of IBM in those currencies will change to reflect the currrency valuation but Americans tend not to realize the same thing happens when the Dollar gets stronger or weaker too. Once you do realize this – you have a huge advantage in trading the Futures (and we have a Live Futures Workshop this afternoon at 1pm).
The Fed's easy-money policies keep the Dollar weak (because we're printing another Trillion of them each year and, in this economy, no one is using them – ie. no demand) and that has goosed the market by 7% since last summer, when the S&P was about 1,650 – about 10% lower than it is now.
That means that 75% of the gains in the S&P since last summer have been the result of a weak currency and have noting to do with a "strong" economy. Now THAT makes sense, doesn't it?
"THEY" had to tank the Dollar to get us over the 1,600 level, which was a very key technical off our consolidated bottom at 800 during the crash. It's no coincidence that we were hitting resistance there in May and pulling back to 1,560 and looking weak in July when, suddenly, the Fed went into a new round of crazy, which led to 6 months of fairly steady value erosion for every single Dollar you have worked for and saved your entire life.
It's kind of a tax on you – the Government has reduced the value (in International Terms) of EVERYTHING you have by 7% in order to transfer market wealth to the top 1%, who own 85% of all equities and, of course, who control pretty much 100% of all corporations, who are able to use their inflated stock prices as collateral to sell or borrow against (or acquire other companies). It's a fantastic game – if you're the one on the top of it!
It's also a great way for the Government to reduce their debt, which is mainly owed to foreign Governments like Japan and China. A weaker Dollar means our debt, which is priced in fixed Dollars can be paid back with less Yuan, Yen, Pounds and Euros. It's not that simple of course – Japan is racing us to the bottom as they try to devalue the Yen to reduce their own 200% debt to GDP ratio.
It is, however, a fantastic way for our Multinational Corporate Masters to cut our pay by 3.5%, since half of the S&P 500's revenues come from overseas, which means paying us in US dollars that have dropped 7% saves them half of that reduction on their balance sheets and that makes their earnings seem 3.5% higher (depending on how many US employees, of course) than they would be otherwise.
It's amazing how we villify Putin for essentially doing the exact same thing in Russia as the top 0.01% are doing to America – the only difference is, we haven't invaded Canada yet for their resources – but don't worry, there will be hostile takeovers down the road – look how quickly Blackberry was destroyed. Now we are messing with their oil and gas revenues with our "drill baby, drill" and pipeline policy – just like Putin did with the Ukraine before he invaded (allegedly). Maybe we'll just get the French Canadians to declare themselves a state and then we'll run in to support their right to choose…
As I said above, being aware of currency fluctuations makes us much better Futures Traders. This morining, for example, in our early morning Member Chat, we did a chart review and we had a good discussion about the 5% Rule™ and I pointed out to our Members that the Dollar was down 0.5% this morning and breaking below support, saying:
Dollar down to 79.19 is down 0.5% so I guess that's the big, BS news that's propping up the market. Nikkei hasn't reacted much to it yet, still 14,350 so shortable on that line (/NKD) but out if the Dollar bounces.
Overall, I'd say yesterday was low volume BS and we should see more downside today. S&P 1,880 (/ES) is still a good shorting line as is /NQ 3,600 and Dow 16,450 confirmed by /TF below 1,120. If we can't move up on a 0.5% Dollar drop – thats' not a good sign!
Already, as I'm writing this at 8:30, the Dollar is down to 79.10 but that's not stopping the slide in the Futures with the Nikkei at 14,275 (up $375 per contract), S&P Futures (/ES) 1,873 (up $350 per contract), Nasdaq 3,586 (up $280 per contract) and Dow 16,425 (up $125 per contract). That, as we like to say, pays for the Egg McMuffins this morning and that is what I will be teaching you how to do in our Live Futures Trading Workshop at 1pm today.
If you already made $1,130 trading 4 contracts in less than two hours this morning – by all means don't bother – I'm sure you have some shopping to do!
We're expecting more downside because, as noted on Dave Fry's SPY chart, yesterday's volume was ridiculously low and Monday's are always to be taken with a grain of salt, so we're throwing out the chart and focusing on the data and the data (earnings, etc) is not any better than it was on Friday, when we decided to move back to more cash – in anticipation of a bigger drop than the 1.25% we hit at yesterday's brief low.
We're not betting heavily to the downside – we've been burned too often to gamble on that. What we have done is cash out our non-hedged, directional longs at what we're pretty sure was an interim top and we'll see how things go from here. Meanwhile, playing the Futures is one of the many fun things we can do with CASH!!!
Futures allow us to make quick in and out trades with low friction and often we can make a few hundred Dollars very quickly. Occasionally, we get big winners, like last Thursday's call to short the Nikkei (/NKD) Futures at 14,500 and this morning, just 3 sessions later, we're already testing 14,250. At $5 per point, per contract, that's $1,250 for each contract in just 3 days. The call was there, for free, right in the morning post – don't say I never gave you nothin'….
We were also shorting oil at $100 that day and we have had a couple of rides down to $99 and, this morning, we're testing $100 again (/CL). Needless to say we're shorting it again as well. You can play along – it's a free trade idea – maybe you can buy a Membership with the winnings!
We're still looking for follow-through to the downside. Watch the Russell closely for a breakdown below the 200 dma (1,114) or the S&P below 1,865, which would be $450 per contract on our Futures play!
Phil- You posted several of the portfolio's yesterday, but I didn't see the Long Term Portfolio and I was wondering if I missed it or if you were waiting for some reason? If you did post it, can you tell me when so I can figure out the glitch on my end, and if not will you be posting it today? Thanks.
Phil – The cushing info in that post probably came from here
but that was from Mar. The most recent I could find of new data does show a increase
good morning everyone
phil thank you for the link regarding the 5% rule. much appreciated!
jph thank you for your help in explaining what the various levels represent
May 5th, 2014 at 3:49 pm
OK, that took a long time – we'll do the LTP tomorrow.
So, with the USD getting shred this morning, why are the futures down…..or am i in left field?
R3 – 101.83
R2 – 101.13
R1 – 100.30
PP – 99.60
S1 – 98.77
S2 – 98.07
S3 – 97.24
Thanks for the answer on BTU butterfly and market analysis from late yesterday. Very useful information that saves me a lot of time not having to chase down.
•Twitter shares tumble 6% as lock-up period expires.
/cl getting ready to cross 100.. hopefully it goes over and down for a chance to short
Sold jan 2016 28 put for 2.95, just below 200 sma
Getting the drop we expected and the support we expected at S&P 1,865 and RUT 1,114 so won't be exciting until we fail those levels.
Oil giving us a quick dip but be careful as we've got inventories tomorrow and, of course, Putin.
The only news I care about this morning is Office Depot closing 1/3 of its stores. What recovery? Maybe it reflects a move to on-line selling but I just don't like the feel of it… But their investors do – what could be better than cutting 20,000 jobs?
At the open
No Movement for U.S. Economic Confidence in April – Gallup's Economic Confidence Index remained at -16 for April, virtually the same as the monthly averages for January through March.
Phil Office Depot
Those places are mostly serving very small business and home office. The cost of shipping stops on line buying of supplies, UPS and Fed Ex costs are up for all but the largest shippers that guarentee a minimum of a truck or trailer per day.
TWTR getting hammered down to $35 as lock-up expires. We'll see how low they can go but just an opportunity to buy if you ask me. Keep in mind, a lot of these locked up people are in at $2 – $35 is a lot to them! Even for big funds, it's a way to goose their quarterly performance by cashing in a huge winner.
LTP/Craigs – So you saw them but didn't read them? I'm insulted! At the end of the STP I said I was out of time and would get to the LTP today.
And what DC said! (thanks for paying attention DC, nice to know someone is reading this stuff)
Cushing/Burr – Yes, as I said, we're right in the normal range, not low at all. That chart you picked up was from a week in which we had that mysterious 13Mb draw. Speaking of oil charts – here's the only reason we're not swimming in oil in this country:
As to levels: Gulf Coast crude oil inventories reach record level
Cushing is just a terminal – they pump oil out of cushing to goose prices and hide it everywhere else. Fortunately, for them, you can fool some of the people all of the time.
You're welcome Toe.
You're welcome Sibe.
Good paying attention on oil, Burr. Hope you took the non-greedy exit.
That was TWTR, I assume, Jomp. Good call.
Office Depot/Shadow – Good point, I never have things shipped from there – I just go. In fact, I'm going today because I need a new chair – hard to pick one of those without a showroom.
Phil – I never entered /CL today as it didn't cross a line, it's been hovering between 99.50 and 99.95, so I didn't see a clean cut entry.
AMZN taking a dive.
F GMCR! I'm channelling my inner Jabob – they're pumping up into earnings tomorrow:
An Update on May to October Seasonality
Re: TWTR the Jan15 25P are trading at 2.10 with 2.6K traded. Not bad.
The Dec19 21P's are trading at a dollar…
DClark and Phil- Yep, just plain missed that note. Thanks for pointing me to it.
Phil, forgot the symbol – not TWTR but PFE
Phil -I'm not very good at this, but am looking at a Jan 16 spread on TWTR. Perhaps, sell the Jan 16 $30 put for 6.5. Buy the Jan 16 $35 call for $9.73 and sell the Jan 16 $45 call for $6.30. For a net $3 or so. I'm sure there are better spreads. What would you suggest ?
Albo The play you want to set up is called a strangle. Where you play the caller against the putter.
However in case of TWTR you would not sell a caller at this stage in to the negative excitement only a put even covering your put sale by buying a even lower put in case the bottom falls out!
100.10. Maybe a good spot
PFE/Phil … any views on PFE for a 2016 buy stock and sell $30 calls and lower strike puts .. 3.5% dividend .. I know the AZN acquisition talk is not good but that has knocked the share down from $32 to under $30… likely still a little early to do this play but just wondering is it on your Income Portfolio radar? Thanks
Getting some movement on XRT. I'm up about 10% now on the puts.
TWTR/Burr – I like to give things more than a couple of hours before I jump in. We sold TWTR $30 puts in the Income Portfolio and LTP along with a $23/40 spread because we expected this dip. So far, it's not even worth a roll.
PFE/Jomp – Depends how crazy they go with the M&A.
TWTR/Albo – I would suggest waiting and seeing what holds. As I just mentioned, we sold the 2016 $30 puts for $5.70 back on 4/30 and now they are $6.50 – not a big change considering TWTR is down $5 since then. That probably means a lot of people are calling it a floor but it also means that it's not a particularly great price for the puts, since they have a .30 delta and should be $1.50 more, not .80. So there's no reason whatsoever to jump in on that trade. The $23 calls, on the other hand, we paid $18.35 for and now they are $15.50, that's a fair price and a net $38 entry. Those can be covered with $38 calls, now $8, for a net $7.50 entry on the $15 spread that's $11 in the money – that's the way I like to be in a spread to start! Your net $3 makes you $10 at $45, my net $7.50 makes $7.50 at $36 and, with an eventual put sale, the difference in upside is even less – I make $14.80 at $36 while you have a $3 credit plus $1 at $36 and a max of $14 if it goes up another $9 (30%).
Very good advice, Yodi.
Oil/Burr – Not behaving now so a no-play. Who knows, something may be blowing up somewhere. When you see a move like that, wait until you find out WHY it happened and THEN decide whether or not the move was warranted.
PFE/DM – As I said above, I'm not a big fan of big M&A spenders until the deals are done and we have a chance to evaluate the new combo. PFE is certainly a stock we love to buy when they are cheap but blowing below $30 is not a great sign. Either they take back the soon to be meaningless (because of the major acquisition) 200dma at $30.25 or we can certainly wait PATIENTLY to see what happens. $25 I would consider a great price, $29 is just OK.
If AAPL bought AZN for $100Bn, I'd be thrilled because their cash gets no respect anyway and AZN's $3Bn a year would drop to their bottom line and add $30Bn in market cap (6%) to AAPL's value. PFE, on the other hand, does not have $100Bn laying around and they are draining their cash and floating more stock in order to add just over 10% to their bottom line. The AZN deal isn't about the revenue stream – it's about shoring up PFE's weak pipeline and, should the deal fall apart, then you just have PFE with a weak pipeline trading less than 10% off it's all-time highs. So — I prefer to wait.
XRT/Palotay – I am just dumbfounded trying to figure out what people think is so good in that sector.
Phil- You have discussed this before, but I have now sold puts on a few stocks I would like to own and the margin maintenance requirement is eating up my buying power quickly. How do others deal with this while remaining nimble and able to still trade when there is an attractive opportunity. For example the 5 EBAY 2016 $50 puts I sold use up $25000 of margin. Did I once again miss something about how this is done?
craigsa620 – Do you have Portfolio Margin or RegT margin? If Reg-T, you can buy the farthest OTM put in the same month you sold a put to lower the margin req. It lessens you're profit, but frees capital. Many use this in a IRA
Mother & child resting peacefully, thanks to all for your kind wishes — no, not my first, rather my fourth, 2 adopted, now 2 of mine, quite a party!!! Zero
Congrats Zero on the new addition
Analysis: That's BMW coming on in Tesla's rear-view mirror • 11:35 AM
Barclay analyst Kristina Church thinks BMW (BAMXY) could pose a competitive threat to Tesla Motors (TSLA -2.8%) with the i3 EV and i8 plug-in hybrid offering different propositions to green consumers.
The two models sandwich the Model S in terms of target audience and could disrupt the thesis that the Gen III launch is guaranteed to meet expectations, notes Church.
Early reviews of BMW's electric launch have been favorable.
PFE … thanks for the insight Phil. As usual it makes perfect sense!
XRT/phil – not just Macy's and mall shops.. allocation is 22% consumer defensive and looks like ABG, BIG and SUSS are helping to hold XRT up.
XRT/Phil – (not just… as I am sure you know!) 😉
AIG – Ouch! Testing its 50ma today following earnings last night, cc this morning.
Zero- You are already there, but I found that when we had our third child and had to switch from one on one to zone, it was all downhill from there!
Congratulations on your new embodiment of joy – at least until she turns 13.
OK, here we go: Long-Term Portfolio Update (LTP):
We're happy with our short puts in general. EGLE not doing well but neither are any shippers. HAV is net $4.05 and the stock is at $4.50, RRD down just a bit and TASR is off but happy to buy more if we get a better price.
Burr- It's a standard margin account, which is probably the issue. Before 2014 and my discovery of PSW, I never thought about this and didn't even know there were different types of margin accounts. I probably should have taken another look once I started to make trades, but another step in the learning process that I missed. I have now applied for tier 3 account with TDAmeritrade which allows for writing uncovered options. So far I have been lucky not to get hurt by these missed pieces. Knock wood as my mother would say, and since her holy day is this week, why not.
craigsa620 – Simple way to test on TOS is to open the TOS papermoney app, reset the paper account to reflect you're real acct value and margin type. Then sell the same put in paper, check the margin req. Buy the far otm put, check the margin req. Use papermoney as a testbed for all you're ideas.
Hell I'm made millions and lost millions in paper money!
EBAY/Craigs – That's so ridiculous. You can only end up buying 500 shares of EBAY for $50, which is $25,000 so it's 100% margin. If you own a stock, I assume you get no margin credit either? You do have to subtract the cash you collected and, since I don't know what that was – it's hard to talk about it but the 2016 $50 puts are $6 and EBAY is at $51.62 and you COULD buy the $35 puts for $1.40 and that drops your net to $4.60 but saves you 500 x $35 ($17,500) in margin. As I've said before – IRA's are ridiculous because you have to trade with your hands tied behind your back. On the whole, you may as well just buy the $40/50 bull call spread for $6 and those make the same $4 at $50 as your net spread does but without any margin at all.
4 kids/ZZ – Fun!
You're welcome, DM.
XRT/Scott – Good point but, overall, there's no defending the earnings I'm seeing. And so much for that AIG buying premise they were touting yesterday.
LOL Craigs. That's why we stopped at 2. As soon as we took our first trip with both of them I realized what a pain in the ass it would be to travel with a 3rd kid. We'd always need an extra cot, tables for 4 wouldn't fit us in restaurants so we'd have to plan more in advance, someone would always sit alone on 2-seat rides, no more rental convertibles… Yikes!
Having run a company staffwd with talented prima donnas ffrom 4 nations helped hone my management chiops. But not being able to fire anyone is a major disadvantage!!
I have a 401K that I fully contribute to up to the amount my company will match. Mine is an excellent plan though. 1) I can convert my account to options eligible (through Fidelity) which I'm going to do eventually. 2) For my first 4% of salary I contribute, I have a 100% employer match. The next 2% are matched at 50% and my employer contributes 2.5% of my salary twice a year to my account. Works out to a total(my cash+employer) of 16% of my salary contributed for my 6% of pre-tax dollars.
Anyway, not far off from $109.5 on IWM for a long on TNA. Hopefully we pull back there again and I can make the same move I failed to make last time (where I extended my short instead–should have known better!)
BTW, my arbitrary comment from yesterday I think was appropriate but possibly misleading. TA IS arbitrary but it works because people believe it works.
SLW Jan16 $20 puts for $3.00 would be returning 56% on $530 regular margin.
are you talking about the short puts ? and how are you covering ? i want to put them in an IRA if possible