Toppy Tuesday – S&P 1,950 Edition
by phil - June 10th, 2014 8:34 am
Here we go again!
As you can see from Dave Fry's S&P chart, we're back in the top of the channel on a Tuesday and I will refer you to April 1st's "Triple Top Tuesday" and December 31st's "Terminal Tuesday" – both of which were points we thought the market was topping out before.
Actually, in both cases, we did have a mild pullback, but nothing that broke the trend – so far.
Back in that December post, we were playing gold (/YG) bullish at $1,185 to finish the year, based on our premise of MORE FREE MONEY in 2014 keeping the markets afloat. We also went bullish on SHLD at $40, which is like $30 post-spit.
In the April post, it was our 3rd try at 1,880 on the S&P and we had just cashed out our Income Portfolio and I we lost $10 betting the Nasdaq would be above 4,200 at April expirations on a TQQQ spread (now 4,350 – so bad timing) but our support held and kept the damage to a minimum. We also (in the morning post) called for selling the AAPL Jan $450 puts for $5.90 to pay for those spreads and AAPL just split 7:1 so those are now the $64.29 puts at .25. 7 x .25 = $1.75 so up $4.15 (70%) already on that play.
We also had bullish trade ideas for HOV, CHL, FCX, ABX and RIG – right in the morning post! Our best play, however, was shorting the Russell Futures (/TF) at 1,180 in Member Chat at 10:53 – as that was the beginning of an $9,000 per contract pullback on that index – all the way back to 1,090 (where we went long).
As you can see from Dave's Russell chart, we're just playing a channel with our trades – it's really not that complicated. Yesterday the Russell hit 1,180 and – guess what – we shorted it again! Now you are catching on to our "secret" strategy!
Already this morning the Russell Futures are down to 1,170, which is +$1,000 per contract from 1,180 but our…
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The Buy List – 20 Great Trade Ideas for the Rest of 2014 (Members Only)
by phil - June 7th, 2014 8:24 am
What a rally!
While stocks certainly aren't "cheap" by any measure, we've been able to identify 20 that are still good values. We've been compiling this list and going over trade ideas for playing them in our Tuesday Webinars since May 13th and, of course, we've been posting them in our Live Member Chat rooms, so this is just a review to consolidate our trade ideas.
We cashed in our Long-Term Portfolio last week at what we thought was a top but so far – so wrong on that call! Since it's up 19% in just 6 months, we're not going to cry about missing the last 400-point move on the Dow (2.5%) – we'll just have to look ahead to deploying our cash again, following the same strategy that was so successful in the first half of the year, which was, essetially, our "7 Steps to Consistently Making 20-40% Annual Returns" system:
As we did in building our Long-Term Portfolio, we're not going to rush in and buy everything. We will do exactly what we did in January where, following our Fall Buy List, we simply added stocks from our list whenever they became cheap. While our Members are able to pick up our trade ideas as they are released, we don't always add them to our virtual portfolios right away. As with the first half's Long-Term Portfolio, we will track every entry and exit in both our Live Weekly Webcasts, as well as in our Live Member Chat Room and alerts will be sent to our subscribers (you can join here, Basic and Premium Members get full access).
Our picks were originally grouped by industry sectors but, for reference purposes, I'm going to list them alphabetically below – these are the original trade ideas (the Webinar dates where we discussed our picks are next to the symbol), most are still playable but some have already taken off :
ABX (5/28) we featured in our June 3rd post - obviously one I like. If you don't want to buy the stock for $15.90 (and we NEVER pay retail at PSW!), then you can sell the 2016 $15 puts for $2.05,…
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The End of May – Heading into June with CASH!!!
by phil - May 30th, 2014 8:21 am
I hurt myself today
To see if I still feel
I focus on the pain
The only thing that's real – Nine Inch Nails
Were we wrong to cash out?
It's hard to feel bad about taking a 19% profit off the table after just 6 months (in our $500,000 Long-Term Portfolio) but we had another low-volume pump-job yesterday that sent some of the positions we closed up sharply and left us regretting our timing – just a little.
Still, the time to sell your positions is when other people are buying, not while everyone is panicking. We got great exit prices and, on the whole, it was fairly stress-free. S&P 1,920 was our predicted top and we pulled the trigger to take the money and run at 1,910 because, as experience has taught us – it doesn't pay to be greedy!
Last week and this week, I laid out my case for why the economy is not as good as it seems and certainly not good enough to be paying all-time highs for stocks. As you can see from the chart on the left – I'm certainly not the only one who thinks so as the "smart money" has flown out of the market this year, taking advantage of each record high to sell, Sell, SELL!!!
We were a little more patient, we moved our Conservative Income Portfolio ($500,000) to cash at the end of March and avoided the April sell-off and have since been buying bargain stocks in that portfolio. We had left our more aggressive Long-Term Portfolio ($500,000) on the table but this last leg of the rally left it up a ridiculous 19% for the year – and that's halfway to our best-case goal so it's a good time to take a break, step back, and see how the market handles early June.
It's not like we can't find anything to do with our cash. In additions to our usual Futures trading, we still have our Short-Term ($100,000), Butterfly ($100,000) and $25,000 Portfolios to play with and, since Wednesday…
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Thrill A Minute Thursday – Will the Bernanke Bounce Hold?
by phil - May 10th, 2012 8:28 am
Not much happening overnight.
Dollar at 80.30 as we wait on Bernanke at 9:30. The Euro is still dead at $1.296, Pound up to $1.615 as BOE holds rates steady (easing was expected). 79.65 Yen to the Dollar and 1.201 EUR/CHF shows those guys are still serious about supporting the Euro at all costs – and it must be costing them a fortune to do this.
I would say anyone who is holding large Euro positions and isn't taking advantage of the fact that the Swiss are backstopping it to get out is very foolish. The Euro is closer to dissolving now than it was last year. Greece will default on $500Bn in debt, Portugal will either default or need a huge bailout, as will Spain and just because Italy and France and Ireland are quiet at the moment, doesn't mean they are fixed either.
Clearly the only reason the Euro is holding $1.29 is because the Swiss are buying it – this is certainly not a reason to be holding the currency. If the Dollar were only staying over 80 because Canada was buying them to keep the Loonie from going to $1.20 – would that mean you should stay in or get out before the game falls apart?
If the Euro is artificially strong, then the Dollar is artificially weak and if the Dollar begins to rise (and the BOJ would love to see that) then we know there will be a dip in the price of dollar-denominated equities and commodities. So we need to continue to tread carefully because much of what we currently see is based on this artificial construct of a relatively weak Dollar and a relatively strong Euro – and that's distorting reality in many ways.
Also keep in mind that these little CB money-printing schemes can go on much longer than one would think logical so it's more of a big-picture sort of observation than an actionable item other than I sure wouldn't want to tie up too much money in Euros – just in case the SNB does run out of money one day.
The S&P did put in a solid show of holding around 1,360 and that's all it takes sometimes – just one of our majors to hold their 5% lines can give the others reason rally back…
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Thursday Follies – Europe “Fixed” Again
by phil - May 3rd, 2012 7:52 am
Spain is up 2.3% this morning (7:30).
They are bouncing Europe with them despite a pretty poor round of trading in Asia (flat). Why? Because Spain's 3 & 5-year note sales "only" went for 100 more basis points than last time with the 3-years coming in at 4.04%, up 54% from last year's auction at 2.62% and the 5-year notes fetched 4.75%, up only 28% from the last 5-year note sale so YAY – Spain is fixed!!!
A whole $3.3Bn worth of bonds were sold or about 1/3 of 1% of what has been allocated through bailout programs to buy this junk but this autction is moving $80Tn worth of global equities up 1% ($800B) – talk about getting bang for your bailout buck!
I'm not going to get into how silly this is getting – we went through this all in '07 and '08 and the markets can be amazingly silly when they are in denial so we'll just go with the flow and pick up some nice upside momentum plays – as long as we can stay over 3 of 5 of our Big Chart's 2.5% lines and, if the pre-market move up holds – they should have no problem taking back 3,075 on the Nasdaq, 820 on the Russell and 8,200 on the NYSE. We're already over 1,400 on the S&P on yesterday's stick-save close and the poor Dow has 800 whole points to go before they catch up at 14,000 so it looks like the Dow will be the logical bullish bet if the other 3 indexes join the S&P over the line.
So IF the Dow is over 13,300 AND the other indexes are over our mark – how much money can we make playing for the Dow to catch up and make it to 14,000. 700 points is a lot, so there should be many ways to play this to our advantage. DIA $133 calls are $1 and have a delta of .44 so you capture 44% of a move up, which means a 100-point rise in the Dow will get you a 44% gain – it's a good trade to enter with tight stops below 13,300 as the Dow has 2 weeks and two days left to make those 800 points and that should be a cake-walk as they're already up 400 points in the last 7 sessions and, as we know from our friends at CNBC –…
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Thrill-Ride Thursday – Here We Go Again
by phil - April 19th, 2012 8:28 am
Wheeeeee!
We are just loving these crazy-assed market moves. Every morning we have a pump job to short into and every afternoon there is a BS stick-save to re-establish our shorts. It's merely a matter of time before those floors begin to crack. I mean, really – how much of this abuse can they take?
Notice, in Dave Fry's SPY chart, the high-volume selling followed by low-volume pumping – that's the very unhealthy pattern the "rally" was built on, which means there really aren't any buyers waiting to scoop up shares when they dip – just Trade Bots that tease the indexes higher so the IBanks can keep pulling in the bag-holders as the "smart money" stampedes for the exits.
Yesterday was great fun. As I noted in the morning post, we went short on the Oil Futures (/CL) at $104.50 in our morning Member Chat and even in the morning post there was still time to catch it at $104. Oil sold off all the way to $102.60 at 2:10 and my 2:14 comment to Members nailed the turn as I said:
Oil coming right to our goal at $102.50 ($38.50 USO) so let's not be greedy and look to take $1.20 off the table on those 1/2 USO positions in the $25KP and $5KP as it's better to get out while the gettin's good.
That's what we mean when we talk about taking non-greedy exits (I had set $38.50 as my USO target for our exit at 11:08 but it didn't look like we'd get it so we got out). We caught the bottom and got out clean and this morning we got a chance to re-load our shorts at $103.50 on that predictable morning pump. Sure, you can say the markets aren't fixed and maybe we just have amazingly good timing – either way we make the same money!
We did manage to find a few things we liked, one of which was CHK, as the stock plunged to $17.20 on much ado about not too much as people took issue with the CEO borrowing money to invest in their wells. We didn't think it was such a big deal and our trade idea at at 10:23 in Member Chat gave us a good opportunity to buy right into the day's…
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Monday Market Movement – Down for a Change
by phil - April 9th, 2012 8:23 am
Wheeeeeee!
What a ride we're getting (see Bespoke Charts). We discussed the fun that led up to this drop on Friday, so no need to rehash it here. Over the weekend, Philstockworld reviewed "This Month in Fascism" and I put up a post outlining "Capitalism's End Game" where we had some nice additional discussion in that post's Member Chat so read that an you're all up to speed.
That brings us to what is happening now. There was little news this weekend other than inflation accelerating in China, with their CPI hitting 3.6% in March vs 3.3% expected but that number is BS anyway as food alone is up 7.5%. For the Quarter, the CPI was up 3.8% overall and China's target for the year is 4% so this effectively takes stimulus action off the table for now. The ONLY thing keeping CPI lower is the now-steady price of housing, which is down at 2% but that's still 2% higher than prices the Government has already decided the people can no longer afford.
China is clearly slowing down but STILL having inflation. The WSJ points out that China's iron-ore demand is down and other emerging-market economies also appear to be losing steam with India's growth down to 6.1% and Brazil down to 3% with Russia having almost no growth at all. So much for the BRICs… "Year-to-date returns have been quite deceptive. All that really happened in 2012 is a typically powerful bear-market bounce off 2011 lows," said Michael Shaoul, chairman of Marketfield Asset Management.
We've been hanging onto long-term short EDZ positions in anticipation of a sell-off in the emerging markets and, despite $25.6Bn of net inflows in Q1 (the most since 2006), EEM has gone nowhere since the end of January, which is funny, since only $1.7Bn flowed into the US stock market in Q1 yet our indexes are up 10% – but that's a different article!
Anyway, so EDZ is still at $12.79 and if we figure we get a 10% pullback in the Emerging Markets then EDZ pops 30% to $16.62 and you can buy the May $14/16 bull call spread for .40 with a 400% upside at $16 and we used to…
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Wednesday Wheeeee – We Love it When a Plan Comes Together!
by phil - January 11th, 2012 8:21 am
Once again, we're done with our day before you get up.
In my 5am note to Members, I said: "I see nothing in the news to justify this pre-market "recovery" and I hate to sound like a broken record but I like shorting oil (/CL) if we get below that $102 line with tight stops and the Dow (/YM) is right at 12,400, which is a great spot to short. RUT (/TF) is at 762 and below 760 (same as yesterday) will confirm a downturn but 12,400 is a great line so why wait?" By 6:26, I was able to follow it up with:
And wheeeeeeeeeeeeeeeeeeeeeeeee! There go the Futures!
It's 7:07 and we're still going down, with oil at $101.24 (up $760 per contract) and the Dow at 12,340 (up $300 per contract) and, as Dennis said: "Good enough for steak and eggs for me!" Roro got up late but still caught the Dow at 6:16 and that was right on the nose for the oil drop as well as we hit it right on the nose this morning and now we're done and waiting for the next good set-up.
Of course we scale in and scale out of positions as there's no need to get greedy in the Futures, where a single remaining contract catching a $1 move down in oil (now $101.25 again) pays $1,000. This week, we have even stationed our own Craigzooka in New Zealand, where it's tomorrow – which makes it much easier to bet on today's action as he can tell us what happened already! Not that today was all that hard to predict, right? My comment to Members LAST Wednesday was:
It’s been a pretty reliable bet that they tank the markets into the longer-term note auctions because it scares people into T-Bills and keeps the rates low. From this line-up, it
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White Christmas Portfolio Wrap-Up
by phil - December 24th, 2011 8:31 am
Merry Christamas!
I know it's tacky to give cash but, as we closed our original, virtual $25,000 Portfolio early on October 20th and we were miles ahead of our $100,000 goal, we decided to do this bonus portfolio starting with a fresh virtual $15,000 set aside out of our $130,000 – risking 1/2 of the excess profits in an attempt to make 60% more ($10,000) in two months.
We started that Monday, the 24th of October with our GNW spread (which I also discussed on TV that day) and that Friday we put up the official post where, I will remind you, our stated goal was to make a little bonus money for the holidays AND to share some of that money with a worthy cause. I want to thank everyone who chose to donate to the NYC Food Bank, we got some really spectacular donations from some of you and I really appreciate it and I hope you have all gotten into the holiday spirit and helped to support those in need this season – it's much appreciated and I thank you.
Just as importantly, I very much hope you were able to learn something following this portfolio. We never put much capital at risk, we took quick profits off the table and we worked our way out of most of our losses through rolling and adjusting – letting the trading range do most of the hard work. Most importantly, we had BALANCE – we selected trades in both directions – enjoying the wild ride from the up and down markets.
That strategy, in fact, worked very well!
As of Friday and since our last update on the 16th, when we had $41,465 of realized gains, we closed the following positions:
- 5 SCO Dec $37 puts sold for net $1.90, expired worthless – up $1,900
- 5 FAS Dec $40 puts sold for $2.40, expired worthless – up $1,200
- 10 TNA Dec $41 calls at net $1.50, out at $1.50 – even
- 10 FAS Dec $61 calls sold at net $0 (spread), expired worthless – even
- 10 TLT 12/23 $121 calls sold for net .74 ($740), expired worthless – up $740
…
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Wednesday Weakness – Can We Survive Without QE3?
by phil - December 14th, 2011 8:01 am
WTF?
Do Ben Bernanke and I live on different planets? "For a lot of people," he said during a speech at Fort Bliss, "I know it doesn’t feel like the recession ever ended." For what people exactly, Dr. Bernanke, does it seem like it did end? Study after study after study show that, if you are not lucky enough to be in the top 10% of our society (and certainly not a shade of Johnson’s "Great Society" anymore) then you are pretty much f*cked – and, no, there’s not a nicer way to put it.
Bernanke seems to love the Great Depression so much he is Hell-bent on replicating it here so he can study it in greater detail. I suppose he has some sort of academic detachment regarding the untold suffering he is causing the American people but, who can blame him? He just got a great rate when he refinanced his $850,000 home.
Fortunately, we had complete confidence in Bernanke’s incompetence (see yesterday’s "To QE3 or not to QE3 – That Sets Direction") and, of course, we took advantage of yet another chance to short oil futures (/CL) off the $101 and then the $100 lines on the way down. We were HOPING (not a valid investing strategy) that we’d get some QE3 but, as I warned Members in the morning: "If not – well, Hell hath no fury like a market disappointed."
Clearly, as you can see from David Fry’s SPY chart – I was not overselling the point. Bernanke and the Fed are of the opinion that 10% unemployment is within their mandate of "promoting full employment" and don’t see the need to take action? Let’s have a little review of how good the Fed Chairman has been as a prognosticator for our economy as he enters his 7th year at the Fed:
Drivin’ that train, high on cocaine
Casey Jones you better watch your speed
Trouble ahead, trouble behind
and you know that notion just crossed my mind
Trouble with you is the trouble with me…
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the site