WTF Friday – Japan’s 80 TRILLION Yen Stimulus Dresses the Windows
by phil - October 31st, 2014 7:49 am
She knows how hard her heart grows under the nuclear shadows
She can't just escape the feeling repeating in her head
When after all the urges some kind of truth emerges
We felt the deadly surges discovering Japan – Graham Parker
Happy Halloween!
The shorts are certainly getting a scare this morning as the BOJ hands out another $124Bn (yes, we did the relative math in this morning's Alert to our Members) and that was more than enough to pop the Nikkei 5% in 90 minutes, with the /NKD Futures now testing 16,850 – almost catching up to the Dow for the 3rd time in 2 years.
Unfortunately, each time the Nikkei has matched up with the Dow's gains, it's marked and overbought top and led to a sell-off so we were forced to officially reverse our long call on Russell Futures (/TF) from yesterday morning's post and flip short at 1,169 (with tight stops over 1,170). That's OK though because a move from 1,132.50 to 1,169 on /TF is a profit of $3,650 per contract – not bad for a day's work, right?
See, I told you we could pay for your trip to our Las Vegas Live Seminar next week with a Futures trade!
Not that we advocate holding Futures positions overnight – it could just have easily gone the other way. That's what Wednesday's TNA spread was for – the longer-term long position on the Russell, which will pop TNA well over our $80 goal this morning – that trade has a 316% profit potential in less than a month!
Notice how we're popping out of the channel. It would be one thing if we were doing it based on US earnings but doing on Japanese…
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Faltering Thursday – Last Chance to Make Strong Bounces
by phil - October 23rd, 2014 7:56 am
We decided to give yesterday a pass.
Though the indexes failed to hold our strong bounce lines (well, 3 of 5 did), we can blame Canada for that one as a gunman shot up Parliament yesterday afternoon and the "terrorist attack" news sent our markets lower. Other than that (and these things are unavoidable when you sell 500M guns to 400M people in North America), it wasn't a bad day for the markets, so we're going to wait and see what actually sticks. Our watch levels remain:
- Dow 16,466 (weak) and 16,632 (strong).
- S&P 1,878 (weak) and 1,903 (strong).
- Nasdaq 4,280 (weak) and 4,360 (strong).
- NYSE 10,360 (weak) and 10,540 (strong).
- Russell 1,104 (weak) and 1,128 (strong).
So the Dow fell almost exactly from it's strong bounce to it's weak bounce yesterday. Aside from confirming the 5% Rule™ is firmly in charge, holding the weak bounce line is bullish – IF it holds. The S&P and Nasdaq held their strong bounce lines (thanks to AAPL) while the NYSE stayed in it's range but the Russell was a big disappointment and failed the weak bounce – a very bad sign if they can't take it back today.
We had a lot of fun playing the Russell Futures yesterday, starting with my too-early short…
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Tempting Tuesday – Low Volume Rally Challenges Our Bounce Lines
by phil - October 21st, 2014 8:23 am
It LOOKS impressive, doesn't it?
As I said to our Members this morning in our Live Chat Room, all is going according to plan, as we expected to see strong bounces in our indexes by Wednesday – no matter what news or earnings turned out to be. If the powers that be want the market to bounce – it bounces.
Our general rule of thumb is that dip buyers only learn their lesson after they have been burned 3 times and, so far, only the August dip buyers are being relly burned but a failure to retake that line and a move lower – that might get them to think twice about mounting another rescue effort next time we test 1,050 on the Russell.
On this next chart, you can see how the various Fed speakers were used at key inflection points to guide the markets exactly where they wanted them to go.
As you can see from this S&P chart with Fed notes attached, the manipulation we told you about on 10/6 (see: "Market Mayhem – 12 Fed Speeches in 5 Days Causes Chaos") is merely playing out according to plan and this is why we were able to take full advantage of both the dip (see: "Money-Making Monday: How to Profit from a Market Correction") and the bounce (see: "Wednesday Market Weakness – Oil Collapses to $80, Good or Bad?").
In fact, the TNA Oct $58/60.50 bull call spread that we pointed out last Wednesday at $1.12 closed on Friday morning at $2.40 – up a very nice 114% in 48 hours for those of you who get our morning newsletter (which you can subscribe to here). Our suggested roll to the Nov $56/63 bull call spread at $3 still has to play out but, so far, we're at $4, so up 33% in 4 trading days is "on track" towards our planned 133% gain in 30 more days.
This is how rich people get richer folks – if you are in the top 1%, the Fed is out there working for us –…
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Flip Floppin’ Friday – Futures Fly as Fear Fades
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.
…
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Wednesday Market Weakness – Oil Collapses to $80, Good or Bad?
by phil - October 15th, 2014 8:00 am
If what goes up, must come down – oil has a LONG way to fall:
As you can see, during the glorious Clinton era, oil prices generally stayed down in the $20s despite OPEC cutbacks (because Clinton counteracted them by releasing oil from the SPR), hurricanes, tornadoes, wars in the Middle East (we used to win them, you know), etc. Then, a real disaster struck and oil man GWB was elected to office.
Bush and his Enron buddies destablized the commodities markets (under looser regulations) and Bush started wars in Iraq and Afghanistan to catch Osama Bin Laden, who was in Pakistan and, while he had the US military destroying Iraq's 3Mbd production and burning up another 1 Million barrels of oil a day looking for Osama in all the wrong places, he was also BUYING an average of 500,000 barrels a day to stick in the ground – doubling the size and filling to the brim our strategic petroleum reserve.
That led to a "reserve oil gap" and, of course, other countries began building and filling their own SPRs as well so more oil was bought by more countries, only to be shoved into the ground and never used. This created a very false sense of demand for oil and, when the price of oil rose to the point where consumers could no longer afford to drive – President Bush gave every family $3,000 to spend on oil – and they did – and oil hit $140 a barrel. "Cha-ching" indeed!
But then the $3,000 was gone and so was the ridiculous spike in oil and it fell and fell and fell and fell and fell – all the way down to $35 before stabilizing for a few months around $40 and then heading back to $80 as the market doubled and then, since 2010, US production has jumped 50% and generally kept oil under $100, despite MASSIVE manipulation by the Banksters (see "Goldman's Global Oil Scam Passes the 50 Madoff Mark").
Now it is falling again and, like 2008, people love to call the bottom every $5 on the way down. All the same reasons are being…
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Fabulous Friday – Counting our Blessings in the Market Collapse
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:
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- 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
The margin requirements for the Futures trades are roughly $4,000 per contract so we're talking net gains of…
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Thrilling Thursday – S&P 2,000!!! Again…
by phil - September 25th, 2014 8:01 am
Wheeeee, what a ride!
This is why we use hedges – they kept us from stopping out of our long positions during the dip and, since our long positions pay off in a flat or up market, anything not down is VERY profitable for our Long-Term positions, which outnumber our bearish Short-Term hedges by 10:1 in our Income Portfolio and Long-Term Portfolio.
Markets do, indeed go up AND down on a pretty regular basis and we've made a lot of bottom calls this week, adding more long positions as we got a nice pullback. Now we have the bounces we predicted and we'll just have to wait and see if our strong bounce lines hold up for the week. Yesterday morning, before the Market, our 5% Rule™ predicted we'd see:
- Dow 17,100 (weak) and 17,150 (strong) – Now 17,210
- S&P 1,990 (weak) and 1,995 (strong) – Now 1,998
- Nasdaq 4,525 (weak) and 4,550 (strong) – Now 4,555
- NYSE 10,875 (weak) and 10,950 (strong) – Now 10,885
- Russell 1,125 (weak) and 1,135 (strong) – Now 1,128
So we have 3 greens and two in-betweens and that's certainly enough to get us to stop being bearish but not quite enough to turn us bullish yet. If we are holding the Strong Bounce lines on the Dow, S&P and Nasdaq, however, we could go long on the Russell, with the …
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Technical Tuesday – Rejected, Rejected, Rejected!
by phil - September 23rd, 2014 8:07 am
So much for 2,000 holding.
Fortunately, our Big Chart kept us cautiously bearish into the weekend and the hedges in our Short-Term Portfolio functioned perfectly, gaining $13,000 on the day and completely offsetting the drop of $8,000 in our Long-Term Portfolio.
That's without our big hedge, DXD, kicking in yet, as the Dow is still over 17,000 but, should it fail, we'll see those STP gains multiply quickly.
For those of you who are not Members, and don't have access to our various Member Portfolios (and you can by subscribing here), we have done our best to prepare you for this drop as well. Last Thursday, right in the morning post, I shared our short stance with the general public, saying
It's going to be crazy into the weekend but, in our Live Chat Room this morning, I said to our Members:
Futures pumped back up to yesterday's highs at 17,125, 2,001.50, 4,080 and 1,156.5 so I like shorting below 17,100, 2,000, 4,075 and 1,155 – short the laggard, out of any of them cross back over – very simple!
That's our plan into the weekend. As I've mentioned before, we're also using DXD ($24 at the time), TZA ($14.68) and SQQQ ($35.26) to hedge our long portfolios – just in case things unravel over the weekend. We also discussed FXI ($40.30) puts earlier in the week as a play on China melting down so PLENTY of ways to profit from the downside.
This morning, the Futures are 17,050 on /YM (up $375 per contract), 1,979 on /ES (up $1,125 per contract), 4,035 on /NQ (up $900 per contract) and 1,116.50 on /TF (up $4,000 per contract) – so that strategy went pretty well.
In last Wednesday's post, we also shorted Oil Futures at $95 and oil fell to…
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Which Way Wednesday – Fed Edition
by phil - September 17th, 2014 7:37 am
Wow, what a recovery!
And wow, what complete and utter BS it is. They NYSE is still below 11,000 (our Must Hold line) and the Russell is still below it's 50 dma and we up on less than 10% of the volume (total) that sold off for the last two weeks. But, who cares as long as it paints a pretty picture?
We can thank the Wall Street Journal's Fed Whisperer, John Hilsenrath with yesterday's rally as he wrote not one but TWO articles that whipped traders into a frenzy on his "insider view" that the Fed "may keep the words "considerable time" in its policy statement." Oh, be still my heart! More free money? Really? Will wonders never cease?
Needless to say we took the opportunity to re-short the Dow Futures (/YM) at 17,050 and the S&P Futures (/ES) at 1,993 and the Nasdaq Futures (/NQ) at 4,060 and the Nikkei Futures (/NKD) at 15,950 – all of which we discussed in yesterday's Live Trading Webinar that was, sadly, a Members only affair (but you can join us here).
We also got a chance to short oil at $95 again (a level I published in yesterday's post) and we're thrilled with that and already this morning, it's back at $94.50 for $500 per contract gains. For non-futures players we grabbed the SCO Sept $30s at .25 as a fun play that inventories at 10:30 won't support $95 oil in much the way Fed policies at 2pm won't support these market levels. In fact, here's CNBC's Art Cashin telling you yesterday at noon what I told you pre-market, yesterday morning – BRILLIANT!
Art's actually one of the very few Wall Street analysts I respect (and not just because he repeats what I say), I've followed him since I was a kid – he's a fantastic guy and a lot of what I share with you – I learned from him. As you can see on the Big Chart, the Russell is the laggard and, if the indexes break higher – it's the index we'll go long on but our short bets…
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Friday August Finally – Dressing that 2,000 Window
by phil - August 29th, 2014 8:24 am
Saved by the bad news!
August has been a spectacular month in which we ignored the most bad news ever ignored by a species that is still not extinct. With any luck, an asteriod will head straight for us next month and we can rally the markets another 5% in anticipation of more Fed easing on impact. The asteriod struck the other side of the Earth this morning as Russia Invaded Ukraine and Euro Zone Inflation plunged to 0.3%, miles below the 2.0% target considered "healthy".
This is, of course, GREAT NEWS, because it means Super Mario is free to go ahead and do something – like he always says he will do but never does. That doesn't stop people from believing it because they WANT TO BELIEVE – they want to think someone is going to save them and make all their hardships go away. 11.5% of the people in Europe are still out of work, double the rate in the US. Over 25% of the people under 25 are out of work, about the same as the US. These are horrific figures – of course people are eager to hear the words of a potential savior.
Since it's Friday, we're not going to debate the merits or discuss what a farce it all is – we've done that this week. Today we'll talk about making money.
On Tuesday, in the morning post, I suggested the TNA Sept $72.50/76.50 bull call spread at $2, selling the Sept $68 puts for $2. 10 of those would not have cost you a penny (since it netted out to $0), though about $7,500 in margin on the short puts. Today the spread is $2.50 and the short puts are $1.15 for net $1.35 or +$1,350 in 3 days, which is an 18% gain on the committed margin despite the fact that TNA has essentially gone nowhere.
I don't point this out to brag, we have plenty of trade ideas that have done much better – I point this out because it was a free trade idea, right in the morning post which anyone could have done and it…
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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