Global Market Comments
August 6, 2024
Fiat Lux
Featured Trade:
(HOW TO EXECUTE A MAD HEDGE TRADE ALERT)
I received a call from a friend the other day.
He said he bought Goldman Sachs last summer, a great move since it has since risen by 40%. That is until last week when he got a margin call from Goldman Sachs. It turns out that he didn’t actually BUY (GS), he sold it short, accidentally clicking the bid instead of the offer.
My friend asked if there was any recourse in this situation.
No, not a chance, not in a million years. Brokers are the most sued companies on the planet. They record absolutely everything and have massive teams of lawyers to defend themselves. Even when they mistakenly allocate someone else’s trade to your account you only have 24 hours to contest it. After that, you own it.
Oh, if you accidentally do the wrong trade and it makes money, it will disappear from your account the second they become aware of it, even if it is months later.
What was the cost of this harsh lesson? $700,000.
So, today, I’m going to teach you how to execute one of my market-beating Trade Alerts to prevent you from suffering a $700,000 lesson yourself.
Pay attention, because if you have subscribed to Global Trading Dispatch or Mad Hedge Concierge, you will receive about 200 of these a year. These alerts will bunch up at market tops and bottoms. After that, we may see weeks of no action. Ideal entry points don’t happen every day of the year.
Following them is your path to understanding global financial markets.
You will also make a lot of money.
Most important thing is for you to add my email address to your address book. Otherwise, all my trade alerts will go into your spam folder.
So please add alert@madhedgefundtrader.com right now to your email address book. To sign up for the Text Alert Service so you can get alerts five seconds after they are issued, please email Filomena directly at support@madhedgefundtrader.com. Be sure to put “Text Alert Sign Up” in the subject line.
Let me show you a real-world example of how to do a round trip on a trade that I issued a few years ago.
First, start trading on paper only. All online brokers now give you the option to trade on paper with pretend money. They will even run a pretend P&L for you. That way, in a moment of excitement, when you hit the bid instead of lifting the offer, you will lose $700,000 of pretend money, not the real thing.
Here's another hint. Check your positions at the end of every day. I know this can be tedious, but that way, if a surprise $16 million US Treasury bill position suddenly and erroneously ends up in your account (which happened to me last week) you can get on the phone immediately and get your friendly broker to move it into the correct account.
There are two ways to execute a trade: like a beginner, or as a professional. I’ll focus on the latter.
You may notice that I send out a lot of trade alerts for options spreads, where I believe the best risk/reward for the individual trader lies. That’s because these include a hedge within a hedge within a hedge, which I will talk about another day.
These are illiquid securities that are executed by computer across 11 different online exchanges. These have wide dealing spreads. For example, yesterday I bought the Tesla (TSLA) August 2024 $150-$160 in-the-money vertical bull call debit spread at $8.60 or best. These expire worth $10 in nine trading days. The bid/offered spread was $8.30-$8.90.
This is how you enter your orders. Split your order into five parts. Then start at the middle market and place limit orders at $8.60, $8.70, $8.80, $8.90, and $9.00. You should get one or two fills at $8.80 and $8.90. If there is an intraday dip in the market, you will get all of them with an average price of $8.80. This is called scaling.
For overseas traders who are asleep when the US markets are open, such as those in Australia, this is a great approach. Just enter your limit orders before the market opens, go to sleep, and dream about how you will spend your profits. When you wake up, your fills are in your inbox. I have followers in Australia who have been with me for a decade or more and they say this approach works like a charm.
Holy smokes! What’s that?
That pinging sound from your cell phone tells you the Mad Hedge Fund Trader has just sent out a Trade Alert! The urgent text alert says:
MHFT ALERT- Buy ETF (TBT) at $57.06 or best, Opening Trade 9-8-2014, wgt: 10% =174 shares, SEE EMAIL
A minute later I received the following email:
Sender: Mad Hedge Fund Trader
Subject: Trade Alert - (TBT) September 9, 2014
Trade Alert - (TBT)
Buy the ProShares Ultra Short 20+ Treasury ETF (TBT) at $57.06 or best
trade date 9-8-2014
Opening Trade
Portfolio weighting: 10%
Number of Shares: 174
You can buy this in a $57-$58 range and have a reasonable expectation of making money on this trade.
Logic to follow.
Here is the specific trade you need to execute this position:
Buy 174 shares of the (TBT) at……………$57.06
(174 shares X $57.56 = $10,015.44)
So that’s how it’s done.
You now own 174 shares of the (TBT). That is a bet that bond prices will fall and interest rates will rise.
So let’s see how that position worked out over the next several days.
Did you make money? Let’s see what transpired in the weeks after this trade alert was issued.
It turned out that the TBT was the perfect position to take at that time.
Bond prices fell pretty fast, and interest rates spiked up nicely, causing the (TBT) to jump by $2.91 in the following nine days. That works out to a nice little gain of 5%.
By the way, you can pull up these charts anytime you want for free by just going to www.stockcharts.com
What’s that? Here comes another text message from the Mad Hedge Fund Trader! Better check it out.
MHFT ALERT- Sell ETF (TBT) at $59.97 or best, Closing Trade 9-17-2014, wgt: 10% =174 shares, SEE EMAIL
The following email says:
Sender: Mad Hedge Fund Trader
Subject: Trade Alert - (TBT) September 17, 2014
Trade Alert - (TBT)
Sell the ProShares Ultra Short 20+ Treasury ETF (TBT) at $59.97 or best
trade date: 9-17-2014
Closing Trade
Portfolio weighting: 10%
Number of Shares: 174
Here is the specific trade you need to exit this position:
Sell 174 shares of the August 2014 (TBT) at……………$59.97
Profit: $59.97 - $57.06 = $2.91
174 shares X $2.91 = $506.34, or 0.51% for the notional $100,000 model portfolio.
So there, you’ve just made $506 in just 9 days, which works out to 0.51% per $100,000.
You did this never risking more than 10% of your cash at any time.
Annualize that, and it works out to 206% a year.
That’s how it’s done. This is how the big boys do it. This is how I do it.
Of course, not every trade is a winner, and not all do this well so quickly. Sometimes, it requires the patience of Job to see a trade through to profitability. Last year, 90% of my trades made money. The rest I stopped out of for small losses. That’s because it’s easier to dig yourself out of a small hole than a big one.
But one thing is for sure. You win more games hitting lots of singles. Beginners stand out by swinging for the fences and striking out almost every time.
So, watch your text message service for the next Trade Alert. Watch your email. And you can follow me on your way to successful trading, and to riches.
Nvidia, the world leader in graphics processing units (GPUs), has hit a significant roadblock in its highly anticipated Blackwell B200 chip launch. A design flaw, discovered late in the production process, has forced the company to delay the release of these powerful chips, expected to be a game-changer in the artificial intelligence (AI) landscape. This unexpected delay could have ripple effects throughout the tech industry, particularly for companies heavily invested in AI development and those relying on Nvidia's hardware to power their AI initiatives.
The Blackwell B200: A Promise of AI Power
The Blackwell architecture, Nvidia's next-generation GPU design, was poised to revolutionize AI computing. The B200, the flagship chip in this series, promised to deliver unprecedented performance and efficiency for AI workloads, such as training large language models and powering complex AI applications. The chip's advanced features, including a massive increase in processing power, improved memory bandwidth, and enhanced energy efficiency, made it a highly sought-after component for data centers and AI researchers worldwide.
Nvidia's partners, including tech giants like Microsoft, Meta, and Google, had eagerly awaited the B200's arrival, hoping to leverage its capabilities to accelerate their AI projects and gain a competitive edge in the rapidly evolving AI landscape. The chip's delay, therefore, has come as a major disappointment, leaving these companies scrambling to adjust their plans and potentially delaying their own AI initiatives.
The Design Flaw: A Late Discovery
The design flaw, reportedly discovered by Nvidia's manufacturing partner Taiwan Semiconductor Manufacturing Company (TSMC), affects the processor die connecting two Blackwell GPUs on a single board. This critical component, responsible for communication and data transfer between the GPUs, was found to have a defect that could impact the chip's performance and reliability.
The late discovery of this flaw, unusually late in the production process, has raised concerns about Nvidia's quality control and testing procedures. The company typically conducts rigorous testing throughout the chip development cycle to identify and address any potential issues before mass production. However, in this case, the flaw managed to slip through the cracks, resulting in a costly and embarrassing delay.
Consequences of the Delay
The delay of the B200 chip is expected to have significant ramifications for Nvidia and the broader tech industry. For Nvidia, the delay could impact its financial performance, as the company had projected strong sales of the B200 to its major partners. The setback could also tarnish Nvidia's reputation as a reliable provider of cutting-edge AI hardware, potentially opening the door for competitors like AMD to gain market share.
For Nvidia's partners, the delay could disrupt their AI development timelines and force them to reconsider their hardware choices. Some companies may opt to wait for the B200 to become available, while others may explore alternative solutions from other vendors. This could create opportunities for AMD and other GPU manufacturers to capitalize on Nvidia's misstep and attract new customers.
The delay could also slow down the pace of AI innovation, as researchers and developers who were counting on the B200's capabilities may have to scale back their ambitions or delay their projects. This could have a ripple effect on various industries that are increasingly relying on AI to drive growth and efficiency, such as healthcare, finance, and transportation.
Nvidia's Response
Nvidia has acknowledged the design flaw and is working to rectify the issue. The company has stated that it is revising the chip's design and will conduct further testing with TSMC before resuming mass production. Nvidia has also assured its partners that it is committed to delivering the B200 as soon as possible, but the revised timeline now extends into 2025.
Looking Ahead
The delay of the Blackwell B200 chip is a significant setback for Nvidia, but it is not necessarily a fatal blow. The company has a strong track record of innovation and has overcome challenges in the past. However, the incident serves as a reminder that even industry leaders are not immune to mistakes and that the development of complex technology like GPUs is fraught with risks.
As Nvidia works to address the design flaw and resume production of the B200, the AI community will be watching closely. The chip's success or failure could have a major impact on the trajectory of AI development and the competitive landscape in the GPU market.
Mad Hedge Technology Letter
August 5, 2024
Fiat Lux
Featured Trade:
(A GREAT OPPORTUNITY FOR TECH INVESTORS)
($COMPQ), (AAPL), ($NIKK)
When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline. Read more
We avoided the big one.
That’s a common utterance in Japan when the Japanese believe they avoided devastation when it comes to earthquakes.
The same goes for US tech stocks today.
Sure, raising interest rates when the Japanese economy is contracting is something a schoolboy wouldn’t do, but that is what took place and U.S. tech stocks ($COMPQ) are dealing with the devastating aftermath.
Japan is in a rock and a hard place in terms of monetary policy - orders were sent through to Bank of Japan governor Kazuo Ueda to protect the yen at all costs.
It was a totally political move.
Then the Japanese yen exploded higher after Ueda raised rates a measly 25 basis points, but by mistake crashed the U.S. tech sector and the Japanese stock market ($NIKK) which is down around 25% in the past month.
All this talk about the economy going into recession is too early.
It is also highly positive for US tech stocks that this crash was provoked in Japan and has nothing to do with structural issues to the US economy or tech sector.
I do agree that the US economy is slowing and hiring is getting worse, but the economy is still growing, unlike Japan.
Therefore, this is a swift overreaction from another policy error from the Japanese establishment. The Bank of Japan is also out of bullets on the monetary side of things. One and done.
Japan could be the worst-run country in the world which is why most foreigners want to briefly visit to eat sushi and leave.
The Japanese will soon eclipse the 300% debt per GDP threshold – a practice of pile-driving a country completely into the ground while demoralizing the local youth and their fragile future hopes.
So I’ll get to the meat and bones of it.
This will be a big dip to buy into and the hard landing narrative should be delayed by a few months because data is still too good to ignore.
The major tech companies have been priced for perfection for quite some time now. But doubts over AI, which incurs high costs today for uncertain returns in the future, have crept in and started to unnerve investors.
Chipmaker Intel plans to cut a huge chunk of its global workforce while pocketing $8 billion from the federal government. The transformation into lean staffing continues in Silicon Valley and won’t stop.
Now what?
The tech stock freakout does make it much easier for the Fed to push through a half-point rate hike rather than a quarter-point rate cut in September, which really puts a floor under tech stocks. I could argue that this would inject rocket fuel into a possible winter rally.
I highly doubt that tech stocks will suffer real panic before the US election because imagine a boatload of democratic voters who are the ones mostly owning tech stocks going to the polls grumpy, frustrated, and confused as to why their 401k has been flushed down the toilet.
This is most likely the biggest dip in the best of tech that we will get before the US election. Embrace and execute.
Warren Buffett unloading half of his Apple (AAPL) position almost suggested that he knew something before the rest of us, but I do believe that he will regret selling out so early. He is deep in the know in Japan and stateside.
He will need to buy tech back at a higher price, but he can afford it. Most of the rest of us must execute like a miracle depended upon it and that’s why I am here to guide you through the fog of war.
Buy the dip in tech shares.
“Nobody buys a farm based on whether they think it's going to rain next year.” – Said American Investor Warren Buffett
When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline. Read more
When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline. Read more
(THE CORRECTION IS UPON US – BUCKLE UP)
August 5, 2024
Hello everyone,
U.S. Markets turned down sharply last Friday after the July nonfarm payroll revealed the highest unemployment rate since 2021, catching many by surprise. (If you had read my Monday, July 29 newsletter last week, you would have already known we were in a Wave 4 down period and would have been aware of the targets). Many stocks were absolutely battered, including Intel. No sector was left untouched. Yields fell, and the TLT rallied strongly. But you knew all this was about to happen – you had been forewarned.
The US dollar depreciated against all major currencies, with particularly steep declines against traditionally risk-off currencies like the Swiss franc (CHF) and the Japanese yen (JPY). In response to this data, markets are now pricing in steep rate cuts – as many as 150 basis points – from the Federal Reserve by year’s end. ( I said earlier in the year that the slowdown in the economy would show up in the second half of the year and steamroll its way through the economy like a ball falling down a hill, gathering momentum as it fell, and this is exactly what is showing up in the data now – the economy is slowing faster than most realize, and the Fed is where it was when it went to raise rates - slow to the party - and will now be expected to act aggressively.)
All Aussies will be watching the Reserve Bank on Tuesday. No change is expected, but many are hoping for a rate cut.
Economic data points from China, including the trade balance and inflation figures, will give some insight into an economy that is still struggling post-pandemic.
I am not suggesting you buy any of the stocks listed above at this time. I am merely showing you what the bank is focused on. We hold three of these stocks in our portfolio: Caterpillar, Amazon and Microsoft.
Week ahead calendar
Monday, August 5
9:45 a.m. PMI Composite final (July)
9:45 a.m. S&P PMI Services final (July)
10:00 a.m. ISM Services PMI (July)
Previous: 48.8
Forecast: 51
Earnings: Simon Property Group, Diamondback Energy, Tyson Foods, Progressive
Tuesday, August 6
8:30 a.m. Trade Balance (June)
12:30 a.m. Australia Rate Decision
Previous: 4.35%
Forecast: 4.35%
Earnings: Super Micro Computer, Fortinet, Devon Energy, Airbnb, Wynn Resorts, Axon Enterprise, TransDigm Group, Yum Brands, Fidelity National Information Services, Uber Technologies, Marathon Petroleum, Caterpillar
Wednesday, August 7
3:00 p.m. Consumer Credit (June)
10:00 a.m. Canada Ivey PMI
Previous: 62.5
Forecast: 58
Earnings: Costco Wholesale, Warner Bros, Discovery, Occidental Petroleum, Ralph Lauren, CVS Health, Hilton Worldwide Holdings, Walt Disney Company
Thursday, August 8
8:30 a.m. Continuing Jobless Claims (07/27)
8:30 a.m. Initial Claims (08/03)
10 a.m. Wholesale Inventories final (June)
9:30 p.m. China Inflation Rate
Previous: 0.2%
Forecast: 0.3%
Earnings: Gilead Sciences, Akamai Technologies, Take-Two Interactive Software, News Corp, Paramount Global, Expedia Group, Martin Marietta Materials, Eli Lilly
Friday, August 9
8:30 a.m. Canada Unemployment Rate
Previous: 6.4%
Forecast: 6.4%
MARKET UPDATE
S&P 500
Correction sell-off in progress. Support zone = between 5,265 – 4,950. Sustained break of 4,950 would probably see a much deeper sell-off toward the late 4,500’s.
GOLD
If gold can hold $2,350 area, the metal could advance to the mid $2,500’s. A break of the latter level would see gold rallying toward the $2,650 zone. However, if gold does fall below the $2,300 area, we could see a fall toward $2,260 or even $2,200.
BITCOIN
As I write this Post Sunday after/evening, I am watching the price action of Bitcoin, which is now sitting at $54,190.00. There is strong support at the $50k level, and at the $40k level.
PSYCHOLOGY CORNER
Herd Behaviour
This occurs when investors follow the actions of the majority, often leading to trends and bubbles. Herd behaviour can result in significant swings as large groups of investors buy or sell simultaneously.
Exploiting Herd Behaviour
By understanding how herd behaviour drives market movements, investors can position themselves to benefit from the irrational actions of the crowd. For example, contrarian investors often buy when others are selling and sell when others are buying.
QI CORNER
AUSTRALIAN CORNER
It’s the Olympics, so we must celebrate our athletes’ achievements.
Australian, Saya Sakakibara, wins the gold medal in BMX and dedicated it to her brother.
GOOD VIBES CORNER
Cheers,
Jacquie