Diary Archives

2014 Trade Alert Review

When is the Mad Hedge Fund Trader a genius, and when is he a complete moron?

That is the question readers have to ask themselves whenever their smart phones ping, and a new Trade Alert appears on their screens.

I have to confess that I wonder myself sometimes.

So I thought I would run my 2014 numbers to find out when I was a hero, and when I was a goat.

The good news is that I was a hero most of the time, and a goat only occasionally. Here is the cumulative profit and loss for the 75 Trade Alerts that I closed during calendar 2014, listed by asset class.

Profit by Asset Class

Foreign Exchange 15.12%
Equities 12.52%
Fixed Income 7.28%
Energy 1.4%
Volatility -1.68%

Total 37.64%

Foreign exchange trading was my big winner for 2014, accounting for nearly half of my profits. My most successful trade of the year was in my short position in the Euro (FXE), (EUO).

I piled on a double position at the end of July, just as it became apparent that the beleaguered European currency was about to break out of a multi month sideway move into a pronounced new downtrend.

I then kept rolling the strikes down every month. Those who bought the short Euro 2X ETF (EUO) made even more.

The fundamentals for the Euro were bad and steadily worsening. It helped that I was there for two months during the summer and could clearly see how grotesquely overvalued the currency was. $20 for a cappuccino? Mama mia!

Nothing beats on the ground, first hand research.

Stocks generated another third of my profits last year and also accounted for my largest number of Trade Alerts.

I correctly identified technology and biotech as the lead sectors for the year, weaving in and out of Apple (AAPL) and Gilead Sciences (GILD) on many occasions. I also nailed the recovery of the US auto industry (GM), (F).

I safely stayed away from the energy sector until the very end of the year, when oil hit the $50 handle. I also prudently avoided commodities like the plague.

Unfortunately, I was wrong on the bond market for the entire year. That didn?t stop me from making money on the short side on price spikes, with fixed income chipping a healthy 7.28% into the kitty.

It was only at the end of the year, when the prices accelerated their northward trend that they started to cost me money. My saving grace was that I kept positions small throughout, doubling up on a single occasion and then coming right back out.

My one trade in the energy sector for the year was on the short side, in natural gas (UNG), selling the simple molecule at the $5.50 level. With gas now plumbing the depths at $2.90, I should have followed up with more Trade Alerts. But hey, a 1.4% gain is better than a poke in the eye with a sharp stick.

In which asset class was I wrong every single time? Both of the volatility (VIX) trades I did in 2014 lost money, for a total of -1.68%. I got caught in one of many downdrafts that saw volatility hugging the floor for most of the year, giving it to me in the shorts with the (VXX).

All in all, it was a pretty good year.

What was my best trade of 2014? I made 2.75% with a short position in the S&P 500 in July, during one of the market?s periodic 5% corrections.

And my worst trade of 2014? I got hit with a 6.63% speeding ticket with a long position in the same index. But I lived to fight another day.

After a rocky start, 2015 promises to be another great year. That is, provided you ignore my advice on volatility.

Here is a complete list of every trade I closed last year, sorted by asset class, from best to worse.

Date	Position	Asset Class	Long/short	?	?	?	?	?	?
7/25/14	(SPY) 8/$202.50 - $202.50 put spread	equities	long	?	?	?	?	?	2.75%
10/16/14	(GILD) 11/$80-$85 call spread	equities	long	?	?	?	?	?	2.57%
5/19/14	(TLT) 7/$116-$119 put spread	fixed income	long	?	?	?	?	?	2.48%
4/4/14	(IWM) 8/$113 puts	equities	long	?	?	?	?	?	2.38%
7/10/14	(AAPL) 8/$85-$90 call spread	equities	long	?	?	?	?	?	2.30%
2/3/14	(TLT) 6/$106 puts	equities	long	?	?	?	?	?	2.27%
9/19/14	(IWM) 11/$117-$120 put spread	equities	long	?	?	?	?	?	2.26%
10/7/14	(FXE) 11/$127-$129 put spread	foreign exchange	long	?	?	?	?	?	2.22%
9/26/14	(IWM) 11/$116-$119 put spread	equities	long	?	?	?	?	?	2.21%
4/17/14	(TLT) 5/$114-$117 put spread	fixed income	long	?	?	?	?	?	2.10%
8/7/14	(FXE) 9/$133-$135 put spread	foreign exchange	long	?	?	?	?	?	2.07%
10/2/14	(BAC) 11/$15-$16 call spread	equities	long	?	?	?	?	?	2.04%
4/9/14	(SPY) 5/$191-$194 put spread	equities	long	?	?	?	?	?	2.02%
10/15/14	(DAL) 11/$25-$27 call spread	equities	long	?	?	?	?	?	1.89%
9/25/14	(FXE) 11/$128-$130 put spread	foreign exchange	long	?	?	?	?	?	1.86%
6/6/14	(JPM) 7/$52.50-$55.00 call spread	equities	long	?	?	?	?	?	1.81%
4/4/14	(SPY) 5/$193-$196 put spread	equities	long	?	?	?	?	?	1.81%
3/14/14	(TLT) 4/$111-$114 put spread	fixed income	long	?	?	?	?	?	1.68%
10/17/14	(AAPL) 11/$87.50-$92.50 call spread	equities	long	?	?	?	?	?	1.56%
10/15/14	(SPY) 11/$168-$173 call spread	equities	long	?	?	?	?	?	1.51%
7/3/14	(FXE) 8/$138 put spread	foreign exchange	long	?	?	?	?	?	1.51%
10/9/14	(FXE) 11/$128-$130 put spread	foreign exchange	long	?	?	?	?	?	1.48%
9/19/14	(FXE) 10/$128-$130 put spread	foreign exchange	long	?	?	?	?	?	1.45%
10/22/14	(SPY) 11/$179-$183 call spread	equities	long	?	?	?	?	?	1.44%
5/29/14	(TLT) 7/$118-$121 put spread	fixed income	long	?	?	?	?	?	1.44%
2/24/14	(UNG) 7/$26 puts	energy	long	?	?	?	?	?	1.40%
2/24/14	(BAC) 3/$15-$16 call spread	equities	long	?	?	?	?	?	1.39%
6/23/14	(SPY) 7/$202 put spread	equities	long	?	?	?	?	?	1.37%
9/29/14	(SPY) 10/$202-$205 Put spread	equities	long	?	?	?	?	?	1.29%
5/20/14	(AAPL) 7/$540 $570 call spread	equities	long	?	?	?	?	?	1.22%
9/26/14	(SPY) 10/$202-$205 Put spread	equities	long	?	?	?	?	?	1.22%
5/22/14	(GOOGL) 7/$480-$520 call spread	equities	long	?	?	?	?	?	1.16%
5/19/14	(FXY) 7/$98-$101 put spread	foreign exchange	long	?	?	?	?	?	1.14%
1/15/14	(T) 2/$35-$37 put spread	equities	long	?	?	?	?	?	1.08%
3/3/14	(TLT) 3/$111-$114 put spread	fixed income	long	?	?	?	?	?	1.07%
1/28/14	(AAPL) 2/$460-$490 call spread	equities	long	?	?	?	?	?	1.06%
4/24/14	(SPY) 5/$192-$195 put spread	equities	long	?	?	?	?	?	1.05%
6/6/14	(CAT) 7/$97.50-$100 call spread	equities	long	?	?	?	?	?	1.04%
7/23/14	(FXE) 8/$134-$136 put spread	foreign exchange	long	?	?	?	?	?	0.99%
8/18/14	(FXE) 9/$133-$135 put spread	foreign exchange	long	?	?	?	?	?	0.94%
11/4/14	(BAC) 12/$15-$16 call spread	equities	long	?	?	?	?	?	0.88%
4/9/14	(SPY) 6/$193-$196 put spread	equities	long	?	?	?	?	?	0.88%
7/25/14	(SPY) 8/$202.50 -205 put spread	equities	long	?	?	?	?	?	0.88%
6/6/14	(MSFT) 7/$38-$40 call spread	equities	long	?	?	?	?	?	0.87%
10/23/14	(FXY) 11/$92-$95 puts spread	foreign exchange	long	?	?	?	?	?	0.86%
7/23/14	(TLT) 8/$117-$120 put spread	fixed income	long	?	?	?	?	?	0.81%
3/5/14	(DAL) 4/$30-$32 Call spread	equities	long	?	?	?	?	?	0.76%
4/10/14	(VXX) long volatility ETN	equities	long	?	?	?	?	?	0.76%
1/30/14	(UNG) 7/$23 puts	equities	long	?	?	?	?	?	0.66%
4/1/14	(FXY) 5/$96-$99 put spread	foreign currency	long	?	?	?	?	?	0.60%
1/15/14	(TLT) 2/$108-$111 put spread	equities	long	?	?	?	?	?	0.47%
3/6/14	(EBAY) 4/$52.50- $55 call spread	equities	long	?	?	?	?	?	0.24%
10/14/14	(TBT) short Treasury Bond ETF	fixed income	long	?	?	?	?	?	0.22%
3/28/14	(VXX) long volatility ETN	equities	long	?	?	?	?	?	0.20%
7/17/14	(TBT) short Treasury Bond ETF	fixed income	long	?	?	?	?	?	0.08%
3/26/14	(VXX) long volatility ETN	equities	long	?	?	?	?	?	0.06%
7/8/14	(TLT) 8/$115-$118 put spread	fixed income	long	?	?	?	?	?	-0.18%
4/28/14	(SPY) 5/$189-$192 put spread	equities	long	?	?	?	?	?	-0.45%
3/5/14	(GE) 4/$24-$25 call spread	equities	long	?	?	?	?	?	-0.73%
4/28/14	(VXX) long volatility ETN	volatility	long	?	?	?	?	?	-0.81%
4/24/14	(TLT) 5/$113-$116 put spread	fixed income	long	?	?	?	?	?	-0.87%
4/28/14	(VXX) long volatility ETN	volatility	long	?	?	?	?	?	-0.87%
6/6/14	(IBM) 7/$180-$185 call spread	equities	long	?	?	?	?	?	-1.27%
9/30/14	(SPY) 11/$185-$190 call spread	equities	long	?	?	?	?	?	-1.51%
10/9/14	(TLT) 11/$122-$125 put spread	fixed income	long	?	?	?	?	?	-1.55%
9/24/14	(TSLA) 11/$200 call spread	equities	long	?	?	?	?	?	-1.62%
2/27/14	(SPY) 3/$189-$192 put spread	equities	long	?	?	?	?	?	-1.67%
3/6/14	(BAC) 4/$16 calls	equities	long	?	?	?	?	?	-2.01%
10/14/14	(SPY) 10/$180-$184 call spread	equities	short	?	?	?	?	?	-2.13%
11/14/14	(BABA) 12/$100-$105 call spread	equities	short	?	?	?	?	?	-2.38%
10/20/14	(SPY) 11/$197-$202 call spread	equities	short	?	?	?	?	?	-2.72%
7/3/14	(GM) 8/$33-$35 call spread	equities	long	?	?	?	?	?	-2.91%
3/7/14	(GM) 4/$34-$36 call spread	equities	long	?	?	?	?	?	-2.96%
11/25/14	(SCTY) 12/47.50-$52.50 call spread	equities	long	?	?	?	?	?	-3.63%
10/20/14	(SPY) 11/$197-$202 call spread	equities	short	?	?	?	?	?	-4.22%
4/14/14	(SPY) 5/$188-$191 put spread	equities	long	?	?	?	?	?	-6.63%

What a Year!

January 15, 2015 - Quote of the Day

Diary, Newsletter, Quote of the Day

?The central bank put is alive and well in Washington, Brussels, and Tokyo? said Michael Block, from Rhino Trading.

January 14, 2015

Diary, Newsletter, Summary

Global Market Comments
January 14, 2015
Fiat Lux

SPECIAL SHORT SELLING ISSUE

Featured Trade:
(SHORT SELLING SCHOOL 101),
(SH), (SDS), (PSQ), (DOG), (RWM), (SPXU), (AAPL),
(VIX), (VXX), (IPO), (MTUM), (SPHB), (HDGE)

ProShares Short S&P500 (SH)
ProShares UltraShort S&P500 (SDS)
ProShares Short QQQ (PSQ)
ProShares Short Dow30 (DOG)
ProShares Short Russell2000 (RWM)
ProShares UltraPro Short S&P500 (SPXU)
Apple Inc. (AAPL)
VOLATILITY S&P 500 (^VIX)
iPath S&P 500 VIX ST Futures ETN (VXX)
Renaissance IPO ETF (IPO)
iShares MSCI USA Momentum Factor (MTUM)
PowerShares S&P 500 High Beta (SPHB)
AdvisorShares Ranger Equity Bear ETF (HDGE)

January 13, 2015

Diary, Newsletter, Summary

Global Market Comments
January 13, 2015
Fiat Lux

Featured Trade:
(A DAY IN THE LIFE OF THE MAD HEDGE FUND TRADER),
(SPY), (SPX), (QQQ), (AAPL), (VIX), (FSLR), (SCTY), (TLT), (TBT), (FXE), (GLD), (GDX), (USO)

SPDR S&P 500 (SPY)
S&P 500 Index (SPX)
PowerShares QQQ (QQQ)
Apple Inc. (AAPL)
VOLATILITY S&P 500 (^VIX)
First Solar, Inc. (FSLR)
SolarCity Corporation (SCTY)
iShares 20+ Year Treasury Bond (TLT)
ProShares UltraShort 20+ Year Treasury (TBT)
CurrencyShares Euro Trust (FXE)
SPDR Gold Shares (GLD)
Market Vectors Gold Miners ETF (GDX)
United States Oil (USO)

January 12, 2015

Diary, Newsletter, Summary

Global Market Comments
January 12, 2015
Fiat Lux

Featured Trade:
(THROWING IN THE TOWEL ON THE BOND MARKET),
(TBT), (TLT), (LQD), (MUB), (ELD),
(THE 1% AND THE BOND MARKET),
(TLT), (TBT), (MUB), (LQD), (ELD), (JNK)

ProShares UltraShort 20+ Year Treasury (TBT)
iShares Trust - iShares 20+ Year Treasury Bond ETF (TLT)
iShares Trust - iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD)
iShares National AMT-Free Muni Bond (MUB)
WisdomTree Trust - WisdomTree Emerging Markets Local Debt Fund (ELD)
SPDR Series Trust - SPDR Barclays High Yield Bond ETF (JNK)

Throwing in the Towel on the Bond Market

Diary, Free Research, Newsletter

Here are the long-winded, feeble bunch of excuses I promised you.

I have broken every rule in my trading book hanging on to my position in the (TBT) for the past four months. I ignored my own stop losses. I listened to the morons on TV saying interest rates were about to spike up. I took the pile of charts that were telling me there was no bottom in sight, and deliberately lost them behind the radiator.

I even listened to the Fed signaling me with an emergency flare gun that they would raise rates in June.

As a result, I have been punished. Not too severely though, for I did follow one cardinal rule: I kept the position small. I did not double, triple and quadruple up, as many in the hedge fund industry have done.

As a result, I am merely suffering a thrashing in the woodshed, the kind my grandfather used to give me when he caught me shooting out the lights with my .22 rifle on our ranch in Indio, California. This is not a beheading, nor even a water boarding, and not a scintilla of an existential threat.

Still, a $14, 25% loss on a single position is no laughing matter. It?s about as welcome as a slap in the face with a wet mackerel. This is all proof that after 45 years in this business, I can still make the mistakes of a first year intern that was only hired for her good looks, shapely figure and loose morals.

If you told me that US GDP growth was 5%, unemployment was at a ten year low at 5.6%, and energy prices had just halved, I would have pegged the ten-year Treasury bond yield at 6.0%. The US economy created 2.9 million jobs in 2014, the most since 1999. Full employment is now almost a gimme.

Yet here we are at 2.00%.

You might as well take your traditional economic books and throw them in the trash. Apologies to John Maynard Keynes, John Kenneth Galbraith, and Paul Samuelson. It is yet another indication that this market has an insatiable need to teach an old dog new tricks.

After turning a blind eye to the writing on the wall, it?s time for me to read it out to you loud and clear.

The collapse of the German bond market is the big deal here. With the European economy in free fall, and doubts remaining about the ability of quantitative easing to work there under any circumstances, investors are assuming the future demand for money on the beleaguered continent will be zero.

German 10 year bond yields at 0.45% and still falling make 10 year US Treasuries at 2.00% appear the bargain of the century. Governments and hedge funds alike can buy US paper, sell short European paper against it, hedge out the currency risk, and lock in a risk free 1.55% a year for ten years. Sounds like a deal to me.

Multiply this by trillions of dollars and you can see what the problem is.

The other big deal here is the price of oil. I will reiterate my belief that if Texas tea stays down at the $40 handle, it is worth not just a 10% gain in stocks, but a double. The flipside is that interest rates stay far lower for longer than anyone expects, even including the Fed.

People just don?t understand how far reaching the impact of oil prices is. This heralds an entire new leg in the deflation story, one that could continue for years. It completely rules out any chance of a hike in interest rates this year. It is also fantastic news for the US bond market, and terrible for the (TBT).

If you want to add a third strike against continuing with a short bond position, look no further than the string US dollar. Investors around the world are pouring money into the greenback for a host of reasons. What do they do with the dollars when they get here? Buy bonds.

For more depth on why I totally missed the boat on bonds, please click here for ?10 Reasons Why I Am Wrong on Bonds?.

There are also opportunistic issues to consider here.

With implied volatilities on options sky high here, I can slap on almost any other options position and make back my 2.5% loss on the (TBT) in a couple of weeks. So there is no point in tying up 10% of my portfolio in a position that is dying a death of a thousand cuts.

Also, If you have been short the Euro (FXE), (EUO) and the Japanese yen (FXY), (YCS) after the past seven months, as I begged you to do, you have already more than made back the money.

January 9, 2015

Diary, Newsletter, Summary

Global Market Comments
January 9, 2015
Fiat Lux

Featured Trade:
(A VERY CHICAGO CHRISTMAS),
(TESTIMONIAL),
(BREAKFAST WITH MOHAMED EL-ERIAN)

A Very Chicago Christmas

Diary, Newsletter

There is nothing more enjoyable than partaking in an all you can eat Christmas buffet lunch with a group of friends. That was how my Chicago Global Strategy Luncheon turned out two weeks ago.

Guests came from Detroit, Canada, and remote Illinois. The abundance of roast beef, ham, and turkey on our plates matched the tales of outsized trading returns in 2014. We all had much to give thanks for.

I even managed to dispense some career advice for some of the guests? kids, and no, it was not to go into plastics (with apologies to The Graduate).

Mad Day Trader, Jim Parker, was there to back up, or dispute my own market views. Jim has had a particularly hot hand of late, and attendees vigorously pumped him for more guidance.

Countless personal financial advisors have told me that the market color he provides is invaluable, freeing them up for more productive client interactions.

After the lunch, I took a few rare days off to revel in a festive Windy City. I never fail to visit the Chicago Art Institute when in town as it is across the street from my usual abode. The works of the great masters, Van Gogh, Degas, Rodin and Monet, always seem to improve with age. The museum store there is perfect for last minute Christmas shopping.

In the Museum of Modern Art wing there was a special exhibition on the 1960?s urban renewal projects in New York, Chicago and Los Angeles. There, I saw photos of the old Victorian buildings in downtown L.A.I remembered as a child, every one now demolished. If this shortsighted city had preserved them, they would be worth a fortune today. That?s why I now live in San Francisco.

At the Museum of Science and Industry I enjoyed this cool interactive experience on the WWII German submarine U-505, which subjected me to an imaginary underwater depth charge attack. A case displaying artifacts found on the ship had a rare pair of 1930?s Zeiss officer?s binoculars. I bought an identical pair years ago at a garage sale for $10 because the case had a broken strap.

I saw Abraham Lincoln?s stovepipe hat at the Chicago History Museum. His suit had my length, but definitely not my waist. He must have been a size 38 extra long. At size 14, we could have shared boots.

One afternoon, I bundled up with every piece of clothing I had and took the Architectural Tour on the Chicago River. A lifelong love of architecture took me to suburban Oak Park to seek out the many masterpieces of Frank Lloyd Wright. I did a drive by in a taxi at Ernest Hemingway?s Home because it was too cold to get out of the car.

I then had a drink in Al Capone?s private booth at The Green Mill, a Depression era speakeasy.

At Navy Pier I picked up a pedestrian fish and chips for lunch. To work off the meal, I rented a City Bike and rode the length of the Chicago waterfront, through Millennium Park all the way to Soldier Field, now nicknamed ?The UFO?.

Of course, I took the dare and stood on the glass floor 108 stories up at the top of the Sears Tower, now known as the Willis Tower.

The service at Gibson?s, one of the world?s greatest steak restaurants, was marvelous as always. They give a detailed description of their many cuts of meat worthy of a medical school. Call my friend there, the maitre d?, Alex Lampugnani, and he?ll set you up with a good table. Just tell him John Thomas sent you.

If you had any doubts about the health of the economy, make a visit to the Water Tower Place shopping Mall on Michigan Avenue. Every store saw massive lines. The parking lots were full, and the streets to get there were jammed. People couldn?t spend money fast enough.

Judging by what I saw, the Q3 GDP growth rate at a blistering 5% is probably a low number. For good measure, I chartered a helicopter for a night tour of Chicago, with a low pass over the spectacular lights at the Lincoln Zoo.

As for the invitation to dive into the freezing waters of Lake Michigan at North Avenue Beach on New Year?s day, this year I decided to give it a pass.

I?ll be back in Chicago for another Global Strategy Luncheon in the spring, and to catch the few parts of the city I missed.

January 8, 2015

Diary, Newsletter, Summary

Global Market Comments
January 8, 2015
Fiat Lux

Featured Trade:
(MAD DAY TRADER JIM PARKER?S Q1, 2015 VIEWS),
(SPY), (XLV), (XLK), (PCLN), (F),
(TLT), (TBT),
(FXE), (EUO), (FXA), (FXB),
(GLD), (GDX), (SLV),
(USO)
(VIX), (VXX)
(THE MARKETS ARE NOT RIGGED)
(TESTIMONIAL)

SPDR S&P 500 ETF Trust (SPY)
Health Care Select Sector SPDR ETF (XLV)
The Select Sector SPDR Trust - The Technology Select Sector SPDR Fund (XLK)
The Priceline Group Inc. (PCLN)
Ford Motor Co. (F)
iShares Trust - iShares 20+ Year Treasury Bond ETF (TLT)
ProShares UltraShort 20+ Year Treasury (TBT)
CurrencyShares Euro Trust (FXE)
ProShares Trust II - ProShares UltraShort Euro (EUO)
CurrencyShares Australian Dollar Trust (FXA)
CurrencyShares British Pound Sterling Trust (FXB)
SPDR Gold Trust (GLD)
Market Vectors ETF Trust - Market Vectors Gold Miners ETF (GDX)
iShares Silver Trust (SLV)
United States Oil Fund LP (USO)
VOLATILITY S&P 500 (^VIX)
iPath S&P 500 VIX ST Futures ETN (VXX)

Mad Day Trader Jim Parker?s Q1, 2015 Views

Diary, Newsletter, Research

Mad Day Trader Jim Parker is expecting the first quarter of 2015 to offer plenty of volatility and loads of great trading opportunities. He thinks the scariest moves may already be behind us.

After a ferocious week of decidedly ?RISK OFF? markets, the sweet spots going forward will be of the ?RISK ON? variety. Sector leadership could change daily, with a brutal rotation, depending on whether the price of oil is up, down, or sideways.

The market is paying the price of having pulled forward too much performance from 2015 back into the final month of 2014, when we all watched the December melt up slack jawed.

Jim is a 40-year veteran of the financial markets and has long made a living as an independent trader in the pits at the Chicago Mercantile Exchange. He worked his way up from a junior floor runner to advisor to some of the world?s largest hedge funds. We are lucky to have him on our team and gain access to his experience, knowledge and expertise.

Jim uses a dozen proprietary short-term technical and momentum indicators to generate buy and sell signals. Below are his specific views for the new quarter according to each asset class.

Stocks

The S&P 500 (SPY) and NASDAQ have met all of Jim?s short-term downside targets, and a sustainable move up from here is in the cards. But if NASDAQ breaks 4,100 to the downside, all bets are off.

His favorite sector is health care (XLV), which seems immune to all troubles, and may have already seen its low for the year. Jim is also enamored with technology stocks (XLK).

The coming year will be a great one for single stock pickers. Priceline (PCLN) is a great short, dragged down by the weak Euro, where they get much of their business. Ford Motors (F) probably bottomed yesterday, and is a good offsetting long.

Bonds

Jim is not inclined to stand in front of a moving train, so he likes the Treasury bond market (TLT), (TBT). He thinks the 30-year yield could reach an eye popping 2.25%. A break there is worth another 10 basis points. Bonds are getting a strong push from a flight to safety, huge US capital inflows, and an endlessly strong dollar.

Foreign Currencies

A short position in the Euro (FXE), (EUO) is the no brainer here. The problem is one of good new entry points. Real traders always have trouble selling into a free fall. But you might see profit taking as we approach $1.16 in the cash market.

The Aussie (FXA) is being dragged down by the commodity collapse and an indifferent government. The British pound (FXB) is has yet to recover from the erosion of confidence ignited by the Scotland independence vote and has further mud splattered upon it by the weak Euro.

Precious Metals

GOLD (GLD) could be in a good range pivoting off of the recent $1,140 bottom. The gold miners (GDX) present the best opportunity at catching some volatility. The barbarous relic is pulling up the price of silver (SLV) as well. Buy the hard breaks, and then take quick profits. In a deflationary world, there is no long-term trade here. It is a real field of broken dreams.

Energy

Jim is not willing to catch a falling knife in the oil space (USO). He has too few fingers as it is. It has become too difficult to trade, as the algorithms are now in charge, and a lot of gap moves take place in the overnight markets. Don?t bother with fundamentals as they are irrelevant. No one really knows where the bottom in oil is.

Agriculturals

Jim is friendly to the ags (CORN), (SOYB), (DBA), but only on sudden pullbacks. However, there are no new immediate signals here. So he is just going to wait. The next directional guidance will come with the big USDA report at the end of January. The ags are further clouded by a murky international picture, with the collapse of the Russian ruble allowing the rogue nation to undercut prices on the international market.

Volatility

Volatility (VIX), (VXX) is probably going to peak out her soon in the $23-$25 range. The next week or so will tell for sure. A lot hangs on Friday?s December nonfarm payroll report. Every trader out there remembers that the last three visits to this level were all great shorts. However, the next bottom will be higher, probably around the $16 handle.

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