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1) Market Outlook for the Week Ahead, or The Teflon Market That Won?t Quit

I hate using worn out, hackneyed clich?s like ?Teflon market? or ?Goldilocks,? but it was one heck of a Teflon Goldilocks market last week. The FANG?s truly went bananas.

Stocks had every excuse for the wheels to fall off.

The president?s chief economic advisor resigned. The US declared the most ferocious trade war since the 1930?s, which should cut US GDP growth by 0.5%. The administration appeared to be lurching from one disaster to the next.

And it all turned out to be yet another fabulous buying opportunity, and a chance to go solidly ?RISK ON?.

As I expected.

It is another demonstration of an old trading nostrum that has served me faithfully for half a century. If you throw bad news on a market and it fails to fall, you buy it.

With the buckets of bad news poured on the market it should go ballistic.

And so it has.

If you were long technology stocks like (INTC), (AAPL), (FB), short US Treasury bonds (TLT), and short the Euro (FXE), as I have been begging, pleading, and beseeching you to do, you just saw one of your best trading week of the year.

And guess what? It?s going to get a lot better. We still have two months of seasonal buying before stocks depart for the normal summer correction. And you can make a lot of money in two months.

What really poured gasoline on the fire was a blockbuster February Nonfarm Payroll Report, up some 313,000. That is 120,000 over expectations. The Headline Unemployment Rate remained steady at 4.1% a ten year low.

The real crusher was that this frenetic rate of job creation caused Hourly Wages to go up only 0.1%, or essential zero, meaning that inflation is nowhere to be seen anywhere. It was a number that left economists everywhere scratching their heads.

The December and January reports were revised upward by 54,000 jobs.

Construction was up by 61,000, Retail was up 50,000, and Professional and Business Services up by 50,000. No doubt a big chunk of this was prompted by deficit financed tax cuts.

The only sector showing job losses was in Information Technology, down some 12,000.

The U-6 broader ?discouraged worker? jobless rate stayed at 8.2%.

Overall, the total size of the workforce jumped by 806,000, the largest gain since 1983.

It was essentially a perfect report.

I would be remiss in not remembering the nine-year anniversary of the end of the stock market crash on March 9, 2009. ?

In those days, the S&P 500 futures were wildly swinging at 100 points a pop. The Nonfarm Payroll Reports were then printing horrifying losses of 700,000 a month.

As the bad news always seemed to come out on Sundays, you could buy a put option at the Friday afternoon close and it would be up 400% at the Monday morning opening. We raked the profits in. Those were the days!

I turned bullish a week later and have remained so ever since. How times have changed.

It was another great week for the Mad Hedge Fund Trader Alert Service, almost clawing our way all the way back to another new all-time high. We only need to make another 1.95% and we?ll be there, hopefully sometime next week.

A double position in Apple (AAPL) really gave us a turbocharger, with that stock just short of a new all-time high, and up $10 from our last ?BUY?. The Iron Condor in Facebook (FB) will expire at its maximum profit point on Friday.

We already took profits in our short in the US Treasury bond market (TLT) on a quick 48-hour turnaround. The short position in the Euro is firing on all cylinders.

Mercifully, we got out of you short in the Japanese yen (FXY) at cost as a risk control measure. It looks like those who kept the positon will get the maximum profit there anyway.

Having survived the February nightmare, I now feel invincible.

This coming week is fairly subdued on the data front.

On Monday, March 12 nothing of note is released.

On Tuesday, March 13 at 8:30 AM we learn the all-important February Consumer Price Index to see if inflation really is asleep. This has recently become one of the most important numbers of the month.

On Wednesday, March 14, at 8:30 AM EST, we get February Retail Sales.

Thursday, March 15 leads with the Empire State Manufacturing Survey at 8:30 AM EST. Weekly Jobless Claims are announced at the same time.

On Friday, March 16 at 8:30 AM EST we get the February Housing Starts.

At the close we undergo a Quadruple Witching in the options market with several monthly series expiring today.

At 1:00 PM we receive the Baker-Hughes Rig Count, which saw a small rise of only one last week.

As for me, I am going to be shopping for a new Steinway Grand Piano. I have made so much money his year that it?s time to upgrade and go for the max with a Model D concert grand piano!

Good luck and good trading!

2) How to Handle the Friday March 16 Options Expiration

We have the good fortune to have several options positions left that expire on Friday, March 16 in four trading days and I just want to explain to the newbies how to best maximize their profits.

This involves the:

Currency Shares Euro Trust ETF (FXE) March 16 $120-$123 vertical bear put debit spread

The Facebook (FB) March 16 $155-$165 vertical bull call debit spread

The Facebook (FB) March 16 $190-$195 vertical bear put debit spread

Provided that some we don?t have a monster ?RISK OFF? move in the market over the next few days (war with North Korea?), which cause bonds to rally big time, these position should all expire at their maximum profit point below.

Your profit on each position should amount to the following:

(FXE) put spread - $2,000 or 20.00% in 18 trading days
(FB) call spread - $1,800 or 17.64% in 33 trading days
(FB) put spread - $1,266 or 12.35% in 22 trading days

Many of you have already emailed me asking what to do with these winning positions.

The answer is very simple. You take your left hand, grab your right wrist, pull it behind your neck and pat yourself on the back for a job well done.

You don?t have to do anything.

Your broker (are they still called that?) will automatically use your long ?positions to cover your short positions, cancelling out the total holdings.

The profit will be credited to your account on Monday morning March 12, and he margin freed up.

Some firms charge you a modest $10 or $15 fee for performing this service.

If you don?t see the cash show up in your account on Monday, get on the blower immediately.

Although the expiration process is now supposed to be fully automated, occasionally mistakes do occur. Better to sort out any confusion before losses ensue.

I don?t usually run positions into expiration like this, preferring to take profits two weeks ahead of time, as the risk reward is no longer that favorable.

But we have an excess cash right now, and I don?t see any other great entry points for the moment.

Better to keep the cash working and duck the double commissions. This time being a pig paid off handsomely.

If you want to wimp out and close the position before the expiration, it may be expensive to do so.

Keep in mind that the liquidity in the options market disappears, and the spreads substantially widen, when a security has only hours, or minutes until expiration on Friday. So if you plan to exit, do so well into the final expiration.

This is known in the trade as the ?expiration risk.?

One way or the other, I?m sure you?ll do OK, as long as I am looking over your shoulder, as I will be.

I am going to hang back and wait for good entry points before jumping back in. It?s all about getting that ?Buy low, sell high? thing going.

I?m looking to cherry pick my new positions going into yearend.

Take your winnings and go out and buy yourself a well-earned dinner. Or use it to pay your upcoming 2017 income tax bill.

It?s probably going to be a big one, given how much money you made trading this year.

Well done, and on to the next trade.

Quote of the Day

When asked how he felt when visiting the Federal Reserve at the height of the financial crisis, Goldman Sachs CEO Lloyd Blankfein responded, ?I?m getting out of a Mercedes to go to the Federal Reserve, not getting out of a Higgins Boat going to Omaha Beach.?

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