Global Market Comments
October 22, 2014
Fiat Lux
Featured Trade:
(BANK OF AMERICA IS BREAKING OUT ALL OVER),
?(BAC), (XLF), (TLT)
(AN EVENING WITH TRAVEL GURU ARTHUR FROMMER),
(THE TECHNOLOGY NIGHTMARE COMING TO YOUR CITY)
Bank of America Corporation (BAC)
Financial Select Sector SPDR ETF (XLF)
iShares 20+ Year Treasury Bond (TLT)
Global Market Comments
October 21, 2014
Fiat Lux
Featured Trade:
(10 SIGNS OF A MARKET BOTTOM),
(SPY), (IWM), (TLT), (FXE),
(HOW TO SELL SHORT A CALL SPREAD),
(SIGN UP NOW FOR TEXT MESSAGING OF TRADE ALERTS)
SPDR S&P 500 ETF (SPY)
iShares Russell 2000 (IWM)
iShares 20+ Year Treasury Bond (TLT)
CurrencyShares Euro ETF (FXE)
Bottom? Bottom? Where?s the market bottom?
The talking heads on TV have been working overtime speculating on where the worst move down in the stock market in three years will take us.
It all may sound like intelligent prognosticating to you.
As for me, I know they are guessing.
So I shall share with you my ten benchmark indicators that you can closely track to decide for yourself whether stocks are headed for perdition, or are soaring skyward once again.
1) Ten year Treasury bond yields start to rise, and break out above 2.30% (they are now at 2.18%).
2) The US dollar begins to appreciate once again, taking the Euro ETF (FXE) below $125.
3) Inflation expectations start to rise in Europe. Watch the monthly CPI numbers out of France and Italy, which have recently been negative.
4) Fed funds futures start to rise from near zero.
5) The price of crude oil stabilizes. Watch Brent, which will have the sharpest move up once recovery begins.
6) The small cap index, the Russell 2000 (IWM), starts to outperform the S&P 500 (SPY) on the upside. Smaller companies led the retreat on the downside, and should lead a new recovery as traders like me cover shorts (I already have).
7) Cyclical stocks, like airlines (DAL) outperform defensive stocks like soap and shampoo makers (PG) we already captured this with a (DAL) Trade Alert.
8) The junk bond market (HYG) starts to appreciate.
9) The macro data stream delivers a series of positive numbers.
10) People quit talking about the market bottom, and start opining about the next market top.
As you have probably figured out buy now with my flurry of recent Trade Alerts, I am leaning towards the probability that the bottom for stocks is already in. It?s all about oil.
I spent my weekend running numbers on the impact that cheap energy will have on the economy, and they are truly staggering. I list a few points below:
1) If oil stays down in this area, it will deliver a savings of $12,000 per family in gasoline, heating bills (being from California, I have only heard about these) and electricity.
2) The increased spending this will generate will add 1% to US GDP growth next year, as the cost of energy is pervasive through all industries, either directly, or indirectly.
3) This amounts to a $1.1 trillion stimulus package for the US economy, larger than the one we got in 2009. Think of it as a QE 4.
I rest my case.
Watch the Signs (My Infrared Picture)
It?s time to teach some old dogs some new tricks.
This is a bet that the S&P 500 does not climb to a new all time high by the November 21 expiration in 24 trading days.
I think that we need to chop around here a bit and consolidate within a wide range before the (SPY) starts its New Year run to all time highs.
Not wanting to leave a single penny on the table, I want to profit from this likely outcome. Therefore, I am adding a short position in the S&P 500 (SPY) November, 2014 $197-$202 out-of-the-money vertical call spread this morning.
The maximum profit point for this short position is anywhere below $197 in the (SPY), which is above the 50 day moving average. That is 5.7% above the Friday close.
When you sell short a security, your broker places the cash proceeds in your account, and leaves it there as collateral for the position. You give it back when you come out of the position at a later date, hopefully a lesser amount when the trade is profitable.
As long as the (SPY) doesn?t close above $197, you will be able to keep the entire $0.49 premium that you received in cash on the short sale. This cash you receive will be immediately credited to your account and left there until the options expire.
The upside breakeven point for the position is $197.49 (The $197 strike, plus the $0.49 premium you took in on the initial sale).
You can sell short this vertical call spread anywhere in a $0.40-$0.60 range and have a reasonable expectation of making money on this trade.
This is a new kind of position for my Trade Alert followers. It has exactly the same risk profile and margin requirement as buying an S&P 500 (SPY) November, 2014 $197-$202 deep in-the-money vertical put spread.
It does also give us some downside protection with which we can protect our existing long positions in case the market decides to take another swoon. We are just one US Ebola case from the next 300 point plunge in the Dow Average, and there are certain to be more. There is no shortage of morons on this earth.
If the (SPY) has already put in its final bottom and continues to appreciate, you will think you have died and gone to heaven, because your remaining substantial long positions in (BAC), (SPY), and short in the (FXE) will cause your P&L to soar.
You might then take a small loss on your short (SPY) call spread. But then, nobody complains when they buy fire insurance and their house doesn?t burn down. In the meantime, you get the benefit from time decay on this position.
Why am I doing this, other than to educate you on some new tricks of the trade?
Liquidity for deep out of the money puts has become so poor, and the market dislocations so great, that I can actually make more money now on shorting call spreads than buying put spreads, even though they are mirror images of each other.
If you don?t believe me, then try pricing out the (SPY) November $197-$202 deep in-the-money vertical bear put spread and see what you get. Mathematically, they should be the same. But the bid and offered spreads on the puts are wide enough to drive a Ferrari F-50 through.
It's the market makers way of reaching into your pocket and lifting out your wallet.
If all of this sounds too complicated, then just stand aside and watch how this position plays out. Then, maybe you can do it the next time, if conditions permit.
Global Market Comments
October 20, 2014
Fiat Lux
Featured Trade:
(MAD HEDGE FUND TRADER HITS NEW ALL TIME HIGH WITH 40% GAIN),
(SPY), (TBT), (TSLA), (BAC), (GILD), (DAL), (AAPL), (VIX),
(OCTOBER 22 GLOBAL STRATEGY WEBINAR)
SPDR S&P 500 ETF (SPY)
ProShares UltraShort 20+ Year Treasury (TBT)
Tesla Motors, Inc. (TSLA)
Bank of America Corporation (BAC)
Gilead Sciences Inc. (GILD)
Delta Air Lines, Inc. (DAL)
Apple Inc. (AAPL)
VOLATILITY S&P 500 (^VIX)
It was Thursday night, and the family was glued to the TV set. The San Francisco Giants were playing the St. Louis Cardinals for the National League Pennant.
It was the bottom of the 9th inning, the score was tied 3-3, and the Giants were up. Two men were already on base.
Then right fielder Travis Ishikawa blasted a home run out of the park, winning the game by 6-3. The fans went wild.
My kids rushed to the windows at my mountain top home and watched the barrage of fireworks in the distance.
It looks like I am going to the World Series for the third time in five years.
I have been smashing homers out of the park in my own way this year.
After weathering the worst market turmoil in three years, I managed to boost the performance of my Trade Alert Service this week to 40%, a new all time high.
So far in October, my followers are up a breathtaking 5.39%, a month when most professional traders are getting carried out on stretchers and sent to the Ebola ward.
This is compared to the miserable performance of the Dow Average, which is down -2% during the same period. That was on the heels of blockbuster 5.01% gain in September.
The nearly four year return is now at an amazing 162.4%, compared to a far more modest increase for the Dow Average during the same period of only 33%.
That brings my averaged annualized return up to 42%. Not bad in this zero interest rate world. It appears better to reach for capital gains and trading profits than the paltry yields out there.
This has been the profit since my groundbreaking trade mentoring service was first launched in 2010. Thousands of followers now earn a full time living solely from my Trade Alerts, a development of which I am immensely proud.
What saved my bacon this month was my decision to pile on a hefty 40% short position at the September market top. I warned readers that the Alibaba IPO would suck the life out of the knocked the market and it would take a while to recover. Once the deal was priced, it was all over but the crying.
Wall Street gets so greedy, and takes so much money out for itself, there is nothing left for the rest of us poor traders and investors. They literally kill the goose that lays the golden egg. Share prices have nowhere left to go but downward.
Add to that Apple?s iPhone 6 launch on September 8 and the market had nothing left to look for. The end result has been the worst trading conditions in three years. However, my double short positions in the S&P 500 (SPY) and the Russell 2000 (IWM) provided the lifeboat I needed.
This gave me the extra profit I needed to weather the losses I took on my long side positions. One long stock position I did have, in Tesla (TSLA), I stopped out of with a tolerable loss, strategically cutting my highest beta momentum position.
A second long in Bank of America (BAC) I held on to, knowing full well that an impending positive earnings report would provide a parachute there. That is the power of research, to enable you to stick to your guns when the going gets rough.
I rolled another long position down and out for another loss, switching my (SPY) October $180-$185 vertical bull call spread into a November $168-$173 strike. As long as the (SPY) stays above $173, I should make back everything I lost n the first trade.
Finally, after spending two months touring dreary economic prospects on the Continent, I doubled up my short positions in the Euro (FXE), (EUO).
This extra protection kicked in this week when the market meltdown ensured in earnest and volatility (VIX) soared from $17 to $30.
I then spent Wednesday and Thursday covering short positions, and piling in new longs in Gilead Sciences (GILD), Delta Airlines (DAL), and Apple (AAPL). We may get a one day wonder from Apple, which reports quarterly earnings after the close today.
The market melt up that ensued on Friday delivered the biggest up day in the history of the Trade Alert Service, gaining 6.2%. All in all, it was a chorus of masterful trading, if I do say so myself.
It has all been a vindication of the trading and investment strategy that I have been preaching to followers for the past seven years. No one got wiped out. No one got a margin call. I quickly cut the highest risk positions, enabling me to ride out the storm with the rest. It all worked.
The only position I have currently bedeviling me is a premature short in the Treasury bond market in the form of the ProShares Ultra Short 20+ Treasury ETF (TBT).
Occasionally, the world does go mad. From the Tuesday high to the Wednesday low, yields on the ten-year Treasury bond plunged an unbelievable 44 basis points, from 2.30% to 1.86%, and then back to 2.20%.
All of the short positions in the market have been cleaned out (except ours). All of the margin calls are done. Fortunately, the hit there for us has been manageable. Our position in the (TBT) is relatively unleveraged and small.
Quite a few followers were able to move fast enough to cash in on the move. To read the plaudits yourself, please go to my testimonials page by clicking here. They are all real, and new ones come in almost every day.
Our business is booming, so I am plowing profits back in to enhance our added value for you. The latest, our updated website, has a new look and is more user friendly.
The coming year promises to deliver a harvest of new trading opportunities. The big driver will be a global synchronized recovery that promises to drive markets into the stratosphere by the end of 2014.
Global Trading Dispatch, my highly innovative and successful trade-mentoring program, earned a net return for readers of 40.17% in 2011, 14.87% in 2012, and 67.45% in 2013.
Our flagship product, Mad Hedge Fund Trader PRO, costs $4,500 a year. It includes Global Trading Dispatch?(my trade alert service and daily newsletter). You get a real-time trading portfolio, an enormous research database and live biweekly strategy webinars. You also get Jim Parker?s?Mad Day Trader?service and?The Opening Bell with Jim Parker.
To subscribe, please go to my website at?www.madhedgefundtrader.com, click on the ?Memberships? located on the second row of tabs.
It Has Been a Week of Soaring Homers
?The dirty little secret in Washington is that the biggest doves wear uniforms. They have seen wars and they have seen consequences. They have also been sent into conflict and then seen political support evaporate. We need to be a lot more careful when deploying our military forces.? said former Secretary of Defense, Robert Gates.
Global Market Comments
October 17, 2014
Fiat Lux
Featured Trade:
(THE BOTTOM BUILDING PROCESS HAS BEGUN),
(SPY), (TLT), (TBT), (GILD), (AAPL), (DAL),
(FRIDAY OCTOBER 24 SAN FRANCISCO STRATEGY LUNCHEON)
(REVISITING CHENIERE ENERGY),
(LNG), (USO), (UNG)
SPDR S&P 500 ETF (SPY)
iShares 20+ Year Treasury Bond (TLT)
ProShares UltraShort 20+ Year Treasury (TBT)
Gilead Sciences Inc. (GILD)
Apple Inc. (AAPL)
Delta Air Lines, Inc. (DAL)
Cheniere Energy, Inc. (LNG)
United States Oil ETF (USO)
United States Natural Gas ETF (UNG)
I have an arrangement with several large hedge funds where they pay me a small fortune every month for the privilege of calling me one day a year.
Wednesday was that day.
It was a day when the $20 billion hedge fund waited on hold while I got off the phone with the $100 billion hedge fund. And that?s not including urgent calls from the White House, the office of the Joint Chiefs, and the Federal Reserve.
Of course, no one needs to tell these guys how to chew gum. They were interested to know if they were missing anything.
The advice I gave them was very short and simple: ?Keep your eye on the economic data, and ignore everything else.?
You can palpably feel the tension when enduring crisis like these. The Internet noticeably slows down. Transatlantic and Transpacific phone lines get clogged up. Traffic on our website, www.madhedgefundtrader.com, rises tenfold.
So do plaintive emails from followers, everyone of which I attempt to answer quickly. To save time, I will give a generic answer to all of you in advance: ?No, it is not time to stop out of your ProShares Ultra Short 20+ Treasury Bond ETF (TBT) position at the $46 handle.? We are at a multiyear peak in bonds, and this is absolutely not the place to puke out. That?s why I always keep my positions small.
You have to allow room for markets to breathe and still be able to hang on when it goes against you. It is also nice to have the dry powder to double up.
I know some of you are suffering from sleepless nights, so I?ll make it easy for you. We have hit bottom for the year. This is the best time in three years to buy stocks, just in case you forgot to load up at any time since 2011. Ditto for bonds on the sell side.
Earnings started coming out last week, and many companies have been delivering blockbuster reports, as I expected. Over all, I think we can expect total S&P 500 earnings to rise by $11.
This means that, given the market?s recent 10% plunge, stocks are now selling at 12.5 X 2015 earnings. That is a rare bargain. It is a chance to buy shares at 2011 valuations. Don?t blink and miss it.
The big driver hasn?t been the Ebola virus, the risk of which has been wildly exaggerated by the media, but the collapse of the price of oil.
I think we got very close to a bottom of the entire move this morning when we tickled $80. I take North Dakota fracking pioneer John Hamm?s view: If this isn?t the bottom, it is close, and wherever the bottom, we will race right back up to $100 sometime next year on China?s insatiable demand.
That means you buy stocks right now.
For a fuller explanation of the fundamentally bullish argument for the stock market, please click here ?10 Reasons Why the Bull Market is Still Alive?.
Now Is the Time to Have a Gunslinger Working on Your Behalf
Come join me for lunch at the Mad Hedge Fund Trader?s Global Strategy Update, which I will be conducting in San Francisco on Friday, October 24, 2014. An excellent meal will be followed by a wide-ranging discussion and an extended question and answer period.
I?ll be giving you my up to date view on stocks, bonds, currencies, commodities, precious metals, and real estate. And to keep you in suspense, I?ll be throwing a few surprises out there too. Tickets are available for $188.
I?ll be arriving at 11:00 and leaving late in case anyone wants to have a one on one discussion, or just sit around and chew the fat about the financial markets.
The lunch will be held at a private club in downtown San Francisco near Union Square that will be emailed with your purchase confirmation.
I look forward to meeting you, and thank you for supporting my research. To purchase tickets for the luncheons, please go to my online store.