Mad Hedge Fund Trader

Selling Bonds Again

You all know well my antipathy to the bond market, which I believe hit a 60-year peak on August 18, 2012 at 10:32 AM EST. I managed to catch the exact top of the one-month post taper bond market rally, and sent the Trade Alerts to sell bonds showering upon you. I quickly closed all of those out for nice profits.

We have since seen a $2.24 dead cat bounce in the (TLT) that took the yield on the ten year Treasury bond back down to 2.68%, off of the recent 2.77% top. That is enough for me to sell into.

Take a look at the chart below, and you will see that we are probably setting up an interim head and shoulders top that presages much larger moves lower to come.

The rocket fuel for this break will be the yearend selling where money managers attempt to minimize their bond exposure that appears in their annual reports so as not to appear too stupid to their customers. Then we have the ?Great Reallocation? trade out of bonds into stocks, which should get some real legs in 2014.

This all promises to take the (TLT) down from today?s $104.51 to $98 or lower over the next six months. If I am wrong on this, then we should hit major resistance for the (TLT) on the upside at $106.80, where you would expect the right shoulder formation to begin that will carry us safely into the December 20 expiration. This could be the trade that keeps on giving.

If you can?t do the options, you can buy the ProShares Ultra Short 20+ Year Treasury leveraged short ETF (TBT) on the dip. My very long-term target for this baby is $200, up from today?s $76.70.

TLT 11-15-13

TBT 11-15-13

Girl-SadBonds Have Suddenly Become Unloved

Mad Hedge Fund Trader

Mad Hedge Fund Trader 2013 Performance Tops 51%

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The Trade Alert service of the Mad Hedge Fund Trader has posted yet another new all time high in performance, taking in 51.13%. The November month to date record is now an enviable 6.67%.

The three-year return is an eye popping 106.18%, compared to a far more modest increase for the Dow Average during the same period of only 20.3%.
That brings my averaged annualized return up to 36.4%.

This has been the highest profit since my groundbreaking trade mentoring service was launched 35 months ago. These numbers place me at the absolute pinnacle of all hedge fund managers, where the year to date gains have been a far more pedestrian 3%. I predict the arrival of a lot more job seekers on Craig?s List in January.

These numbers come off the back of another blistering week in the market where I added 5.13% in value to my model-trading portfolio.

I took profits on all of my extensive shorts in the Treasury bond market, taking advantage of the sudden back up in ten-year yields from 2.47% to 2.77%, the sharpest move of the year.

I then bet that the stock market would continue another tedious sideways correction going into the Thanksgiving holidays. I bought an in the money put spread on the S&P 500, and then bracketed the index through buying an in the money call spread.

When the market took a swan dive on Thursday, my short position then protected my P&L from undo volatility. I accomplished the same with a second short position in the Russell 2000 (IWM). I then took advantage of the weakness to add another long in the Industrials ETF (XLI), a rifle short at one of the best performing sectors of the market.

This is how the pros do it, and you can too, if you wish.

Carving out the 2013 trades alone, 61 out of 72 have made money, a success rate of 85%. It is a track record that most big hedge funds would kill for.

My esteemed colleague, Mad Day Trader Jim Parker, has also been coining it. He caught a spike up in the volatility index (VIX) by both lapels. He also was a major player on the short side in bonds, to the delight of his many followers. By the way, Jim will be following up with another educational webinar on How to Trade this coming Wednesday, and you should receive email invitations for this shortly.

The coming winter 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 in 2014. The Trade Alerts should be coming hot and heavy. Please join me on the gravy train.

Global Trading Dispatch, my highly innovative and successful trade-mentoring program, earned a net return for readers of 40.17% in 2011 and 14.87% in 2012. The service includes my Trade Alert Service and my daily newsletter, the Diary of a Mad Hedge Fund Trader. You also get a real-time trading portfolio, an enormous trading idea database, and live biweekly strategy webinars. Upgrade to Global Trading Dispatch PRO and you will also receive Jim Parker?s Mad Day Trader service.

To subscribe, please go to my website at www.madhedgefundtrader.com, find the ?Global Trading Dispatch? box on the right, and click on the lime green ?SUBSCRIBE NOW? button.

TA Performance

Jim ParkerMad Day Trader Jim Parker

Mad Hedge Fund Trader

November 15, 2013

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Global Market Comments
November 15, 2013
Fiat Lux

Featured Trade:
(WATCHING THE CASH ROLL IN),
(SPY), (IWM), (FXE), (XLI), (C), (FXA), (AAPL),
(HOPPING ON THE AUSSIE),
(FXA), (EWA), (FCX),
(LUNCH WITH ROBERT REICH)

SPDR S&P 500 (SPY)
iShares Russell 2000 (IWM)
CurrencyShares Euro Trust (FXE)
Industrial Select Sector SPDR (XLI)
Citigroup, Inc. (C)
CurrencyShares Australian Dollar Trust (FXA)
Apple Inc. (AAPL)
iShares MSCI Australia (EWA)
Freeport-McMoRan Copper & Gold Inc. (FCX)

Mad Hedge Fund Trader

Watching the Cash Roll In

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Today, many followers of the Mad Hedge Fund Trader?s Trade Alert service have up to eight November option spreads expiring at their maximum potential profit.

My strategy of taking advantage of the short November expiration calendar and betting that the markets stay in narrow ranges turned out to be wildly successful. At this stage I am batting eight for eight. If these all work, then I will have issued 15 consecutive profitable Trade Alerts since October, something most hedge fund managers would die for at this time of the year.

I have already taken profits on five of my November positions, but judging from the email traffic, many of you are hanging on to the bitter end and have asked me how to handle these.

It?s really easy. You don?t have to do anything. Nada, Squat.

Trading in the underlying ceases today, Friday, November 15 at 4:00 PM EST. The contracts legally expire on Saturday night, November 16. The cash profit is then credited to your account on Monday, November 18, the margin freed up, and the position disappears into thin air.

Only the (SPY) November 2013 $180-$183 bear put spread is giving us a run for our money. As I write this, the (SPY) is trading at$179.27, and we are a mere 73 cents in the money on the $180 puts that we are short.

If the (SPY) closes on Friday over $180, then you will be short 100 shares for every contract of the November $180 puts that you are short. Your long position in the November, $183 puts expired on Friday, so you will be naked short. This is not a position you want to have.

It is always best to cover this at the opening on Monday morning to limit your losses and keep your risk from running away. You may also not have sufficient margin to run a naked short, so If you don?t liquidate, your broker will, probably at a worse price.

Don?t try to trade a leveraged short (SPY) position in a bull market. It?s probably beyond your pay grade, and I doubt you?ll sleep at night.

I?m betting that the (SPY) will close on Friday below $180, so I am hanging on to my position. With only one single day to expiration, it is a coin toss what will happen. But with the markets this sluggish, if I am wrong, it will only be by pennies. Quite honestly, being up 56% on the year I don?t mind taking a gamble here.

 

I know all of this sounds very complicated to the beginners among you. Don?t worry, this all becomes second nature after you?ve done the first few thousand of these.

If you have any doubts, call your broker and they will tell you what to do, especially the part about you needing to do a thousand more trades.? Here, an ounce of prevention is worth a pound of cure. Then it?s on to the next trade.

In the meantime, take your winnings and plan your winter Caribbean holiday with your significant other. Or plan a ski vacation at Incline Village in Nevada. They?ve already had two nice dumps of snow. If you do, drop me a line and I?ll take you out for coffee at Starbucks.

Well done, traders!

Expiring TA Nov. Opt.

SPY 11-14-13

BusinessJohnThomasProfileMap2-2Well Done Traders!

Mad Hedge Fund Trader

Hopping on the Aussie

We have a fantastic double bottom developing here on the charts for the Australian dollar (FXA). I think that RISK ON will be the order of the day for the next six months, and the currency of the Land Down Under should prosper mightily.

This is a play on the modest recovery of the Chinese economy continuing, as Australia is far and away their largest supplier to them of bulk commodities. It is also a bet that the global synchronized recovery remains on track in 2014, as I expect.

You can see from the chart below that the Australian stock market (EWA) is also reaching this conclusion, putting in a similar short term bottom to the (FXA). For a third assenting vote, look at the chart of copper producer Freeport McMoRan (FCX).

We did well with our last long play in the Aussie. Since then, we have seen a 4.5% pullback, almost exactly a 50% retracement of the entire move since August, from $88.5 to $97.5. This was prompted by more negative comments from the governor of the Reserve Bank of Australia, who is making every effort to talk his currency down and strengthen his own economy.

These (FXA) options are fairly illiquid, and trade at double the normal spread found in the foreign exchange options market, so execution here is crucial. Put in a strict limit order for the spread that works for you. If you don?t get done, just walk away and wait fore the next Trade Alert, of which there will be many.

FXA 11-14-13

ewa 11-14-13

FCX 11-14-13

KangarooThe Aussie Has Been Hopping

Mad Hedge Fund Trader

November 14, 2013

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Global Market Comments
November 14, 2013
Fiat Lux

Featured Trade:
(LOADING UP ON THE FINANCIALS),
(C), (BAC), (JPM), (MS), (XLF)
(THE BULL MARKET IN AMERICAN COLLEGE DEGREES)

Citigroup, Inc. (C)
Bank of America Corporation (BAC)
JPMorgan Chase & Co. (JPM)
Morgan Stanley (MS)
Financial Select Sector SPDR (XLF)

Mad Hedge Fund Trader

Loading Up On the Financials

After ignoring the financial sector for most of the year, I am more than happy to jump into it here. The sector has been a serious laggard for the past three months, trailing the front-runners I picked in technology, industrials, health care, and consumer cyclicals. After chasing these favorites, traders are now looking for new fresh meat to devour.

No one would touch financials with a bargepole while interest rates were falling. This is because banks are most profitable when short-term interest rates, where they borrow, are low, while longer-term rates that they lend at, are rising. Falling interest rates make financials a no go area. They have done so with a vengeance after the September Federal Reserve decision not to taper its quantitative easing program.

Two weeks ago interest rates bottomed and began a rapid upswing, which I believe could last many months. We could even see ten-year Treasury bonds rebound from the recent 2.47% low back up to 3.0% by year-end, and 4.0% by the end of 2014.

That?s why I called the top of the bond market two weeks ago and showered you with a machine gun succession of Trade Alerts to go short Treasuries, all of which became immediately profitable. Those who followed my advice soon found money raining down upon them.

By buying bank shares here you are playing the second derivative of the short bond trade. Banks are about to go from being less profitable to more profitable during a falling bond price, rising interest rate environment. I have published three books on this topic, so believe me, I know. Every trader on the street understands this, hence the sudden renaissance of the financials.

I picked Citibank (C) because I know the former CEO, Vikram Pandit, well having worked with him for a decade at Morgan Stanley (MS). That relationship gave me unequaled access to the inner workings of this financial institution.

Citibank is not the target of multiple government civil and criminal prosecutions, as JP Morgan (JPM) has become, thanks to the London whale incident. They also do not suffer from the legacy problems bedeviling Bank of America (BAC), which they stepped into with their multiple acquisitions during the financial crisis.

Citibank also sponsors that really cool bike sharing program in Manhattan, called, what else, Citibike.

There is another method to my ?Madness? here. Take a look at the six-month chart for (C) shares. It shows absolute rock solid support at the $47.40 floor. That makes the Citicorp December $45-$47 bull call spread a complete no-brainer.

If you don?t like Citibank you can caste a wider net and buy the Financial Select Sector SPDR ETF (XLF). You can click here to find the precise index makeup and the fund details. Berkshire Hathaway is the largest holding, with an 8.18% weighting, while Citibank is the fifth largest holding with a 6% weighting.

C 11-13-13

XLF 11-8-13

TNX 11-13-13

CitibikeBut Will It Take Me to a Great Trading Year?

Mad Hedge Fund Trader

November 13, 2013

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Global Market Comments
November 13, 2013
Fiat Lux

Featured Trade:
(DOUBLING UP ON MY YEN SHORTS),
(FXY), (YCS), (DXJ), (UUP),
(SAN FRANCISCO?S SUFFERING RENTERS TAKE ANOTHER HIT),
(WHERE THE ECONOMIST ?BIG MAC? INDEX FINDS CURRENCY VALUE),
(MCD), (FXE), (YCS), (FXF), (CYB)
(TESTIMONIAL)

CurrencyShares Japanese Yen Trust (FXY)
ProShares UltraShort Yen (YCS)
WisdomTree Japan Hedged Equity (DXJ)
PowerShares DB US Dollar Index Bullish (UUP)
McDonald's Corp. (MCD)
CurrencyShares Euro Trust (FXE)
CurrencyShares Swiss Franc Trust (FXF)
WisdomTree Chinese Yuan (CYB)

Mad Hedge Fund Trader

Doubling Up On My Yen Shorts

My bet that the Japanese yen (FXY) would weaken against the dollar has paid off handsomely. I am now so confident that we are finally breaking out of a six month trading range to the downside that I am more than happy to double my short position in the yen.

I am therefore taking on the Currency Shares Japanese Yen Trust (FXY) December, 2013 $101-$104 in-the-money bear put spread, moving $1 down in the strikes, but keeping an ever shortening December 20 expiration. The other nice thing about this position is that we will benefit greatly from time decay going into the volatility sapping Thanksgiving and Christmas holidays.

The official reason for the weakness is that the shockingly strong October nonfarm payroll released on Friday will prompt the Federal Reserve to taper its quantitative easing program sooner than later, possibly as early as the December meeting. That would raise interest rates for the greenback while yen interest rates will remain nailed to zero for years to come. This is important, as interest rate differentials are the primary driver in the foreign exchange markets.

The real reason is that traders expect the Bank of Japan to become more aggressive in its campaign to weak the yen and further stimulate economic growth. Japanese companies are now reporting blockbuster earnings, thanks to a falling yen, and the central bank would like to see more of the same.

With the Japanese government actively seeking to cut the knees out from under their own currency, while the Fed will soon take moves to strengthen theirs, a short yen/long dollar trade here a no brainer.

The Tokyo stock market is certainly a believer. Last night, the Nikkei average soared by 2.2%, the biggest move in three months. That?s why I have also been recommending the Wisdom Tree Japan Hedged Equity ETF (DXJ) for longer-term investors, a long stock/short yen ETF.

For more probing and illuminating depth on why the Japanese yen is about to crater, please read ?The Party is Just Getting Started With the Japanese Yen?.

FXY 11-12-13

YCS 11-12-13

DXJ 11-12-13

Woman - Hari KariIt?s All Over for the Yen

Mad Hedge Fund Trader

November 12, 2013

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Global Market Comments
November 12, 2013
Fiat Lux

Featured Trade:
(YOU JUST CAN?T KEEP AMERICA DOWN),
(TLT), (SPY), (GLD),
(A SPECIAL NOTE ON NOVEMBER EXERCISED OPTIONS)

iShares 20+ Year Treasury Bond ETF (TLT)
SPDR S&P 500 (SPY)
SPDR Gold Shares (GLD)

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