(NOVEMBER 20 GLOBAL STRATEGY WEBINAR), (MAD HEDGE FUND TRADER MELTS UP TO 56% 2013 PERFORMANCE), (SPY), (IWM), (FXA), (TLT), (AAPL), (XLI), (C), (THE YEN IS DEAD MEAT), (FXY), (YCS), (DXJ), (TM), (SELLING BONDS AGAIN), (TLT), (TBT)
SPDR S&P 500 (SPY)
iShares Russell 2000 (IWM)
CurrencyShares Australian Dollar Trust (FXA)
iShares 20+ Year Treasury Bond (TLT)
Apple Inc. (AAPL)
Industrial Select Sector SPDR (XLI)
Citigroup, Inc. (C)
CurrencyShares Japanese Yen Trust (FXY)
ProShares UltraShort Yen (YCS)
WisdomTree Japan Hedged Equity (DXJ)
Toyota Motor Corporation (TM)
ProShares UltraShort 20+ Year Treasury (TBT)
https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png00Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2013-11-18 01:07:262013-11-18 01:07:26November 18, 2013
Last week, I begged you, pleaded with you, and even pounded the table to get you to increase your shorts in the Japanese yen (FXY), (YCS), and longs in the Japanese stock market (DXJ). I was certain that Japan?s beleaguered currency was about to break out of its tedious six month trading range and plumb new lows.
I turned out to be dead right.
My argument was that with the economy slowing, and Prime Minister Shinso Abe?s ?third arrow? economic reforms mired in the political muck, the Bank of Japan would have little choice but to accelerate its quantitative easing program. This would be terrible news for the yen and great news for stocks (DXJ), not just in Japan, but everywhere.
It turns out that while politicians are dithering, the central bank has little choice but to over stimulate on the monetary side to compensate. Haven?t I heard this story somewhere else before?
Take a look at the charts below, put together by my friends at Stockcharts.com. The (FXY)/(DXJ) inverse relationship is almost perfect. This is because a falling yen causes the profits of Japanese exports to rocket when they are translated back into their home currency. Look no further that Toyota?s (TM) fabulous 70% YOY profit gain.
Both charts are showing a major breakout for extended continuation triangles. The yen is telling you to load up on stocks, while stocks are telling you to sell the hell out of the yen. I say do both. In the global macro world it doesn?t get any easier than this.
However, regarding the Currency Shares Japanese Yen Trust (FXY) December, 2013 $102-$105 in-the-money bear put spreadwe already have on board, we have already sucked this position dry. At today?s prices, we can realize 87% of its maximum potential profit, and that is still with more than a month to go to expiration. The risk/reward has swung against us, and it is not worth hanging on for the extra 13%.
Give me a yen rally to sell into, and I will be back into this position in a heartbeat, as I have already done with bonds (TLT).
The Yen is Dead Meat
https://www.madhedgefundtrader.com/wp-content/uploads/2013/11/Ninja.jpg375453Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2013-11-18 01:04:442013-11-18 01:04:44The Yen is Dead Meat
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.
Bonds Have Suddenly Become Unloved
https://www.madhedgefundtrader.com/wp-content/uploads/2013/11/Girl-Sad.jpg329527Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2013-11-18 01:03:272013-11-18 01:03:27Selling Bonds Again
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.
Mad Day Trader Jim Parker
https://www.madhedgefundtrader.com/wp-content/uploads/2013/11/TA-Performance.jpg824577Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2013-11-15 14:34:572013-11-15 14:34:57Mad Hedge Fund Trader 2013 Performance Tops 51%
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)
https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png00Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2013-11-15 01:06:132013-11-15 01:06:13November 15, 2013
Today, many followers of the Mad Hedge Fund Trader?sTrade 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!
Well Done Traders!
https://www.madhedgefundtrader.com/wp-content/uploads/2013/11/Expiring-TA-Nov.-Opt..jpg772555Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2013-11-15 01:05:072013-11-15 01:05:07Watching the Cash Roll In
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.
The Aussie Has Been Hopping
https://www.madhedgefundtrader.com/wp-content/uploads/2013/09/Kangaroo.jpg298403Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2013-11-15 01:04:382013-11-15 01:04:38Hopping on the Aussie
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.
But Will It Take Me to a Great Trading Year?
https://www.madhedgefundtrader.com/wp-content/uploads/2013/11/Citibike.jpg312467Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2013-11-14 01:04:302013-11-14 01:04:30Loading Up On the Financials
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)
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