Posts

October 1, 2019

Global Market Comments
October 1, 2019
Fiat Lux

Featured Trade:

(LAUNCHING THE NEW MAD HEDGE BIOTECH AND HEALTHCARE LETTER)
(THE NEW AI BOOK THAT INVESTORS ARE SCRAMBLING FOR),
(GOOG), (FB), (AMZN), MSFT), (BABA), (BIDU),
(TENCENT), (TSLA), (NVDA), (AMD), (MU), (LRCX)

September 10, 2019

Global Market Comments
September 10, 2019
Fiat Lux

SPECIAL ARTIFICIAL INTELLIGENCE ISSUE

Featured Trade:
(NEW PLAYS IN ARTIFICIAL INTELLIGENCE),
(NVDA), (AMD), (ADI), (AMAT), (AVGO), (CRUS),
 (CY), (INTC), (LRCX), (MU), (TSM)

New Plays in Artificial Intelligence

It’s been three years since I published my first Special Report on artificial intelligence and urged readers to buy the processor maker NVIDIA (NVDA) at $68.80.

The stock quadrupled, readers are understandably asking me for my next act in the sector.

The good news is that I have one.

For a start, you could go out and buy NVIDIA again.

With an explosive 50% annual earnings growth, a near-monopoly in super fast processors, and a huge lead over the competition, I think there is another double in the shares that could take the price up to a stratospheric $300. Its newest super-fast graphics card, the Turing, promises to be a real barn burner and dominate the industry yet again.

But I can do better than that.

The good news if you are new to this sector is that the entire AI space has started to broaden out to offer a host of investment opportunities beyond the tiny handful I first mentioned in 2016.

These include legacy chipmakers, survivors of the great Dotcom bust, whose shares have barely moved in years.

Yes, there is such a thing as a cheap AI stock. To find out who they are, read on.

The reason for the expansion of the AI sector is that practically overnight these ultra-sophisticated algorithms have become essential to any company that wants to survive in online commerce or stay in business….period.

Those of us who have been in this business for more than 15 minutes have seen this pattern before, and the resulting impact on share prices: the Boeing 707, the personal computer, Windows, the Internet, and the smart cell phone.

AI is everywhere.

In the old days, visiting a website and window-shopping their products was easy. You just clicked around a few times and then moved on to the next site.

Now if you click on a product once, that site will follow you around relentlessly for months, appearing in the margins of your emails, offering you endless discounts and special deals.

I bought a Dell computer six months ago, and it is still pounding away at me with better offers. I feel like such a dummy buying a machine at the first price asked.

That is all AI.

The auto industry is now a major growth industry for AI. Even a simple garden-variety vehicle needs 100 chips just to operate.

The gull-wing doors on my new Tesla Model X each has its own learning program. They never open the same way twice.

In fact, when I first picked up the car last year, the salesman warned by saying it would be “stupid” for the first 3,000 miles.

It had to “learn” how to drive before I let it attempt any sophisticated self-driving maneuvers, like backing into a parking space on a crowded street.

I let it park itself in my garage now. I have only had a heart attack once.

With US annual auto production at 16.7 million units annualized, and global car and commercial vehicle production at a record 94.64 million, that is a lot of processors.

I have been covering Silicon Valley since it was a verdant, sun-kissed peach orchard in Northern California.

I have to say that in the half-century that I have followed the technology industry, I have never seen the principals, gurus, and visionaries so excited about a major new trend like AI.

Asking if AI is relevant now is like pondering the future of Thomas Edison’s new electricity invention in 1890.

If you think that AI still belongs in the realm of science fiction, you obviously didn’t get the memo. It is all around us all the time, 24/7. You just don’t know it yet.

And here’s the rub.

It is impossible to invest purely in AI.

All-new AI startups comprise small teams of experts from private labs and universities financed by big venture capital firms like Sequoia Capital, Kleiner Perkins, and Andreeson Horowitz.

After developing software for a year or two, they are sold on to major technology firms at huge premiums. They never see the light of day in the form of a public listing.

Alphabet (GOOGL) acquired Britain-based Deep Mind in 2014. Later that year, Google’s AlphaGo program defeated the world’s top-ranked Go player.

In 2016, Microsoft (MSFT) purchased Equivio, a small firm that applies AI to advanced document searches on the Internet.

Amazon (AMZN) recently bought out Orbeus, a startup known for machine learning tools for image recognition.

Amazon’s Jeff Bezos now says that his Amazon Fresh home food delivery service is using AI to grade strawberries.

Really!

We’re not talking small potatoes here.

The global artificial intelligence market is expected to grow at an annual rate of 44.3% a year to $23.5 billion by 2025.

Nearly half of all applications now use some form of AI that by 2020 will earn businesses an extra $60 billion a year in profits.

And from what I have learned from speaking to the major players over the last few weeks, I am convinced that these are low numbers by an order of magnitude.

I have been following developments in artificial intelligence since the 1960s.

There were those feeble computer dating attempts in the early seventies where we all had to prepare IBM punch cards.

I was matched with an annoyingly aggressive bleach blonde real estate agent. (Really?). Her only real qualification was that she was female.

It took decades and tens of thousands of programming man-hours before IBM’s Deep Blue could become a chess grandmaster in 1996, defeating Gary Kasparov.

Big Blue’s latest effort came to us with Watson in 2007, an 85,000-watt behemoth with 90 servers and 15 terabytes of data, or three quarters of the content of the entire Library of Congress.

The machine can read a staggering 1 million books a second. IBM has so far poured $15 billion into the project.

In 2011, Watson defeated the top-rated Jeopardy game show contestant by answering the question “What city’s national museum lost the “Lion of Nimrod.” The answer was “What is Baghdad” (I knew that!).

Today, Watson is on loan to the University of North Carolina at Chapel Hill where it has been deployed to cure cancer.

It took scientists a week to teach Watson how to read medical literature. In the second week, it read every paper published on cancer, some 25 million.

By the third week, it was proposing customized cures for advanced cancer patients, which achieved a 33% success rate.

After all, it can read all of the 8,000 cancer papers that are published every day from around the world IN SECONDS!

Scientists say that Watson has so far reached only 1% of its true potential.

It gets better than that.

A clinic can now biopsy your tumor, sequence its DNA, design a custom protein that will target and destroy your personal tumor, mass-produce it, inject it in your tumor, and cure you of cancer in a month.

This is being done with human volunteers in clinical trials NOW.

Expect this procedure to go retail and be made available to you in about five years. And by that, I mean cheap, locally available, and covered by your health insurance policy.

I believe that Watson and its future offspring will cure the major human maladies within a decade. My generation will probably be the last to suffer serious disease.

It isn’t just Watson that will take us the great leap forward in computing. By 2020, you will be able to buy a low-end laptop for $500 that can hold ALL KNOWLEDGE ACCUMULATED IN HUMAN HISTORY!

They better hurry. That body of knowledge is doubling every 18 months!

It is a key part of my argument that the US will enjoy a Golden Age and see a return of the “Roaring Twenties” during the 2020s.

If you have in any way been involved in the stock market for the past five years, AI has invaded your life.

High frequency trading and hedge funds now account for 70% of the daily trading volume on the major stock exchanges, and almost all of this is AI-driven.

Having spent my entire life trading stocks, I can confirm that in recent years the market’s character has dramatically changed, and not for the better. Call it trading untouched by human hands.

Algorithms are trading against algorithms, and whoever wins the nuclear arms race brings home the big bucks.

You used to need degrees in Finance and Economics, or perhaps an MBA, to become a professional fund manager. Now it’s a Ph.D. in Computer Science.

Remember the May 2010 flash crash when the Dow Average plunged 1,100 points in minutes wiping out $4.1 billion in equity value? AI’s fingerprints were all over that.

In 2016, the British pound lost 6% of its value in a mere two minutes, a move unprecedented in the history of foreign exchange markets. The culprit was AI.

Don’t expect the path forward to AI to be an easy one.

Indeed, the machines already have the power of life and death over all of us.

No less figures than Nobel Prize winner Dr. Stephen Hawking and Tesla’s Elon Musk have warned that computers and the Internet may have the power to pose a threat to human existence within a decade.

They are especially concerned about the militarization of powerful robots, something I know the US Defense Department is hell-bent on developing.

As I write this, the only thing preventing a drone attacking a village in Afghanistan is an Army corporal hitting a red button on a console in Nevada.

In the future, antivirus software won’t be needed to protect your computer. It will be essential to protect you FROM your computer.

You know that massive denial of service attack that hit the United States on October 21, 2016?

I asked one of my friends at security giant Palo Alto Networks (PANW) if it was the Russians again. He replied, “You better hope it’s the Russians.”

The implication is that the Internet may have launched the attack itself.

Now, about that stock recommendation.

Since we aren’t venture capitalists, we can’t buy into pure AI firms in their early stages. And I’m too old to get a Ph.D. in computer science.

We, therefore, have to be sneaky and get in through the back door via an indirect play which still has plenty of upside leverage.

My current favorite among the AI alternative stocks is Advanced Micro Devices (AMD).

If Intel only piques your appetite for AI stocks and you feel you need another serving, I have listed below ten names that will benefit mightily from this once-a-century opportunity.

AI Stock to BUY

Advanced Micro Devices (AMD)
Analogue Devices Communication (ADI)
Applied Materials (AMAT)
Broadcom (AVGO)
Cirrus Logic (CRUS)
Cypress Semiconductor (CY)
Intel (INTC)
Lam Research (LRCX)
Micron Technology (MU)
Taiwan Semiconductor (TSM)

If you’re really lazy, you can just buy a basket of semiconductor stocks through an industry-specific ETF.

The largest is the VanEck Vectors Semiconductor ETF (SMH), with $1.3 billion in assets under management. For a prospectus on the fund, please click here.

Or you could just stick with NVIDIA.

No matter how you want to slice and dice it, AI should be a dominant factor in your IRA, 401k, or benefit plan.

And you are a trader by nature, this will be a great sector to trade around.

As for your computer, you better start leaving it unplugged at night.

You never know.

 

 

 

 

 

 

She’s Smarter Than You Think

August 23, 2019

Global Market Comments
August 23, 2019
Fiat Lux

Featured Trade:

(AUGUST 21 BIWEEKLY STRATEGY WEBINAR Q&A),
(FXB), (NVDA), (MU), (LRCX), (AMD),
 (WFC), (JPM), (BIDU), (GE), (TLT), (BA)

August 21 Biweekly Strategy Webinar Q&A

Below please find subscribers’ Q&A for the Mad Hedge Fund Trader August 21 Global Strategy Webinar broadcast with my guest and co-host Bill Davis of the Mad Day Trader. Keep those questions coming!

Q: Hey Bill, how often have you heard the word “recession” in the last 24 hours?

A: Seems like every time I turn around. But then we’re also getting a pop in the market; we thought it bottomed a few days ago. The question was: how far were we going to get to bounce? This is going to be very telling as to what happens on this next rally.

Q: Can interest rates go lower?

A: Yes, they can go a lot lower. The general consensus in the US is that we bottom them out somewhere between zero and 1.0%. We’re already way below that in Europe, so we will see lower here in the US. It’s all happening because QE (quantitative easing) is ramping up on a global basis. Europe is about to announce a major QE program in the beginning of September, and the US ended their quantitative tightening way back in March. So, the global flooding of money from central banks, now at $17 trillion, is about to increase even more. That’s what’s causing these huge dislocations in the bond market.

Q: If we’re having trouble getting into trades, should we chase or not?

A: Never chase. Leave your limit in there at a price you’re happy with. Often times, you’ll get done at the end of the day when the high frequency traders cash out all their positions. They will artificially push up our trade alert prices during the day and take them right back down at the end of the day because they have to go 100% cash by the close of each day—they never carry overnight positions. That’s becoming a common way that people get filled on our Trade Alerts.

Q: Will Boris Johnson get kicked out before the hard Brexit occurs?

A: Probably, yes. I’m hoping for it, anyway. What may happen is Parliament forcing a vote on any hard Brexit. If that happens, it will lose, the prime minister will have to resign, and they’ll get a new prime minister. Labor is now campaigning on putting Brexit up to a vote one more time, and just demographic change alone over the last four years means that Brexit will lose in a landslide. That would pull England out of the last 4 years of indecision, torture, and economic funk. If that happens, expect British stock markets to soar and the pound (FXB) to go up, from $1.17 all the way back up to $1.65, where it was before the whole Brexit disaster took place.

Q: Is the US central bank turning into Japan?

A: Yes. If we go to zero rates and zero growth and recession happens, there’s no way to get out of it; and that is the exact situation Japan has been in. For 30 years they have had zero rates, and it’s done absolutely nothing to stimulate their economy or corporate profits. The question then—and one someone might ask Washington—is: why pursue a policy that’s already been proven unsuccessful in every country it’s been tried in?

Q: Will US household debt become a problem if there is a sharp recession?

A: Yes, that’s always a problem in recessions. It’s a major reason why financials have been in a freefall because default rates are about to rise substantially.

Q: Given the big spike in earnings in NVIDIA (NVDA), what now for the stock?

A:  Wait for a 10% dip and buy it. This stock has triple in it over the next 3 years. You want to get into all the chip stocks like this, such as Micron Technology (MU), Lam Research (LRCX), and Advanced Micro Devices (AMD).

Q:  Baidu (BIDU) has risen in earnings, with management saying the worst is over. Is this reality or is this a red herring?

A: I vote for A red herring. There’s no way the worst is over, unless the management of Baidu knows something we don’t about Chinese intentions.

Q: When will Wells Fargo (WFC) be out of the woods?

A: I hate the sector so I’m really not desperate to reach for marginal financials that I have to get into. If I do want to get into financials, it will be in JP Morgan (JPM), one of my favorites. The whole sector is getting slaughtered by low interest rates.

Q: Any idea when the trade war will end?

A: Yes, after the next presidential election. It’s not as if the Chinese are negotiating in bad faith here, they just have no idea how to deal with a United States that changes its position every day. It’s like negotiating with a piece of Jell-O, you can’t nail it down. At this point the Chinese have thrown their hands up and think they can get a better deal out of the next president.

Q: Would you short General Electric (GE) or wait for another bump up to short it?

A: I would wait for a bump. Obviously—with the latest accounting scandal, which compares (GE) with Enron and WorldCom—I don’t want to get involved with the stock. And we could get new lows once the facts of the case come out. There are too many better fish to fry, like in technology, so I would stay away from (GE).

Q: How do you put stop losses on your trade?

A: It’s a confluence of fundamentals and technicals. Obviously, we’re looking at key support levels on the charts; if those fail then we stop out of there. That doesn’t happen very often, maybe on 10% of our trades (and more recently even less than that). Our latest stop loss was on the (TLT) short. That was our biggest loss of the year but thank goodness we got out of that, because after we stopped out at $138 it went all the way to $146, so that’s why you do stop losses.

Q: How about putting on a (TLT) short now?

A: No, I think we’re going to new highs on (TLT) and new lows on interest rates. We’re just going through a temporary digestion period now. We’ll challenge the lows in rates and highs in prices once again, and you don’t want to be short when that happens. The liquidity is getting so bad in the bond market, you’re getting these gigantic gaps as a global buy panic in bonds continues.

Q: Do you have thoughts on what Fed Governor Powell may say in Jackson Hole, and any market reaction?

A: I have no idea what he might say, but he seems to be trying to walk a tightrope between presidential attacks and economic reality. With the stock market 3% short of an all-time high, I’m not sure how much of a hurry he will be in to lower interest rates. The Fed is usually behind the curve, lowering rates in response to a weak economy, and I’m not sure the actual data is weak enough yet for them to lower. The Fed never anticipates potential weakness (at least until the last raise) so we shall see. But we may have little volatility for the rest of the week and then a big move on Friday, depending on what he says.

Q: What is your take on the short term 6-18 months in residential real estate? Are Chinese tariffs and recession fears already priced in or will prices continue to drop?

A: Prices will continue to drop but not to the extent that we saw in ‘08 and ‘09 when prices dropped by 50, 60, 70% in the worst markets like Florida, Las Vegas, and Arizona. The reason for that is you have a chronic structural shortage in housing. All the home builders that went bankrupt in the last crash has resulted in a shortage, and you also have an immense generation of Millennials trying to buy homes now who’ve been shut out by higher interest rates and who may be coming back in. So, I’m not expecting anything remotely resembling a crash in real estate, just a slowdown. And new homes are actually not falling at all. That’s because the builders are deliberately restraining supply there.

Q: What is a good LEAP to put on now?

A: There aren’t any. We’re somewhat in the middle of a wider, longer-term range, and I want to wait until we get to the bottom of that; when people are jumping out of windows—that’s when you want to start putting on your long term LEAPS (long term equity anticipation securities), and when you get the biggest returns. We may get a shot at that sometime in the next month or two before a year in rally begins. If you held a gun to my head and told me I had to buy a leap, it would probably be in Boeing (BA), which is down 35% from its high.

 

 

 

 

 

February 22, 2019

Global Market Comments
February 22, 2019
Fiat Lux

Featured Trade:

(FEBRUARY 20 BIWEEKLY STRATEGY WEBINAR Q&A),
(NVDA), (MU), (AMD), (LRCX), (GLD), (FXE), (FXB), (AMZN),
(PLAY IT SAFE WITH ANTHEM), (ANTM), (CI)

February 20 Biweekly Strategy Webinar Q&A

Below please find subscribers’ Q&A for the Mad Hedge Fund Trader February 20 Global Strategy Webinar with my guest and co-host Bill Davis of the Mad Day Trader. Keep those questions coming!

Q: If there is a China trade deal, should I buy China stocks, specifically Alibaba?

A: To a large extent, both Chinese and US stocks have already fully discounted a China trade deal, so buying up here could be very risky. The administration has been letting out a leak a day to support the stock market, so I don’t think there will be much juice left when the announcement is actually made. The current high levels of US stocks make everything risky.

Q: Is it time to buy NVIDIA (NVDA)?

A: The word I’m hearing from the industry is that you don’t want to buy the semiconductor stocks until the summer when they start discounting the recovery after the next recession (which is probably a year off from this coming summer). The same is true for Micron Technology (MU), Advanced Micro Devices (AMD), and Lam Research (LRCX).

However, if you’re willing to take some heat in order to own a stock that’s going to triple over the next three years, then you should buy it now. If you’re a long-term investor, these are the entry points you die for. Looking at the charts it looks like it is ready to take off.

Q: Should I be shorting the euro (FXE), with the German economy going into recession?

A: No. We’re at a low for the euro so it’s a bad time to start a short. It’s interest rates that drive the euro more than economies. With the U.S. not raising interest rates for six months, maybe a year, and maybe forever, you probably want to be buying the currencies more than selling them down here.

Q: Would you buy the British pound (FXB) on Brexit fears?

A: I would; my theory all along has been that Brexit will fail and the pound will return to pre-Brexit levels—30% higher than where we are at now. I have always thought that the current government doesn’t believe in Brexit one iota and are therefore executing it as incompetently as possible.

They have done a wonderful job, missing one deadline after the next. In the end, Britain will hold another election and vote to stay in Europe. This will be hugely positive for Europe and would end the recession there.

Q: What do we need to do for the market to retest the highs?

A: China trade deal would do it in a heartbeat. If this happens, we will get the 5% move to the upside initially. Then we’re looking at a double top risk for the entire 10-year bull market. That’s when the short players will start to come in big time. You’d be insane to new positions in stocks here. There is an easy 4,500 Dow points to the downside, and maybe more.

Q: Do you think earnings growth will come in at 5%, or are they looking to be zero or negative?

A: Zero is looking pretty good. We know companies like to guide conservative then surprise to the upside; however, with Europe and China slowing down dramatically, that could very well drag the U.S. into recession and our earnings growth into negative numbers. The capital investment figures have been falling for three months now. US Durable Goods fell by 1.2% in January.

This explains why companies have no faith in the American economy for the rest of this year. This was a big reason why Amazon (AMZN) abandoned their New York headquarters plans. They see the economic data before we do and don’t want to expand going into a recession.

Q: When will rising government debt start to hurt the economy?

A: It already is. Foreign investors have been pulling their bids for fear of a falling US dollar. They have also become big buyers of gold (GLD) in order to avoid anything American, so we have a new bull market there. In the end, the biggest hit is with business confidence.

Nothing good ever comes from exploding US deficits and companies are not inclined to invest going into that. That is a major factor behind the sudden deterioration in virtually all data points over the past month.

Good Luck and Good Trading
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader

January 28, 2019

Mad Hedge Technology Letter
January 28, 2019
Fiat Lux

Featured Trade:

(BUY DIPS IN SEMIS, NOT TOPS),
(XLNX), (LRCX), (AMD), (TXN), (NVDA), (INTC), (SOXX), (SMH), (MU), (QQQ)

January 28, 2019

Global Market Comments
January 28, 2019
Fiat Lux

Featured Trade:
(THE MARKET FOR THE WEEK AHEAD, or IT’S FINALLY OVER)
(SPY), (TLT), (FXE), (MSFT), (AAPL),
 (PG), (F), (LRCX), (AMD), (XLNX)

The Market Outlook for the Week Ahead, or It’s Finally Over

Last week, I was too busy to cook dinner for my brood, so I ordered a pizza delivery. When an older man showed up with our dinner, I told the kids to tip him double. After all, he might be an unpaid federal air traffic controller.

It is a good thing I work late on Friday afternoon because that’s when the government shutdown ended after 35 days. The bad news? The government stops getting paid again in only 18 more days. If you have to travel, you better do it quick as the open window may be short.

The most valuable thing we learned from all of this is that the weak point in America is the airline transportation system which relies on 4,000 flights to get the country’s business done.

Having once owned a European air charter company, I could have told you as much was coming. Every nut, bolt, and screw that goes into a US registered aircraft has to be inspected by the federal government. They are painted yellow when viewed which is called “yellow tagging”. No inspection, no screw. No screw, no airplane. No airplane, no flight. No flight, no economy. I can’t tell you how many times I have seen a $30 million aircraft grounded by a failed 50-cent part.

And here’s what most investors don’t get. We lost 75 basis points in GDP growth from the shutdown. We may lose another 75 basis points restarting. And if you lose 1.50% from a post-Christmas period that is normally weak anyway, Q1 GDP may well come in negative. Hello recession!

We won’t know for sure until the first advanced estimate of Q1 GDP from the US Department of Commerce’s Bureau of Economic Analysis is published on April 26. That’s when the sushi will hit the fan. That, by the way, is perilously close for the May 10 prediction of the end of the entire ten-year bull market.

How did investors fare during the shutdown? We clocked the best January in 32 years with the Dow Average up 7.55%. Maybe the government should stay closed all the time!

It is not like the government shutdown, the fading Chinese trade talks, and the arrest of the president’s pal were the only things happening last week.

A slowing China is freaking out investors everywhere. Even if a trade deal is cut tomorrow, it may not be enough to pull the economy out of a downward death spiral. Look out below! A 6.6% growth rate for 2018 is the slowest in 30 years.

Existing Home Sales were down a disastrous 6.4%, in December and 10% YOY, the worst read since 2012. The government shutdown is made closings nearly impossible.

The EC’s Mario Draghi said there would be no euro rate rises until 2020 and the US bond market took off like a rocket. Another point or two and we’ll be in short selling territory again. Don’t count on Europe to pull us out of the next recession. Whoever came up with the idea of putting an Italian in charge of Europe’s finances anyway? Like that was such a great idea.

Procter & Gamble (PG) beat with an upside earnings surprise. It must be all those people buying soap to wash their hands of our political system. But Ford (F) disappointed, dragged down by weak foreign earnings. The weakest big car company to get into electric cars is really starting to suffer. The last of the buggy whip makers is taking a swan dive

The semis have bottomed in the wake of spectacular earnings reports from (LRCX), (AMD), and (XLNX). The great artificial intelligence play is back in action after a severe spanking. I never had any doubt they would come back. Now for an entry point.

Farmers are leaving crops to rot in the field as the trade war with China destroys prices and the Mexicans needed to harvest them are trapped at the border. There’s got to be an easier way to earn a living. Avoid the ags and all ag plays. Short tofu stocks!

Investors are now sitting on pins and needles wondering if we get a repeat of the horrific February of 2018, or whether so far great earnings reports will drive us to higher highs. Earnings tail off right when the next government shutdown is supposed to start so our lives will be interesting, to say the least.

My January and 2019 year to date return soared to +7.24%, boosting my trailing one-year return back up to +30.23%. 

My nine-year return climbed up to +308.14%, a mere 1.72% short of a new all time high. The average annualized return revived to +33.61%. 

I have been dancing in between the raindrops using rallies to take profits on longs and big dips to cover shorts.

I started out the week using the 4 1/2 point plunge in the bond market (TLT) to cover the last of my shorts there, bring in a whopper of a $1,680 profit in only 13 trading days. To quote the Terminator (whose girlfriend I once dated, the Terminatrix), I’ll be back.”

I used the big 500-point swoon in the Dow on Monday to come out of my (SPY) short at cost. An unfortunate comment on interest rates by the European Central Bank forced me to stop out of my long in the Euro (FXE), also at cost.

That has whittled my portfolio down to only two positions, a long in Microsoft (MSFT) and a short in Apple (AAPL). As a pairs trade you could probably run this position for years. I am now 80% in cash.

The goal is to go 100% into cash into the February option expiration in 14 trading days, wait for a big breakout, and then fade it. Essentially, I am waiting for the market to tell me what to do. That will enable me to bank double-digit profits for the start of 2019, the best in a decade.

The upcoming week is very iffy on the data front because of the government shutdown. Some government data may be delayed and other completely missing. Private sources will continue reporting on schedule. All of the data will be completely skewed for at least the next three months. You can count on the shutdown to dominate all media until it is over.

Jobs data will be the big events over the coming five days along with some important housing numbers. We also have several heavies reporting earnings.

On Monday, January 28 at 8:30 AM EST, we get the Chicago Fed National Activity Index.

 On Tuesday, January 29, 9:00 AM EST, the Case Shiller National Home Price Index for November is released.  The ever important Apple (AAPL) earnings are out after the close, along with Juniper Networks (JNPR).

On Wednesday, January 30 at 8:15 AM EST, the ADP Private Employment Report is announced. Pending Home Sales for December follows. Boeing Aircraft (BA) and Facebook (FB), and PayPal (PYPL) announce.

 Thursday, January 31 at 8:30 AM EST, we get Weekly Jobless Claims. We also get the all-important Consumer Spending Index for December. Amazon (AMZN) and General Electric (GE) announce.

On Friday, February 1 at 8:30 AM EST, the January NonFarm Payroll Report hits the tape.

The Baker-Hughes Rig Count follows at 1:00 PM. Schlumberger (SLB) announces earnings. Home Sales is released. AbbVie Inc (ABBV) and DR Horton (DHI) report.

As for me, I will be celebrating my birthday. Believe me, lighting 67 candles creates a real bonfire. I received the best birthday card ever from my daughter which I have copied below

Good luck and good trading.

John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader