(SPY) Archives

10 Reasons Why the Bull Market is Still Alive

Well, so much for the 200 day moving average! It?s like that girlfriend who has been ferociously loyal for the last year, and suddenly she is busy every weekend and never returns phone calls.

Not that this ever happens to me. Ahem.

I knew there would be trouble when the perma bulls on TV told me the market would bounce hard off this inviolable line in the sand, with the (SPX) at 1,905. I cut my bullish equity positions by two thirds on the first market rally and never looked back.

For proof that you still make beginner mistakes after 45 years in the business, take a look at how I handled my Tesla (TSLA) position last week. Elon Musk teased us all with his ?D? tweet two weeks ago, and the stock levitated magically while all other momentum stocks were being mercilessly thrown overboard.

?Women and traders? first comes to mind.

Did I sell into the rumor and capture the 80 basis point profit I had in hand? Nope. I held on until yesterday morning and bailed after a $40 plunge in the stock, taking a 1.62% hit.

This happened while the rest of Texas was coming down with Ebola Virus. I fall victim to the bout of over confidence whenever my Trade Alert success rate exceeds 90%, as it recently has done. I start to believe my own research, always a fatal flaw.

Fortunately, I?m still running double shorts in the S&P 500 (SPY) and the Russell 2000 (IWM) to hedge these losses. The ?Hedge? in ?Mad Hedge Fund Trader? is a well-earned one, I assure you.

You would think I would get hate mail for making such a stupid mistake. Au contraire! Readers thanked me for pulling the plug so quickly and with all humility. It appears that when most other newsletters put out a bad call they develop a sudden case of amnesia, leaving their customers to thrash about in bloody, shark-invested waters on their own.

Not here!

So, should we be burning up the Internet trunk lines with frenzied clicks to unload our long-term stock portfolios?

I think not. Here are ten reasons why I believe the bull market in shares is still alive and well:

1) Stocks are selling at only 14 X 2015 earnings, in the middle of the historic range.

2) The $23 plunge in oil prices we have enjoyed over the last five months amounts to a gigantic tax cut for the world economy, and could add a full 1% to US GDP growth, which has essentially come out of nowhere. Saudi Arabia told us today that this could go on for another year. Remember, it is our oil that is crushing prices.

3) The Christmas selling seasons is setting up to be a strong one, thanks to a friendly calendar and renewed consumer confidence. This is why retailers and credit card companies like American Express (AXP) have been reviving.

4) The November 4 midterm elections are still a big unknown for the market to discount. The next day could signal the beginning of the yearend bull market.

5) I think we are seeing the final blow off top in the bond market. A reversal would be very stock friendly, especially for financials (BAC).

6) Mergers and acquisitions are continuing at a torrid pace. This is happening because companies see each other as cheap, not expensive, and usually happens at market bottoms.

7) Those who aren?t merging are buying their own stock back with both hands, like Apple, at a staggering $400 billion annualized rate.

8) Volatility spikes (VIX) also signal market bottoms (see chart below). We are nearing another top with the closely followed indicator closing at $24.64 today, a high for the past two years.

9) Capital spending is accelerating, not only in technology, but across most other industries as well. This is why the IMF boosted its growth forecast for America next year to 3.8%, and that is probably a low number.

10) Ever heard of ?Sell in May and Go Away?? Well, ?Buy in November and stay put? is also true. That is only weeks away. October is usually the worst month of the year to sell and is not the path to untold riches.

The big question now is how much additional pain we have to suffer before the promised turnaround occurs.

My colleague, Mad Day Trader Jim Parker, went over his screens with a fine tooth comb and came up with $1,846 and $1,810 for the (SPX). Similarly, NASDAQ could trade down to the $3,700-$3,800 range.

My personal favorite is on the calendar, the Midterm elections on November 4. Whatever the outcome, we could see an upside explosion that lasts for six months, once thus unknown disappears. Not only could this make your year in 2014, but 2015 as well.

And I already know who is going to win! It is gridlock, whether the Democrats control one House of congress, or none!

Do You Think They Carry Ebola Virus?

The Correction is Over

Diary, Newsletter, Research

5%. A lousy 5%.

That?s all we managed to clock in the latest correction in the greatest bull market of all time.

It?s not the 6% hickey we had to endure in February, nor as modest as the 4% setback in August. Call it a middling type correction, a kind of correction light. The buyers do still have itchy trigger fingers.

All it took to bring it to an end was a September nonfarm payroll that blew the socks off the forecasts of most analysts, coming in at a positively steroidal 248,000. It?s like they?re finally hiring again.

That is, unless you just graduated from college with a degree in English, Sociology, or Political Science, and are lugging $100,000 in student loans. Coders everywhere are writing their own tickets.

The headline unemployment rate plunged from 6.1% to 5.9%, an eight year low, and the broader U-6 figure is closing in on 10%.

Even more impressive were the back month upward revisions, which were enormous. July was boosted from 212,000 to 243,000, and August was goosed from 142,000 to 180,000.

The hiring was across the board, with professional & business services, retail, health services, and even construction leading the way.

What all of this means is that the freshly updated 4.4% Q2 GDP growth rate isn?t some cockamamie government concoction, but is, in fact real.

More amazing is that we are seeing these blistering numbers against a background of non-existent inflation, even deflation, if the August -0.1% Consumer Price Index is to be believed.

That gives my friend, Federal Reserve governor Janet Yellen, a blank check to keep interest rates lower for longer than anyone believes possible.

Without the inflation bogeyman, you might as well keep rates at zero forever. Personally, I am in the 2016 camp before we start to see interest rate rises.

All this means it is back to the races for the stock market, with an (SPX) bull?s-eye of 2050-2100 now in the cards. However, we?re not going there in a straight line.

I expect more of a sideways wedge formation developing first over the coming month where we see successive higher lows and lower highs. When we reach the apex of the triangle it will be bingo!, and a blast off to new all time highs.

Of course, you can?t go to the races without a program. So make your choices carefully, as the kind of corrections of the type we have just seen often herald sudden sector rotations.

I think financials are the place to be, especially if my prediction that interest rates are bottoming proves correct. That?s why I knocked out a Trade Alert to buy Bank of America (BAC) last week (click here for the editor?s cut). Conveniently, it jumped 5% the next day. I have a pleasant habit of doing that with (BAC).

I am not dishing out a positive view on risk assets because I live in LaLa Land (I only grew up there), am a perma bull, or like drowning myself in the punch bowel (at least not since college). For me, it?s all about the numbers.

Here?s a list of figures to show, not that shares are cheap or how expensive shares are, but how moderately priced they are:

1) With a price earnings multiple of 17X, we are smack in the middle of a 10-25X historic range.

2) The dividend yield for stocks is at 1.9%, compared to only 1.1% at the 2007 top.

3) Cash reserves per S&P 500 share are a rich $443, compared to only $353 seven years ago.

4) Corporate debt to assets is a mere 23% versus 32% 2007.

I could go on and on, but you see my point. This bull market has years to go before it even flirts with becoming truly expensive, unless you own Tesla (TSLA), according to Mr. Elon Musk.

I think the way to trade this market is to reserve the daily newspapers only for lining the bottom of a birdcage, and to hit the mute button on your TV.

That way you won?t hear about the Ebola Virus, ISIL, the Midterm Elections, the war in the Ukraine, and all the other bogus reasons to sell stocks we are bombarded with daily.

Did I mention that the $20 per barrel plunge in the price of oil we have just seen amounts to one of the largest tax cuts in history for the economy?

See, I always write more interesting economic pieces while watching Men in Black. I think the 6,800-foot altitude here at Lake Tahoe helps too.

So Inspiring!

Mad Hedge Fund Trader Tops 30% Gain in 2014

Diary, Free Research, Newsletter

It looks we are going to have to start watching the appalling Zombie shows on TV and in the movies. That is so we can gain tips on how to survive the coming Apocalypse that will unfold when the Ebola virus escapes Texas and spreads nationally.

I?m not worried. I?m actually pretty good with a bow and arrow.

Thank you United Airlines!

I happy to report that the total return for my followers so far in 2014 has topped 35%, compared to a pitiful 1% gain for the Dow Average during the same period.

In September, my paid Trade Alert followers have posted a blockbuster 5.01% in gains. This is on the heels of a red-hot August, when readers took in a blistering 5.86% profit.

The nearly four year return is now at an amazing 157.8%, compared to a far more modest increase for the Dow Average during the same period of only 37%.

That brings my averaged annualized return up to 39.7%. Not bad in this zero interest rate world. It appears better to reach for capital gains 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.

It has been pedal to the metal on the short side for me since the Alibaba IPO debuted on September 19. I have seen this time and again over four decades of trading.

Wall Street gets so greedy, and takes out so much money 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 two years. However, my double short positions in the S&P 500 (SPY) and the Russell 2000 (IWM) provided the lifeboat I needed.

The one long stock position I did have, in Tesla (TSLA), is profitable, thanks to a constant drip, drip of leaks about the imminent release of the Model X SUV. The Internet is also burgeoning with rumors concerning details about the $40,000 next generation Tesla 3, which will enable the company to take over the world, at least the automotive part.

Finally, after spending two months touring dreary economic prospects on the Continent, I doubled up my short positions in the Euro (FXE), (EUO).

Those positions came home big time when the European Central Bank adopted my view and implanted an aggressive program of quantitative easing and interest rate cuts. Hint: we are now only one week into five more years of Euro QE!

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). Still, I only have a 40 basis point hickey there.

Against seven remaining profitable positions, I?ll take that all day long. And I plan to double up on the (TBT) when the timing is ripe.

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.

Watch this space, because the crack team at Mad Hedge Fund Trader has more new products and services cooking in the oven. You?ll hear about them as soon as they are out of beta testing.

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 ?Memberships? located on the second tier of tabs.

Waiting for a High Level Contact

Why I?m Doubling Up My Shorts

Diary, Newsletter, Research

I don?t double up short positions very often. I am too old to lose all my money and go back to work as an entry-level analyst at Morgan Stanley. Besides, they probably wouldn?t have me back anyway. It is a different company than it was 30 years ago, a lot different.

However, the dead cat, short covering bounce we got off this morning?s Hong Kong dump does allow me to get back into the short side of the (SPY) one more time.

We managed to gain 20 (SPX) points, or 2 entire (SPY) handles from the Monday morning capitulation, puke on your shoes low. Except this time, we are a weekend closer to expiration, only 14 trading days until October 15.

And waiting all the way until Friday for the September nonfarm payroll buys us a free week.

Does anyone really care what?s going on in Hong Kong, China, or anywhere else in the world, for that matter? Not really. It appears only day traders do, and those of us who have family members there, like me.

The beginning of October is usually the scariest two weeks of the year. So a bet that the (SPY) doesn?t blast up to new all time highs during this period looks like a pretty good idea.

Buying the S&P 500 (SPY) October, 2014 $202-$205 vertical in-the-money bear put spread with the volatility index (VIX) just short of the $17 handle, the highest print in six months, is also getting us the best short term spread prices this year. It?s almost like the good old days.

If the prospect of executing this trade causes the hair on the back of your neck to stand up, take a look at the charts below.

The Russell 2000 (IWM) broke through to a new low this morning, proving that a solid, three-month downtrend in the small caps is still alive and well.

The chart looks even worse for the iShares iBoxx High Yield Corporate Bond ETF (HYG), which has become a very important lead security for traders to keep a laser like focus on.

NASDAQ (QQQ) and the Dow Jones Average ($INDU) are sitting bang on crucial support lines. Alibaba is still sucking all the oxygen out of the technology sector, with major institutions selling everything else to take instant 5% stakes in the new issue. This is great news for the sector for the long term, but not so great for the short term.

Finally, I asked my ace Mad Day Trader, Jim Parker, his thoughtful take here. He believes that short term, markets are oversold and due for a rallyette. He wouldn?t be shorting stocks here with My money! But is the (SPY) going to a new all time high in 14 trading days? Absolutely no way!

There is another factor to consider here. We have recently clocked substantial profits with our short positions in the Euro (FXE) and the Russell 2000 (IWM).

So we can afford the luxury of getting aggressive here when everyone else is running and hiding. We are essentially now playing with the house?s money. The only question is whether we will next post a larger gain, or a smaller one. That is a position of strength, and a great place to trade from.

So I think the net net of all of this is that best case, the risk markets all keep trending downward, worse case, they flat line sideways, at least for the next 14 trading days. Either way, it is a win-win for me. That makes the S&P 500 (SPY) October, 2014 $202-$205 in-the-money bear put spread a winner in my book.

You can buy this spread anywhere in a $2.60-$2.75 range and have a reasonable expectation of making money on this trade.

This is a rare instance where there is no outright stock or ETF equivalent to this trade. If you sell short the stock market here, such as through purchasing the ProShares Ultra Short S&P 500 ETF (SDS), we could rally all the way up to, but just short of the all time high, and you would get your head handed to you.

If this happens with the S&P 500 (SPY) October, 2014 $202-$205 in-the-money bear put spread, you make your maximum profit of 1.30% of your total portfolio. This is why I play in the options market. So non options players are better to stand aside on this trade and just watch it for educational purposes.

Holder Retirement Could Send Bank of America Flying

Diary, Newsletter, Research

Watching the market melt down today, I have been hurriedly compiling a shopping list of stocks to buy, and writing the Trade Alerts in advance for readers to execute.

If I am right about interest rates remaining flat or rising for the rest of the year, then financials have to be at the absolute top of such a list.

Bank of America (BAC) certainly was the chief whipping boy of the financial crisis. Since 2008, it has paid out more than $50 billion in fines and lawsuit settlements for every transgression under the sun.

After getting a bail out from the US Treasury, it was forced to cut its dividend payment to a token one cent. Do any Google search on the company and you are inundated with a flood of bad news.

All that is now ancient history. The entire banking industry is now moving into the sweet spot in the economic cycle. This is because rising interest rates mean that they will be able to charge more for loans, while their cost of funds (deposits and equity) remains low. These rising spreads fall straight to the bottom line.

Now with the bank?s Torturer-in-Chief, US Attorney General Eric Holder, announcing his retirement, the way is clear for better days ahead.

With the 30-year bull market in bonds now at an end, substantially higher rates in the near future are now included in virtually every economic forecast out there. Since the beginning of 2014 the ten-year Treasury yield has collapsed from 3.05% to as low as 2.32% at he end of August, pummeling bank shares.

What happens next? They go from 2.32% back up to 3.05%, possibly by yearend, then a lot more. Bank shares will ride on the back of this bull.

The jungle telegraph is now ringing with the prospect of a dividend hike by the company, currently at a lowly four cents. We may get the good news as soon as the next reporting period on October 14. The implications of such a move are broad.

If it pulls this off, it is only because of renewed confidence by the markets in the improved financial condition of the company. After several capital raises and the liquidation of the wreckage of the 2008 crash, US banks are now the healthiest in history, with balance sheets of bedrock stability.

Ahem, they are also too big to fail, again.

To get the dividend yield on the shares up to industry standard of 2.5%, the company really needs to raise its dividend to 42 cents. It certainly has the cash flow to do this. In 2013, (BAC) reported net income of $11.4 billion, more than four times to amount needed to cover such a payout.

Needless to say, this is all great news for the share price. The prospective return of increasing amounts of capital to shareholders should suck in new and wider classes of shareholders. It won?t be just about hedge fund punters anymore. Respectable, large and long term holding institutions will be in there as well.

Take a look at the charts below, and it is clear that such a move is underway. (BAC) broke out from the end of a classic triangle formation, which traditionally resolves itself to the upside. New post crash highs beckon.

You can find more dry powder in the chart for the Financials Select Sector SPDR ETF (XLF), which clearly rejected a complete breakdown at long-term trend support in early February.

Finally, take a gander at the chart for the S&P 500. New life from the financials will be the adrenaline shot this market needs to break it out of its current low volume sideways consolidation, taking it to new highs as well.

Finally, for those who are concerned that the bull market was killed off by last week?s massive Alibaba IPO (BABA), take a look at he chart below provided by my friends at Business Insider. Certainly, the collapse of the iShares iBoxx High Yield Corporate Bond ETF (HYG) has put the fear of God into traders.

The chart tracks long-lived bull markets in terms of their price earnings multiples. It shows that we have only reached half the length of the great 1987-2000 bull market. The implication is that this bull could live another five or more years.

This bull is not dead, it is just resting.

So far, the S&P 500 has declined by a feeble 2.8% off the $202 top. If we break the 50-day moving average here, we could make it down to the 200-day moving average at $1,880, a more substantial 7% pullback. Take that as a gift, and load the boat for the year-end rally.

I?ll send out the Trade Alert to buy (BAC) when I think the timing is ripe.

(XLF) Weekly

(XLF) Daily

Time to Visit the ATM Again

The Bull is Not Dead, It is Resting

Time to Bail on the Small Caps

Diary, Newsletter, Research

It now appears that the ?Alibaba? correction (BABA) is at hand.

I warned you, pleaded with you, and begged you about this yesterday, and on May 8 (click here for ?Will Alibaba Blow Up the Market?).

The longer the company postponed the mother of all IPO?s, the higher the prices flew, until we finally got a print at the absolute apex of the market. Now, it?s time to pay the piper.

The development is part of a broader move out of riskier, higher beta stocks into safe, large caps that has been underway for several weeks now. Those traders who are ahead want to protect their years. Those who aren?t are screwed anyway, so don?t bother returning their phone calls.

Look no further than my favorite, Tesla (TSLA), which topped out on September 3, along with the rest of the MoMo high technology, biotechnology and Internet names.

Still love the cars, though.

The (IWM) has really been sucking hind teat all year, falling by 3% year to date compared to an 8% gain in the S&P 500.

Yesterday, the sushi really hit the fan when the 50-day moving average pierced the 200-day moving average for the first time since August, 2011. Known as a much dreaded ?death cross,? this is the technical equivalent of slitting both wrists and thrashing about in shark-invested waters, heralding more declines to come.

Let me list the reasons why this is the sector traders love to hate when markets move from ?RISK ON? to ?RISK OFF?:

*Since small companies borrow more than large companies, they are far more sensitive to rising interest rates. Guess what? Rates have been rocketing this month.

*Since small companies are more leveraged (indebted) than big ones, they are more sensitive to a slowing economy.

*Small companies don?t have the international diversification of their bigger brethren, and therefore have less of a financial cushion to fall back on.

*The (IWM) has roughly 1.5 times the volatility of the S&P 500, making a short position here fantastic downside protection for a broader based portfolio of stocks. So you get a lot of selling here, as managers try to lock in performance for fiscal years that start ending as early as October 31.

*Did I mention that the stock market is at one of its most overbought levels in history, the worst since 1928? Bearish sentiment is at only 13%, the lowest since 1987. These are more reason to sell, as if you needed any.

My readers have made tons of money over the years playing the (IWM) on the short side. It?s time for another visit to the trough. I?m not finishing my year early.

Not yet, anyway.

If you can?t trade options, then buy the Short Russell 2000 Fund ETF (RWM) as a 1X play, or the Direxion Daily Small Cap Bear 3X ETF (TZA) for a 3X trade. However, 3X ETF?s of any kind are for intra day traders only.

Time to Bail on a Burning House

She Speaks!

Diary, Newsletter, Research

Like a deer frozen in a car?s onrushing headlights, markets have been comatose awaiting Federal Reserve governor Janet Yellen?s decision on monetary policy and interest rates.

Interest rates are unchanged. Quantitative easing gets cut by $15 billion next month, and then goes to zero. Most importantly the key ?considerable period? language stayed in the FOMC statements, meaning that interest rates are staying lower for longer.

Personally, I don?t think she?s raising interest rates until 2016. The number of dissenters increased from one to two, but then both of them (Fisher and Plosser) are lame ducks. And, oh yes, the composition of the 2015 Fed will be the most dovish in history.

The latest data points made this a no brainer, what with the August nonfarm payroll coming in at a weak 142,000, and this morning?s CPI plunging to a deflationary -0.20% for the first time since the crash.

Of course, you already knew all of this if you have been reading the Mad Hedge Fund Trader. You knew it three months ago, six months ago, and even a year ago, before Janet Yellen was appointed as America?s chief central banker. Such is the benefit of lunching with her for five years while she was president of the San Francisco Fed.

The markets reacted predictably, with the Euro (FXE), (EUO), and the yen (FXY), (YCS) hitting new multiyear lows, Treasury bonds (TLT), (TBT) breaking down, and precious metals (GLD), (SLV) taking it on the kisser.

What Janet did not do was give us an entry point for an equity Trade Alert (SPY), with the indexes close to unchanged on the day. The high frequency trader?s front ran the entire move yesterday.

Virtually all asset classes are now sitting at the end of extreme moves, up for the dollar (UUP) and stocks, and down for the euro, yen, gold, silver, the ags, bonds and oil. It?s not a good place to dabble.

Putting on a trade here is a coin toss. And when you?re up 30.36% on the year, you don?t do coin tosses. At this time of the year, protecting gains is more important than chasing marginal gains, which people probably won?t believe anyway.

If you want to understand my uncharacteristic cautiousness, take a look at the chart below sent by a hedge fund buddy of mine. It shows that investor credit at all time highs are pushing to nosebleed altitudes. Not good, not good. Oops! Did somebody just say ?Flash Crash??

This is not to say that I?m bearish, I?m just looking for a better entry point, especially as the Q????????? 3 quarter end looms. I?ve gotten spoiled this year. Maybe the Scottish election results, the Alibaba IPO, or the midterm congressional elections will give us one. Buying here at a new all time high doesn?t qualify.

It?s time to maintain your discipline.

Sorry, no more pearls of wisdom today. I?ve come down with the flu.

Apparently, this year?s flu shot doesn?t cover the virulent Portland, Oregon variety. Was it the designer coffee that did it, the vintage clothes, or those giant doughnuts dripping with sugar?

Back to the aspirin, the antibiotics, the vitamin ?C?, and a chant taught to me by a Cherokee medicine man.

My End 2014 Stock Market Forecast

Newsletter, Research

If anyone had any doubts about the future direction of stocks this year, you better take a look at the chart below for the S&P 500.

It shows a very convincing trend upward at almost a perfect 45-degree angle going back for the past year. The range is 100 points wide. It?s almost as if an architect drew it with drafting tools.

To take maximum advantage of this trend, you have to buy every 80 dip, as the floor is constantly rising. It?s as simple as that. Think of Trading 101 for Dummies.

We have had a host of challenges that threatened to knock us out of this channel for the past year.

A second Cold War with Russia? Wake me up when it?s over.

The ongoing collapse of Iraq? Snore?

The suspension of oil exports from Libya barely elicited a blip on your screen, as did the horrific civil war in Syria, a replay of the Middle Ages.

China slowdown? Pshaw! ?Sell in May and Go Away?? Cancelled!

Subpar American economic growth? No problemo.

All of these problems the market has weathered nicely, much like a wet dog shakes off water.

In fact, it has been three years since we endured the distress of a 10% correction, the self-inflicted wound triggered by the government?s hand wringing debt ceiling crisis.

In the end, it amounted to nothing, and was the last decent buying opportunity traders have seen. It has all be one giant ?chase? for performance and reach for yield since then.

The lesson of all of this is that what counts is the good old USA. That is what really is driving markets. All of those foreign distractions are just so much noise. At the end of the day, only the health of the American economy is what matters.

That?s all great news, because our economy is looking pretty darn muscular. Just last week, we saw the Markit August Purchasing Managers Index rocket from 55.8 to 58.0. Weekly jobless claims, the most accurate predictor of true business activity in this cycle, is plumbing seven-year lows. Housing data has just engineered a dramatic turnaround.

It gets better. The upshot of last week?s gathering of Federal Reserve officials at Jackson Hole, Wyoming is that ?normalization? is the new word du jour. What does this mean to us plebeians?

That the economy is so healthy that the government is actually thinking of raising interest rates sometime in the far future, possibly at the end of 2015, and then only by a little bit. That would bring to an end eight years of zero interest rate policy.

Until then, you have a government issued license to print free money. Buy the dips and sell the rallies, and work the 100-point range. If we continue ascending as we have done, the (SPX) should reach 2,100 by December, which happens to be my long held yearend target.

My bet is this could run all the way until April, when the next round of seasonal weakness kicks in again. If there is a risk of anything, it is that the buyers start to panic over missing the move and the (SPY) melts up, possibly as high as 2,200 by January, and 2,300 by March.

Of course, it?s always useful to engage in what my role model, Albert Einstein, called ?thought experiments? and consider what might cause the wheels to fall off of the bull market. To consider that in depth, please read ?What Could Derail the Coming Golden Age? by clicking here.

So what individual sectors should you focus on now? I hate to sound redundant and repetitive. As you may have noticed, ?boring? is not in my DNA (sending Trade Alerts on my iPhone while hanging by ropes from a cliff in the Swiss Alps during a ferocious storm?).

However, I?ll hark back to my favorite three legs for the economy, technology, energy, and health care. Biotechnology continues to sizzle, as do the car companies. And if bonds are peaking, as I believe, the entire financial sector is a screaming buy here.

One unknown is how the markets will take the Alibaba IPO in September, with an expected $150-$200 billion valuation, the largest in history. If institutions have to unload their existing holdings to make room for the new issues, it could trigger our next 4% correction. If that happens, buy the dip with both hands.

By the way, now that the summer is ending, subscription renewals are coming, so don?t forget to ?re-up? if you want to continue with your 41% average annualized returns.

Hey, the house is starting to shake. I think it?s an earthquake, a big one. Better get this out before the broadband goes down?

Uncle Sam is Looking Pretty Muscular These Days

Is the Turnaround at Hand, and Ten Stocks to Buy at the Bottom?

Newsletter, Research

War threatens in the Ukraine. Iraq is blowing up. Rebels are turning our own, highly advanced weapons against us. Israel invades Gaza. Ebola virus has hit the US. Oh, and two hurricanes are hitting Hawaii for the first time in 22 years.

Should I panic and sell everything I own? Is it time to stockpile canned food, water and ammo? Is the world about to end?

I think not.

In fact the opposite is coming true. The best entry point for risk assets in a year is setting up. If you missed 2014 so far, here is a chance to do it all over again.

It is an old trading nostrum that you should buy when there is blood in the streets. I had a friend who reliably bought every coup d? etat in Thailand during the seventies and eighties, and he made a fortune, retiring to one of the country?s idyllic islands off the coast of Phuket. In fact, I think he bought the whole island.

Now we have blood in multiple streets in multiple places, thankfully, this time, it is not ours.

I had Mad Day Trader, Jim Parker, do some technical work for me. He tracked the S&P 500/30 year Treasury spread for the past 30 years and produced the charts below. This is an indicator of overboughtness of one market compared to another that reliably peaks every decade.

And guess what? It is peaking. This tells you that any mean reversion is about to unleash an onslaught of bond selling and stock buying.

There is a whole raft of other positive things going on. Several good stocks have double bottomed off of ?stupid cheap? levels, like IBM (IBM), Ebay (EBAY), General Motors (GM), Tupperware (TUP), and Yum Brands (YUM). Both the Russian ruble and stock market are bouncing hard today.

There is another fascinating thing happening in the oil markets. This is the first time in history where a new Middle Eastern war caused oil price to collapse instead of skyrocket. This is all a testament to the new American independence in energy.

Hint: this is great news for US stocks.

If you asked me a month ago what would be my dream scenario for the rest of the year, I would have said an 8% correction in August to load the boat for a big yearend rally. Heavens to Betsy and wholly moley, but that appears to be what we are getting.

It puts followers of my Trade Alert service in a particularly strong position. As of today, they are up 24% during 2014 in a market that is down -0.3%. Replay the year again, and that gets followers up 50% or more by the end of December.

Here is my own shopping list of what to buy when we hit the final bottom, which is probably only a few percent away:

Longs

JP Morgan (JPM)
Apple (AAPL)
Google (GOOG)
General Motors (GM)
Freeport McMoRan (FCX)
Corn (CORN)
Russell 2000 (IWM)
S&P 500 (SPY)

Shorts

Euro (FXE), (EUO)
Yen (FXE), (YCS)

No, Not This Time

Mad Hedge Fund Trader Sets New All Time High with 19.74% Gain in 2014

Diary, Newsletter

I am writing this to you from the ancient city of Bodrum on the southwest coast of Turkey. Coming here, I had to set my watch ahead ten hours, then back 3,000 years.

As I sit here on my balcony, a flotilla of yachts, both large and small, motor by with the Greek island of Kos hovering in the background in the haze. Smoke from the gurgling water pipes below waft in my direction.

The carnage in Syria goes on 400 miles to my east and worse in Iraq another 300 miles in the distance. The security forces are on a nervous alert and machine guns held by jumpy, sweating teenagers are everywhere. My five star hotel is eerily vacant, even though it is peak season, but the service is great.

Despite these ominous signs, I am happy to report that the industry beating performance of the Mad Hedge Fund Trader?s Trade Alert Service has punched through to a new all time high.

The total return for my followers so far in 2014 has reached 19.74%, compared to a far more feeble 1.4% for the Dow Average during the same period. June came in at a robust 4.32%.

I managed to pull this off during some of the most difficult trading conditions in market history. Turnover across all asset classes is hitting decade lows (see chart below), and volatility has crashed through the floor. Most of the rest of the hedge fund industry is getting destroyed.

The three and a half year return is now at an amazing 142.24%, compared to a far more modest increase for the Dow Average during the same period of only 36%.

That brings my averaged annualized return up to 39.7%. Not bad in this zero interest rate world. It appears better to reach for capital gains 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 of.

Like most of the industry, I expected May and June to be poor months for risk assets. The market has had a tremendous run over the last two years, and the spring historically heralds a period of seasonal weakness.

Wrong!

One of the toughest things to do in this business is to admit you blew it, and then execute an immediate risk reversal in your portfolio.

In the end, the failure of the market to fall meant that it could only go up. We got additional help from month end window dressing, calming events in the Ukraine, and a 7:1 share split at Apple.

Another particularly vexing challenge is that the principal market driver has shifted from economics to geopolitics. The global economic recovery continues, but at a pace so modest that it hardly moves the needle on the volatility front.

The world is waiting to see whether the US can deliver a second half GDP growth rate of 4% per annum?.. or not.

In the meantime, a megalomaniac in Russia and terrorists in the Middle East are determining the short-term direction of asset prices. No hedge fund trader has any edge here, so calls on the coming price action are little more than educated guesses and wishing.

Good luck outperforming in that environment!

I played June predominantly from the long side, accumulating a basket of positions in old technology and traditional industrial names like IBM (IBM), Google (GOOGL), Caterpillar (CAT), and Microsoft (MSFT). I then opportunistically laid out hedging shorts in the S&P 500 (SPY) and the Treasury bond market (TLT).

As the market has tortuously ground up, I have whittled back my portfolio. I figured out that the way to make money trading in this market was not to trade, to ignore the day-to-day counter trend moves.
As a result, almost every day in June was profitable for my followers.

Quite a few were able to move fast enough to cash in on the move. To read the plaudits yourself, please go to my Testimonials Page . They are all real, and new ones come in almost every day.

My esteemed colleague, Mad Day Trader Jim Parker, was no slouch either, dodging in an out of the raindrops to make money on an intraday basis.

What would you expect with a combined 85 years of market experience between the two of us? Followers are laughing all the way to the bank.

Don?t forget that Jim clocked an amazing 2013 with a staggering 374% trading profit. That was just for an eight-month year!

The Opening Bell with Jim Parker, a quickie but insightful webinar giving followers an instant snapshot of the market opening every day, has been an overwhelming success. Many customers have already reported dramatic improvements in their trading results.

Watch this space, because the crack team at Mad Hedge Fund Trader has more new products and services cooking in the oven. You?ll hear about them as soon as they are out of beta testing.

Our business is booming, so I am plowing profits back in to enhance our added value for you. Next out will be the Mad Hedge Fund Trader Channel on YouTube that will enable me to post videos from my frequent travels around the world.

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 my 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, find the?Global Trading Dispatch??or ?Mad Hedge Fund Trader PRO??box on the right, and click on the blue??SUBSCRIBE NOW??button.

Tag Archive for: (SPY)

<img decoding="async" class="aligncenter wp-image-28849" src="https://www.madhedgefundtrader.com/wp-content/uploads/2014/03/John-Thoms-Black-Swans.jpg" alt="John Thoms - Black Swans" width="400" height="337" />Do You Think They Carry Ebola Virus?

<img decoding="async" class="aligncenter size-full wp-image-37238" src="https://www.madhedgefundtrader.com/wp-content/uploads/2014/09/Bank-of-America-ATM-e1411681030258.jpg" alt="Bank of America - ATM" width="400" height="228" />Time to Visit the ATM Again

<img decoding="async" class="aligncenter wp-image-30000" src="https://www.madhedgefundtrader.com/wp-content/uploads/2014/04/Burning-Building.jpg" alt="Burning Building" width="401" height="309" />Time to Bail on a Burning House

<img decoding="async" class="aligncenter wp-image-25490" src="https://www.madhedgefundtrader.com/wp-content/uploads/2013/11/Uncle-Sam-Fist.jpg" alt="Uncle Sam - Fist" width="400" height="316" />Uncle Sam is Looking Pretty Muscular These Days

Do You Think They Carry Ebola Virus?

Time to Visit the ATM Again

Time to Bail on a Burning House

Uncle Sam is Looking Pretty Muscular These Days