Tuesday Market Workshop – Portfolio Repair Part 2 – Resetting Your Positions

10 skills to be a successful stock traderWhat is your plan?  

Come on, I'm not messing around here – WHAT is your trading plan?  Surely you have one if you are in charge of trading your portfolio, right?  If you were a General in the Army and you didn't have a plan – your troops would very likely be screwed.   If you were head coach of a football team and you didn't have a plan – your team would likely lose.  If you were the CEO of a company and you didn't have a plan – your company would likely do poorly.

These things are obvious and while you know it's a bad idea to perform surgery without a plan or mount a legal defense without a plan – somehow some of you business owners, doctors, lawyers and other professionals who trade the markets think it's OK to trade without a plan.  It's not – it's a very bad idea!  

On the right are some good trading guidelines but #1, as it should be, is HAVE A TRADING PLAN.  And it doesn't mean "Until it Fails" – it's even more important to have a plan to FIX your positions AFTER the first plan fails.  Very sadly, a lot of people take 3, 4 and 5 too seriously and hold tight and cross their fingers when faced with a major market sell-off but your plan CANNOT BE waiting until the market recovers.  That is not a plan – that is FEAR!

What we need to do, when the market drops, is have a very rational look at our positions – under the new circumstances – and decide if they are still worth keeping in our portfolio and, most importantly, whether or not we have realistic targets for them to recover.  

Let's take Boeing (BA) for example.  If you owned BA at $350 and watched it fall to $300 but then back to $350 so the next time it hit $300 you weren't worried but  then $275 and back to $300 and suddenly $250 but you thought surely it would bounce back from that and then below $200 the same week and now it's too late to do anything about it but cross your
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Monday Market Workshop – Portfolio Repair – Part 1

The virus rages on.

US infections have jumped from 85,996 on Friday, when we had just passed China, to 143,055 as of 6:11 this morning and that's up 66% in two days.  Globally, there are 735,650 infections with 34,686 deaths and 154,673 recoveries so, to date, 18.3% of the outcomes are – DEATH!!!  No, I don't think it's funny – I want to emphasize that so people, HOPEFULLY, will stop risking their lives to go on a beer run or whatever other silly thing you do that you don't have to do – this is serious people and it remains serious.

On the other hand, as I have pointed out before, 7,708 people die every day in America from all sorts of things but mainly cancer or heart conditions so 2,500 dead (so far) in the US is just another manic Monday morning as far as it's effect on the economy.  What matters is how soon we can get things under control as they are currently still clearly OUT of control as our hospitals are being overwhelmed (leading to more deaths) and supplies are running short.

Trump is right, this is like a war but it's a war we are clearly losing despite Trump telling us:

  • Jan 22nd - “We have it totally under control. … It’s going to be just fine
  • Jan 30th – "We think we have it very well under control. We have very little problem in this country at this moment — five. And those people are all recuperating successfully. But we’re working very closely with China and other countries, and we think it’s going to have a very good ending for it. So that I can assure you.” 
  • Feb 24th – "The Coronavirus is very much under control in the USA. … Stock market starting to look very good to me."
  • Feb 26th - “And again, when you have 15 people, and the 15 within a couple of days is going to be down to close to zero, that's a pretty good job we've done."
  • Feb 28th - “It’s going to disappear. One day, it’s like a miracle, it will disappear.”
  • March 2nd - "We had a great meeting today with a lot of the great companies


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Fallback Friday – US Passes China to Become Most Infected Nation

Why the COVID-19 death rate varies dramatically from country to ...85,996!  

That's how many infections there are in the US as of 6:49 this morning and China has 81,897 so we blew right past them – even though we had 3 more months to prepare than China did and we were certainly not taken by surprise – other than our President, who asked us "Who could have seen this coming?"  

It was way back on January 22nd when we had the first US case of the coronavirus.  I noted it in our Morning Report saying:

One thing that's distracting everybody at the moment is the Chinese virus scare, with 50% more cases today than there were yesterday (now 470) so no, it's not at all under control.   The US case that panicked our markets yesterday was from a guy who was in China recently and it does seem to be contained (so far). 

In drugstores and at airports, and on the online marketplaces increasingly at the heart of Chinese commerce, fear and confusion manifested themselves in shortages or long lines for suddenly scarce products promising protection from the deadly but still largely mysterious respiratory disease.  Surgical masks flew off shelves, travelers canceled plans and rumors flooded social media.   Drug makers are doing well, travel stocks are doing poorly.  

The very next day, we initiated our first virus hedge because that is what you are supposed to do when you come across economic uncertainty and want to protect your portfolios.  What we didn't count on, however, is that two months later, the US would still be totally unprepared for its own viral epidemic or that our President would spend more time in denial than in meetings about controlling the virus.  Rather than lead us through this crisis, Trump made 33 false claims about the virus in the
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Federally Funded Thursday: “We are Not Going to Run Out of Ammunition” – Powell

Fed's balance sheet rockets above previous high in one week$4.5 TRILLION! 

That's how much more lending power the Fed just opened up.  That's on top of the $4.66Tn they arlready doled out – $1Tn of it in the past month alone…  The Fed spent $4Tn buying the first recovery so what's another $4.5Tn to buy the next one?  That was a trick question as the answer is "A good start! 

Pat Toomey (R) of Pennsylvania told Bloomberg yesterday that ANOTHER $4.5Tn is waiting in the wings.  Who knew we had this much money sitting around?  Certainly not the 700,000 Americans Trump pulled off Food Stamps because he said we couldn't afford $4.2Bn to feed starving children.  Yet if one Octogenarian in the Senate gets a virus – suddenly $4,500Bn is available to ease the pain.

"Burn in Hell" is not something you usually hear in a Financial Newsletter but sometimes it's hard to find nicer ways to express yourself….

We still need the House to confirm the bill but let's keep in mind this is only our FIRST bailout package.  If things drag on, there will cerainly be others and the way our Government is responding, things are certainly going to drag on.  If you wonder what FEMA is doing during this emergency, New York, Hawaii and North Carolina  have issued an urgent request to FEMA for emergency mortuary assistance as deaths mount across the states.

New York City has 17,856 cases of the virus (worst city on Earth) and over 200 people have died in the past week, which has overwhelmed the city's morges and they are currently keeping the dead outside in makeshift tents.  As usual, states turn to FEMA to clean up the mess and soon we'll be hearing all the stories of families screaming about misplaced bodies, etc.  This is, of course, not uprecedented:

What, too soon?

CBS (VIAC) will be putting Stephen Colbert back on the air on Monday, apparently from his house but they plan on doing a full show with interviews (from…
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Which Way Wednesday – Is $6Tn Not Enough to Boost the Markets?

Image result for money printing animated gif$6,000,000,000,000!  

That's right, Larry Kudlow announced this morning that the US Government's stimulus package "will come to roughly $6 Trillion."  That's in the form of $2Tn of direct CASH!!! to businesses and individuals and $4Tn from the Federal Reserve or, in other words, given to the Banksters.  If they just gave the $6Tn directly to our 300M US Citizens, that would be $20,000 for every man, woman and child or about $70,000 per household.  I think that would do a Hell of a lot more to stimulate the economy than giving it to Goldman Sachs, don't you?

NONETHELESS, $6Tn is about 1/3 of our entire GDP – the entire output of the United States over a 4-month period and, so far, we're in week 2 of the virus shutdown and, so far, there's no evidence that economic activity is down more than 30% – or about $500Bn for the month.  Granted the virus may be around for longer then 4 months but, as I pointed out yesterday – it's not likely to kill more people than cancer (6M) or even Aids (1M) and, horrible though it is – life will, eventually, go on regardless.

Another reason the Futures dropped 600 points this morning (still green though) is our beloved leader is still sticking to his idiocy of ending the quarantine by Easter (April 12th) despite every expert, including his own, saying that it's a terrible idea to set arbitrary dates this early in the process and, of course, China's quarantine lasted 50 days – how are we going to be done in less than 30 days?  

Also this morning, because our President is an idiot, the World Health Organization (WHO) warned the rest of the World that the United States could become the new hub for the viral outbreak as we are THE WORST country on the planet Earth in terms of preparedness, prevention and containment.  Chad looks organized compared to us – CHAD!  

“This cure is worse than the problem,” Trump said. “In my opinion, more people are going to die if we allow this to continue.”


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PhilStockWorld March Portfolio Review

Image result for one million dollars animated gifWhat a crazy fist quarter it has been!

We cashed out our last set of winning portfolios back in September, as I did not trust the market into Q4 but the market kept going higher so we had too much FOMO (Fear of Missing Out) and we started playing again in October – albeit with much smaller amounts.  Our Long-Term/Short-Term paired portfolios had hit $2.6M after starting at $500,000/100,000 on Jan 2nd, 2016 and it was becomming too difficut to hedge so I said at the time:

Hedging a $1.7M LTP would be very expensive and what if next time we didn't time the turn in the STP and instead blew the turn and lost money there as well as the LTP.  Then we'd be back to $2M and needing to make 30% to get back to $2.6M and what if it's hard to make money next year or what if we have another crash and the market is down 40% – it's just too much to risk vs. putting $2.6M safely on the sidelines and simply looking for new opportunities.

Well, here we are, at the bottom of that 40% sell-off and, as expected, we're having to pull a bit more cash off the sidelines as some of our new portfolios got crushed.  This is going to be an odd review because we made more than one adjustment in the past two weeks on some portfolios and I'll do my best to consolidate all the moves here.  The bottom line is we got a lot more aggressive around March expirations (20th) and yesterday (23rd), as the market hit rock bottom, we went gung-ho bullish in our LTP and Butterfly Portfolios in anticipation of a massive Congressional Bail-Out Package.  

Hopefully, that provides a catalyst to form a floor at the 40% off line and we can consolidate between here and the 20% off (the top) lines, which is where the market should be in the first place – the rest was just fluff – that's why we cashed out in September – at S&P 3,000!  

Short-Term Portfolio Review (STP) (3/19):  $282,168 is up 182% so…
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Turnaround Tuesday – Yes, $3Tn is a LOT of Money!

Image result for oligarch virusMORE FREE MONEY!!!

We're closer to it today than yesterday so the markets have gotten over their temper tantrum about yesterday's delay and now counting the uncountable riches that are about to be thrown around by our Government and our Federal Reserve as well as all the other Central Banksters around the World and we're even having an emergency G20 meeting to discuss even more bailouts for our Top 1% Corporate Citizens because they should never ever suffer the consequences of their bad decisions – like letting the Oligarchs run the World, leaving us totally unprepared to handle a Humanitarian crisis (I know, so many big words to look up!). 

“Sentiment has improved, but to call it a turning point is too strong a word for now,” said James McCormick, global head of desk strategy at NatWest Markets. “It is more of a tug-of-war. Policy bazooka is in place, but will be fighting against very weak data and still worrying trends on Covid-19 data. We are more neutral on risk assets now.”

There's a great article in Bloomberg comparing this sell-off to other market sell-offs but the primary take-away on this thing is IT'S ONLY BEEN 6 WEEKS SINCE THE TOP OF THE MARKET!!!  In that way, the market collapse is most like 1987, when we were in the middle of a rally that had the Dow going from 2,250 in May to 2,750 (22%) in August after already rallying from 1,300 in 1985 and it was all based on Reagan's tax cuts and trickle down BS that masked the "sudden" S&L crisis that exploded and finally popped the bubble and we tested the lows in early October, about 60 days after the top, firmed up around 1,750-2,000 and didn't really get back on track until Aug 1988 and it was a year after that before we were back at our highs.

That's was with MASSIVE intervention by the Government as well.  Government intervention is not a magic wand that will fix everything tomorrow or next month or even next year so those of your sitting around starting at your portfolios with your fingers crossed are NOT…
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Just Another Manic Monday as Congress Fails to Deliver Good News

Image result for free money animated gifI want free money NOW!!!  

That's the word from Wall Street, which is in no mood to give Congress a couple of days to decide how to dole out $1.5Tn(ish) in stimulus spending for the first round of the bailout that has, so far, been bothering Americans for a month.  Imagine how things will be in month 3!  We left off Friday Morning with 246,275 global infections, 9,115 deaths and 84,506 recoverd and Italy was the rising star of the virus World with 35,713 infections and 2,978 deaths and the US had 14,250 infections

This morning there are 349,211 Global Infections (42% more), 15,308 Deaths (68% more) and 100,165 Recoveries (18.5% more).  So STOP listening to the news and their "expert" opinion makers and for God's sake stop listening to the Government and think for yourself.  These are statistics – hard facts.  If there is a 3 times faster rate of people being infected than are recovering – that's not good, if there is a 4x faster rate of people dying than recovering – that's not good either so, in general, your take on this weekend is "Not Good" and don't let people tell you otherwise.  

Now, there are mitigating factors like more testing leads to more cases and sure, that's true but more testing doesn't lead to more deaths (hopefully) so that's a hard fact we need to pay attention to and lack of recoveries is a big concern and makes it seem kind of like BS when people try to assure you that most people get mild cases.  If that's true, why have 233,738 people who have been infected stil not recovered?  

No one is being honest with us – that's the main problem.  One true thing we can isolate is 712 people on the Diamond Princess Cruise Ship got infected one month ago and, as of today, 567 recovered and 8 have died.  It was a Princess Cruise Ship, so we can assume they were generally upscale passengers and generally older and it was early on – so they got the best possible care before hospitals began crowding up yet, one month later, 137 passengers (19%) have still not recovered (or died).  


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TGIF – Hoping to End the Week on a Positive Note

Hi ho silver!  

During Wednesday's Live Trading Webinar (replay available here) we decided to go long on Silver at the $12 line and we were rewarded early this morning with an explosive run to $13, which netted a lovely $5,000 per contract for our Members, which is the same as the $5,000 per contract we gained on the S&P (/ES ) as it popped from our 2,400 line all the way to 2,500 this morning before also stopping us out – salvaging $4,000 gains at 2,480.  

A lot of that rally is fading as we get close to the open and we won't be jumping in again until we see where the bottom is as we got very close to 2,300 on the S&P yesterday so we'd really love to see that again for another Futures entry.  The Futures are an excellent way to make money in volatile markets but you have to take profits off the table as things turn around very quickly.  The EU markets opened at 4am and everything went sour then, which is why we take the money and run on a good rally before then!

Remember, it's very easy to rally the Futures as they are very thinly traded and, once the exchanges open, the volume sellers take full advantage to finish selling what they were trying to get out of yesterday so, if we closed on volume to the downside and reversed in the Futures without any Fudamental changes – it's very likely that the selling will resume in the moring until (if) the sellers become exhausted.  That's especially true in a market like this – where sellers simply can't find enough buyers to fully unwind their positions.  

 

IN PROGRESS

 

 

Faltering Thursday – Fed, Stimulus Fail to Convince the Market

Trillions of Dollars are being committed to "fix" the economy.

So far, the stock market is not buying it as we continue to have wave after wave of selling, though we are still inside our predicted range for the S&P 500 – it just feels very frustrating as we stuggle to get back over the -15% line at 2,420.  This morning the Futures are down yet again as traders are not convinced the Government is doing enough either to calm the markets or fight the virus.

Very simply:  What is their plan?  

If you can't answer that question – then that's the problem, isn't it.  The Government has failed to articulate a clear plan to the American people 

 

IN PROGRESS