Entries by Phil

Which Way Wednesday – Will the Wild Ride Continue?

Related imageWheeee!   

Yesterday sure was fun.  The Dow Futures (/YM) blasted up to 26,050 at 10am and then, by 3pm, it was back at 25,700, down 350 points (1.34%) in 5 hours.  But don't worry, we recovered 100 into the close and now we just tested 26,000 again, which is a good shorting line with tight stops above since yesterday's 300-point drop was good for gains of $1,500 per contract for the shorts.

In our Live Member Chat Room, we stuck with the Russell Futures (/TF) shorts at 1,600 and those fell all the way to 1,575 for gains of $1,250 per contract and we added longs on the Dollar (/DX) at 90 and Coffee (/KC) at $120 while, of course, taking the $1,000 gain on /RB and runningthe same short at $1.85 we played all last week in our morning Reports (you're welcome!).  

We still like the Russell for a hedge into earnings and, in the Live Member Chat Room, we chose the following hedge at 11:25, just in time for the massive 100-point drop in the Russell but we're back to 1,585, so you can still make the hedge on the Ultra-Short ETF (TZA) as follows:

  • Sell 30 TZA 2020 $10 puts for $2.50 ($7,500) 
  • Buy 40 TZA July $10 calls for $1.80 ($7,200) 
  • Sell 40 TZA July $15 calls for 0.60 ($2,400) 

That gives you a net credit of $2,700 and a $20,000 upside on the July spread if TZA pops from $11.40 to $15 (31%) and, since it's a 3x short ETF, that would mean the Russell would have to drop about 10%, back to 1,425, which doesn't seem like much of a stretch after yesterday's quick plunge.  If the Russell doesn't fall, then we take the remaining $2,700 and invest it in rolling the long July calls to something lower in January and then cover with short Jan calls and then we have a full year of insurance in exchange for our promise to buy 3,000 shares of TZA for $10.  The idea, of course, is that our longs make much more money than our TZA shares would lose – hedges…
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Terrific Tuesday – Futures Blast Market to New Highs – Just Because

Dow 26,000?  Really???

That's right, the Dow blasted 1% higher this morning to hit 26,000 and the S&P 500 hit 2,800 and the Nasdaq 100 hit 6,800 and the Russell hit 1,600 all record highs ahead of the Government shut-down on Friday (not really, they will extend it again).  Meanwhile, this puts Donald Trump only 12% behind Obama for first-year market rallies and he only had to promise a $1.5Tn tax cut to get it.  George Bush I also beat Trump – and that guy wasn't even trying!  

Obama's rally peaked out on Jan 19th, 2010 at 1,150 on the S&P and then we fell for a month – back to 1,050 (10%) but then we rallied to 1,200 (April) but then we fell to 1,050 again (July) in a very exciting second year.  Of course, those consolidation waves set the base for the next 1,200 points and then Trump took over we're up another 600 but, of course, Trump is taking credit for the whole 3,222-day rally – even though he's only been President for 10% of it.

Notice the Clinton Rally lasted 4,494 days and was much, much bigger (582%) than our rally (301%) and yes, it was pure lunacy at the end of the dot.com boom but this is the no tax boom and crypto-idiocy boom and 2,000 lie boom – all rolled into one.  Sure, in a few years, we'll look back at this rally and say "What were those idiots thinking?" and we'll forget "those idiots" were us and yes, I'm including myself because, despite warning you to be cautious, we put 20% of our CASH!!! back to work this month in our brand new Member Portfolios.

chartFOMO (Fear of Missing Out) is what drives the markets and, if we are on the way to a Clintonesque 100% additional gain from here (Dow 50,000?), then we'd feel like real idiots missing out on that rally, even if there is "no inflation" – according to the Fed.  As you can see from the Relative Strength Indicator – since 1960, we have never been this "strong" in the market and forget the fact that all those peaks ended
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Fantastic Friday – Greetings from the Top to all you S-Hole Countries!

What a great start to the year!

The S&P 500 is up from 2,680 to 2,770 so 90 points is 3.3% and our Long-Term Portfolio is already up 4.4% or $21,755 in 8 days of trading.  As you can see, we still have all of our cash on the sidelines as the well-hedged positions we picked up have been cash-positive for us so far – we haven't been confident enough to take big risks yet.  Our $100,000 Options Opportunity Portfolio, which you can follow at Seeking Alpha, is only up 3.3% because we're down $900 on our TZA hedge while, in the $500,000 LTP, CASH!!! is still our primary hedge against a market collapse.  

Our goal is not to "beat" the market on the way up, our goal is to kick the market's ass on the way down or if the market is flat.  By capturing all the good stuff and avoiding all the bad stuff, we can consistently outperform the market year after year without suffering the portflio-killing pullbacks that plague more aggressive traders.  While it's fun to brag about making outsized returns during these market bubbles – it's more fun to "Get Rich Slowly" and retire with plenty of money, isn't it?  

The key to building wealthy over time is CONSISTENCY.  Warren Buffett's Berkshire Hathaway has "only" averaged 16% returns but he's been doing it for 50 years, allowing his initial investors to make 10,000 x returns on their invesments.  

But that's not the way it starts.  It starts in year one with a 16% return and $100,000 becomes $116,000 and then $116,000 becomes $134,000 which becomes $156,000 in year 3 and then $181,000 after 4 years and finally, in year 5, you get to say you've doubled up.  While it may seem like you'll never get to $1Bn in 50 years at that pace – the math doesn't lie – you just need to learn how to CONSISTENTLY make good returns.  

And, of course, anyone who says they have a better system is LYING to you because, after 50 years of measuring, no investor on this planet is richer than Warren Buffett so it's Warren Buffett's model we pursue, picking up good stocks at good prices and building
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Thrill-Ride Thursday – Markets Right Back on Top

What pullback?

We waited all year for the markets to pull back and all we got was a lousy 50-point correction?  This market is completely nuts and this morning the Futures already have us back at the 6,700 line on the Nasdaq (/NQ) along with 25,400 on the Dow (/YM), 2,756 on the S&P (/ES) and 1,565 on the Russell (/TF) while Oil (/CL) is testing $64 despite disappointing demand numbers in yesterday's inventory report.

Facts don't matter in this market – it's all about the momentum at this point and, tempting though it may be, we're not placing many bets against it though shorting /NQ Futures at 6,700 with tight stops above is a no-brainer – as it limits your losses but not your gains (see yesterday's Report).  We took a poke short in yesterday's Live Trading Webinar but then decided long was a better play after losing $105 but now we're done with those and flipping short at the same(ish) levels we shorted on Tuesday afternoon.  

We saw how quickly gains could evaportate yesterday but, if those weak retrace lines keep holding up, we may be consolidating for a breakout to new highs, rather than correcting from our New Year's rally.  Yesterday's strong 10-year note auction alleviated fears in the bond market but that may have been because we sold $20Bn in debt at 2.6%, the highest level since last March.  Today we sell $12Bn of 30-year notes at 1pm and we'll see how that goes.  

One thing everyone seems to be ignorning is a warning from Moody's that Trump's tax plan has put the United States on Negative Credit Watch as they see it as detrimental to our economy overall, with at least $1.5Tn in additional deficits over the next 10 years (in addition to the $8Tn deficit that was already modeled in).  According to Moody's:  

"Any boost to economic growth from the new US tax law will be modest and depend on how businesses and individuals


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Weakening Wednesday – Did China Find the Market’s Achilles Heel?

Wheeeee!  

Finally a nice little dip and we nailed it yesterday as I said to our Members at 3:08pm in our Live Chat Room:

  • /NKD down 125 today but the US indexes could care less.
  • /YM 25,400 is a fun short with tight stops above.
  • /ES 2,760 finally got a reject
  • /NQ 6,700 finally caused a pause – also a good shorting line
  • /TF 1,565 is good to play for the cross below
  • DAX 13,400 is a good check line too
  • Check out the 5-year charts.  There are 30 year-old traders with 5 years' experience who have no idea whatsoever that markets can go down.  ?

I put out an Alert to our Members at 6:06 am (and tweeted it too) calling for profit taking on the dip, saying:

I'm taking the money and running here, /NQ was my play and now testing S2 at 6,644 and my fresh horse is now /TF below 1,550 (but I doubt it) with /YM at 25,235 and /ES at 2,738.  If anything, I'd play long for the bounce here but huge winner ($11K) so I'm just happy to watch for now.

Seems like we're only selling off because the Dollar dove and took /NKD down 250 and our indexes followed it lower – otherwise I'd be more inclined to stick with it.

/RB is still a good short at $1.85, of course, with tight stops above. 


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2,750 Tuesday – S&P 500 Hits it’s Next Benchmark

2,750 already?

It was only September when we got over 2,500 so another 10% in 4 months is a 30% annualized pace for the senior index.  Back on 9/26, I asked "Is S&P 2,500 the Market’s Waterloo?"  and clearly it has not been, with barely a down day since, punctuated by this year's crazy kick-off that's taking us 75 points higher (3%) for the year, so far.

Of course that's nothing compared to what's going on with our GreenCoins (GRE), which blasted up another 100% this morning on heavy volume, despite the sell-off in some of the more popular crypto-currencies.   That's up 1,000% from our Dec 3rd call to buy the currency, where we guaranteed we'd accept them at 0.00044 as payment for 2018 Annual Memberships.  We even tweeted that one out the same day – so there was ample chance to get in on the fun.    

And why shouldn't we be able to make 1,000% in a month?  That's the new market paradigm these days when, as I predicted on November 29th, at this pace "We Will All Be Billionaires."  The next day (11/30) we analyzed the Dow in "24,000 Thursday – Dow Continues Its Insane March Higher" and now the Dow is at 25,300, up 5.4% in 6 weeks.  Of course, we didn't think it was sustainable and we cashed out our protfolio positions into the holiday and, since last Monday, we've been slowly building them back up – since this rally seems to be showing no signs of slowing down.

While I'd much rather see a good correction before we jump in and start buying again, we also don't want to get left behind in a good rally so we're picking up values where we can – though there aren't many value stocks left these days!   

Not only is the S&P testing the 2,750 line but the Nasdaq 100 (/NQ) Futures are just under 6,700 – and that's up 10% since October!  We're using the Nasdaq's ultra-short ETF (SQQQ) as our primary hedge at the moment as we really can't believe earnings are going to live up to the hype but it's not really about earnings – it's
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Monday Market Madness – Who’s Watching the Watch List?

It's been a busy weekend.

Last Wednesday, we put up our Watch List for 2018 and we had about a dozen trade ideas, right off the bat, that we were adding to our Long-Term Portfolio and Options Opportunity Portfolio.  Over the weekend, we've added 10 more actionable trade ideas for the OOP and LTP - so don't complain there's nothing to buy in this toppy market – we even had a nice hedging play for you on Friday.  While we're still expecting a correction – it's likely to be just another buying opportunity in a generally bullish market.  

Considering how sure I am that we're going to have a 10% correction this quarter, I was actually surprised at how many stocks there are trading for good prices.  Granted, I was looking at thousdands of stocks and found only dozens to buy – but I thought we'd find far fewer than that.  I suppose it's because the rally has been fairly narrow in scope – leaving many good stocks behind in favor of chasing the popular stocks to new highs.  

It's still too scary to short things, which is a shame – because there are so many things that are tempting to short like Tesla (TSLA) at $316 (always a good short), Amazon (AMZN) at $1,230 ($600Bn!), Netflix (NFLX) at $210 and whatever Uber is currently trading for!  We'll get AMZN's numbers at the end of the month but, last I heard, they should be about $60Bn in sales and $1Bn in profit for the quarter, which will put them up around $2Bn for the year or less than $5 per $1,230 share so it will only take AMZN 246 years to pay back investors at that pace.  

The investing premise on AMZN is, of course, that they will grow into their valuation but then their valuation jumps was faster than their growth – up 50% in 2017, in fact – yet people just keep snapping it up – with half of that growth coming since October.  

How will Amazon justify a $600Bn valuation?  It's earning $2Bn now and it's selling about $180Bn a year worth of stuff while WalMart (WMT) sells $500Bn so let's say AMZN gets as big as WMT
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Friday Follies – Trump Promises Dow 30,000

Dow Jones Industrial Average crosses 25000 for the first timeWell, we're past 25,000 the Dow and the President is promising 30,000 so we'd better buy more stocks, right?

As crazy as it all seems, the makets COULD go up another 20% and there are about 200 trading days for the Dow to gain 5,000 points so 25 points a day would seem calm compared to what the markets are adding this week.  Keep in mind how silly this is as it's a $100 TRILLION Global Stock Market and when we have these 1% gains across the board, we're adding $1Tn of "value" in a single day against an $85Tn Global GDP that's growing, at best, 4% for the year ($3.5Tn).  

Related imageThat, in a nutshell, is what's wrong with the World now – we value Coprorations more than we value Governments and Coporations and their Top 1% owners are slowly but surely taking control of our Governments, turning us into a Global Oligopoly in which people don't matter.

Oddly enough, the people love it, though.  Especially the Top 10% of the people, who buy stocks, as they seem content to let the Billionaire Class lead us into the land promised by Ayn Rand 60 years ago, one in which 

 

IN PROGRESS

 

 

 

 

 

Follow-Through Thursday – Dow 25,000 and Bust?

How long, can this keep going on?  

"Well, your friends with their fancy persuasion

Don't admit that it's part of a scheme

But I can't help but have my suspicion

'Cause I ain't quite as dumb as I seem

And you said you was never intending

To break up our scene in this way

But there ain't any use in pretending

It could happen to us any day" – Ace

So far, 2018 is looking like 2017, with the indexes climbing up and up and, as I noted to our Members this morning, there's some good economic notes backing up the positivity including 18 states that raised the minimum wage on January 1st, which puts a bit more disposable income into the hands of 4.5M affected workers while putting upward wage pressure on 50M more.  Those effects take time to roll in but rising wages is a trend we should be able to rely on.  

Clearly the markets are loving it as we made fresh record highs and this morning the Futures are making even fresher, higher records but, as noted above, how long can this keep going on?  What has actually changed to justify today's record high?  

You can't just keep rewarding the market for doing the same thing it always does otherwise, as I warned back on November 29th, we will all be Billionaires.  While I'm sure you want to be a Billionaire, what's the point of it if everyone is a Billionaire?  If that happens, you're going to be nothing if you aren't a Trillionaire – that's what happened in Zimbabwe, where they were printing $100,000,000,000 bank notes in 2009, right before their currency completely…
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Wednesday Watch List Update – Stocks We Like for 2018

Related imageIt's very important to have a Watch List.

I like to have about 24 stocks I keep a close eye on so that, when something happens and they go on sale, I'm ready, willing and able to pull the trigger in an instant.  We did that in November, when Macy's (M) announced their earnings and we thought they were just what we wanted yet the market sold them off after the opening pop.  That gave us a window to act and, because we follow M closely – we KNEW it was time to act and I issued a Top Trade Alert, identifying it as our top contender for Stock of the Year for 2018 (replacing LB, another retailer who has already flown higher).  

We issued our 2017 Watch List back in March and in May we picked 13 out of 24 for action, including M as well as BMY, ESRX (still cheap), FCX, GE (cheaper), GILD, LB, PSA (still cheap), QCOM, TGT, GCI, FMCC and SEE (still cheap).  So, out of 13 picks we had been watching and pulled the trigger on, 10 are winners, 2 are flat and one (GE) is down.

This is the key to understanding our system.  GE was our only non-winner out of 13 picks (the flat ones make money too using our "Be the House – NOT the Gambler" system) and is still very manageable but, since they cut the dividend, we're not jumping back in yet – other than short puts.  

Image result for real investingIn order to become a real investor, you have to break out of your "winning" and "losing" mind-set and that's very difficult because your broker – who wants you to TRADE, not INVEST, gives you a daily scorecard with minute-by-minute updates to encourage you to thing of your portfolio as something that should constantly be fiddled with to improve your "score".  They even highlight your losers in red – so they bother you and further encourage you to dump slumping stocks by raising the margin requirements on them – making them even harder to hold onto.  

Imagine if you ran a baseball team that way – constantly cutting players who were having a bad month and hiring
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