Sunday, August 26, 2012

Danger, Sharp Curves Ahead

The next two weeks are going to be a doozy.  I have no idea what will happen.  Almost all of my indicators and stocks I follow are neutral or a buy, and most are overbought, at least short term.  But with volume so low, the market can be pushed in any direction.

So my strategy is to keep a core miner position, mostly silver miners, and write some ratio options for September on gold and silver, that will reduce significantly my cost to enter the trade, and risk of loss if the Bernank disappoints the metal bugs at JHole,(which I am a proud member) yet will profit from a move higher.

I am also keeping my EDC puts for September for a sell the news event.  At any rate after the Fed meeting in September, we are going to move lower ahead of 3rd quarter earnings.  Revenue is flat, and most tricks are used up (currency, lay offs, foreign operations, channel stuffing, etc).  Plus, the rich are going to hunker down until they see what damage is coming their way (Obama reelected, Senate flip Republican, fiscal cliff resolution details, etc).

I had a good week, and my signals did well (see below).

Below are a few charts.

Trade history as of Thursday

Sunday, August 19, 2012

August 20th-My Thoughts on the Week Ahead

I can't imagine we will see much drama this week, as the Central Bankers are the story and will not get together until next Wednesday.  I will continue to scalp and play with credit spreads.  There should be an upward bias as the robots will not allow anyone to benefit from the Bernanke capitulation next week if it comes.  We are pricing in perfection.  Only gold and silver has not taken advantage of the creep, and the only area of a pricing mismatch if the Bernank eases.

Corey Rosemblum published an interesting piece on these moves, and if you are leaning long, it is important to see how far the sell off goes historically.  I recommend building a short hedge that profits from a drop in that retracement zone.

Also, going into fall, third quarter estimates are being reduced, and there is a very good chance that revenues fall sequentially, and with a lean workforce, that means reduced profits.  I also would start looking at companies exposed to commodity costs, that offer a discretionary service or product to short, like restaurants.  We are going to start seeing some blowups.  Here are my charts below.

By the way, I am starting an options paid service based on the most common ETFs next week.  I have received a high level of interest in offering such a service.  These will be high probability spread and ratio trades based on my buy and sell signals of the underlying ETF's.  I am going to value price it.  If interested, sign up on my free site, by clicking the button on the top right of the page.

Sunday, August 12, 2012

August 13th, the week ahead

Last week played out nearly exactly as I hoped, and for the most part traded it well.  I cut out of some my miner positions a little earlier than my signals told me to, when SPY flashed a sell for me on Tuesday.  I bought puts on SPY, but closed them Friday morning (small profit) when the market rejected the lows.  The volume is too low to fight the Fed short at this point.

I also bailed on my AMZN trade, as well.

My comments on Gold, Silver, Miners, and SPY are on my charts below, but wanted to talk about Ag Chems and Energy.  Ag Chem is flashing tradeable buys right now, and look to be in accumulation longer term.  I am in and out of POT, IPI, and RNF and have been tweeting signals for those who receive my tweets (free or paid).

Energy has me nervous as higher energy costs complicates Obama's and the Feds life.  CME already indicated higher margin requirements; expect to see more aggressive action and rhetoric.  Ultimately they will fail, but short term things can get whippy.

Have a great week.

Saturday, August 4, 2012

The Repo Man Cometh?

The market rose on Friday, and started when Europe opened and continued until an hour after our market opened.  The reason given was the good employment report.  That reason is obviously a deception, as we lost hundreds of thousands of jobs.  So what could it be?  My contention is the Fed started to add to reserves into the banking system Thursday/Friday (Repos). The last time this happened (Dec 2008) the miners and metals bottomed and then two months later the market rose.

So the market reacted to this, gold and miners showed strength, and as these repos continue, you will see a move to hard asset stocks and commodities, a move out of bonds, and then it will pressure non commodity assets as margin pressure will crush earnings.  But first we will make new highs in equities.

The Fed has no choice but to add reserves to the system or risk sovereign and banking collapses.  Reserves have been falling for a year, and the only reason the market is flat and not down is the volatility crush and short squeezes that forces risk on.  Both are done, volatility at lows and short interest down considerably. Jawboning promises of liquidity is done, and we are at peak earnings and margins, so reserve building is the next step.  Plus they must give the banks more cash to leverage up to buy gov't debt and to support the market price and their profitability.

Plus, who thinks Obama is going to allow a market crash before the election.

Anyway, this is what I am watching and thinking.  Now here are some charts and my comments.  Enjoy.