This past week the markets crept higher as our bearish plays drifted lower...
WE WERE EVEN STOPPED OUT OF ONE PLAY--OUR FEB 44 PUTS ON CLF
Every major index ended up higher for the week and that trend may continue this week confirming that the 'Santa Claus Rally' really does exist. The question is--will it continue after the markets reopen on January 4th?
To help answer that question let's take a good look at where stocks have been and...
WHICH WAY IS THIS MARKET HEADING
In looking at the charts two things become obvious--the first is that the overall trend of the markets is up. And the second is that even though rising wedges are bearish patterns they can fail like anything else as the Nasdaq broke to the upside this past week.
So the market is celebrating for now but how long that lasts is in question. Fund managers could very well be waiting for the new tax year to lock in profits and even if the overall trend remains higher upside breakouts like on the Nasdaq above almost always sell-off before heading higher.
The SPX will likely have trouble getting above the 1133-1138 resistance zone. The most likely scenario is a small consolidation this coming week and then a final push to a minor new high, possibly into the first day or so of January.
This is another holiday-shortened week and will be a quiet one from a volume standpoint. As for economic reports it's also going to be a quiet week. There are no significant reports on Monday and then Tuesday we'll get updates on housing prices and consumer confidence. The numbers might not be as good as expected which could cause that consolidation starting Tuesday morning.
One of the biggest challenges going into 2010 will be employment and the consumer consumption that goes with it. The adult U.S. population grows by about 2 million a year, which means the economy needs to create about 1.3 million jobs every year to satisfy all those who want to work. The economy needs to grow at a pretty fast clip to create those jobs, because productivity improvements mean that we can produce about 2% more each year with the same level of employment.
It could take years to bring the unemployment rate down to 5% or 6%--where it was in 2007.
Recession battered workers--the credit squeeze--the implosion of the housing bubble--weak demand at home and abroad---and the relentless drive to cut costs and preserve margins have put more than 15 million people on the unemployment lines. The official jobless rate has jumped from 4.4% to over 10%, while millions of Americans have been limited to part-time work even though they want to work full time bringing total unemployment rate closer to 17%.
Economists at Goldman Sachs figure the unemployment rate won't peak until the middle of 2011 and will drop back to 10.5% by the end of 2011. That's at least two more years of remarkably high unemployment--and remarkably reduced consumption.
In the decade that's just ending, the private sector has actually lost about 2.3 million jobs, the first decade with negative employment growth since the 1930s. Output has risen 15% over that period, but pay has been stagnant.
Unfortunately the jobs created earlier in the decade were fueled by the twin housing and credit bubbles so much of those gains were unsustainable. Most of the rally of the past nine months has been based on government liquidity infusions designed to inflate the economy out of its problems with no focus on real or sustainable growth. Essentially the government is lending the banking sector capital in an effort to get them to lend to individuals and corporations already drowning in bad debt.
And some of these efforts are working--at least in the short term. "Rising incomes, diminishing job losses, a continuing stock market rally, and widespread price discounting are bringing some holiday cheer to consumers," wrote Nigel Gault and Brian Bethune, U.S. economists for IHS Global Insight.
Economists are forecasting an increase in the Consumer Confidence index to 54 in December from 49.5 in November--a significant improvement. The index bottomed at 25.3 in February, far below the average level of 100 recorded during the last expansion. The Consumer Confidence index is due to be released on Tuesday and should give traders a little bit of an idea of how the holiday shopping season faired.
In the meantime artificially low Government subsidized interest rates and easy year over year earnings comparisons are keeping the stock market heading higher for now--the question is...
HOW DO WE MAKE MONEY ON IT?
We've got one play lined up for this holiday shortened low-volume week with two positions--it's a 'both ways' strangle. The beauty of this play is that the options are on a highly volatile asset--yet the options are cheap!
We're able to buy all the way out to February on this one with a combined price of less than 1.30--and we can make money in BOTH directions!
This is one of those rare opportunities where most of the risk is out of the play but the potential for big profits is extremely good--so let's get to it...
For more information on everything you receive with your Pearly Gates subscription click on www.cashflowheaven.com/pg
Monday, December 28, 2009
Monday, December 21, 2009
RIMM BLEW AWAY ESTIMATES LAUNCHING OUR JAN 65 CALLS TO A FOUR-DAY SIXTY-TWO PERCENT PROFIT!
This past week proved to be extremely profitable...
RIMM BLEW AWAY ESTIMATES LAUNCHING OUR JAN 65 CALLS TO A FOUR-DAY SIXTY-TWO PERCENT PROFIT!
Plus our other new play for the week--the BGZ--is already in profit territory but if things play out like we think there will be HUGE gains to be made in the New Year.
We've got some new cash to work with and two new outstanding new plays to multiply it with--but before we get to them let's take a good look at...
WHICH WAY THIS MARKET IS HEADED
The SP-500 continues to trade sideways with no conviction one way or the other. This looks like fund managers biding their time to sell in the new tax year--and this coming week's holiday low-trading volume won't likely change the sideways trend seen above.
The Nasdaq remains at the top end of its range helped by the same big cap techs that kept the S&P afloat on Friday. RIMM, APPL and CELG were the big Nasdaq stars.
The Nasdaq has moved from a bullish uptrend to a rising wedge pattern and this pattern normally resolves to the downside rather than breaking higher--although the trend above looks up this is actually a bearish pattern.
Unfortunately there is little news over the next two weeks to power techs to a breakout. All the major tech stocks have reported earnings and we are approaching the point before the pre-earnings season where earnings warnings are more likely than guidance upgrades.
The continued failure at resistance on the SP-500 is a sign there is no bullish conviction. Traders are buying the dips but they are also shorting the highs. The charts suggest the level that will fail first is support rather than resistance.
The dollar rally last week was the strongest in eight months. Fueling the rise was the ongoing debt crisis in Dubai and sovereign debt downgrades on Greece, Spain, Italy and Mexico. Analysts believe it will only be a matter of time before the UK loses its AAA rating as well.
Plus other credit issues in Europe are heating up--the PIIGS (Portugal, Ireland, Italy, Greece and Spain) are weak and the threat of an Eastern European collapse is weighing on banks--especially European banks.
Some analysts believe this dollar strength is just profit-taking as traders exit their positions before year-end. The "short the dollar, long commodities" trade is getting old and it appears to be reversing--at least for awhile. Gold is struggling to hold the $1,000 level and we saw what happened to crude oil when the dollar spike began.
If this is just an end of year position adjustment then early January could see another reversal. However, every time we get more news about an improving US economy we get that much closer to a Fed rate hike--and when that happens the dollar will begin a long-term rally just like it did when rates went up back in '80.
The problem now is the US government itself would have a very difficult time paying higher interest rates on its own debt because the amount of debt is so monstrously out of control and there appear to be no intentions for reeling it back in.
Debt in the US is at extreme levels and it spans from the government, to the states, to municipalities, to individuals. Banks borrowed $285 billion in total last year and 75% of them have paid back their TARP funds at the cost of diluted stock holder equity. Unfortunately, Freddie Mac, Fannie Mae, AIG and GMAC require immediate funding and these bailouts could reach $1 trillion. The needs of these 'too-big-to-fail' entities will vastly exceed what has been paid back by the banks, creating a new cash outflow and an even more unsustainable debt.
Personal balance sheets are also weak and in the last few days we learned that credit card defaults are on the rise. Almost 15% of all mortgages are either delinquent or are in foreclosure. And less than half of all baby boomers have even $100,000 saved for retirement. Baby boomers represent a full 25% of the total US population so this workforce moving form tax contributors to tax consumers doesn't bode well for the country's long term economic prospects. Don't take this information as 'gloom and doom'--it's just facts to take into consideration.
Unfortunately the nations--and the worlds--debts won't go away by printing more money. The only real result of that action is deeper debt and less options for the indebted. The majority of the market believes 2010 will close higher than it opens--and it may--it's just a little difficult to understand where all this organic (real) growth is going to come from.
As much as has been said about the faster growing emerging markets they are still dependent on consumption from the developed nations--and there is still too much debt for consumer demand to revive in the foreseeable future. Within the coming year we'll also see the up until now 'infinite' resources of the Federal government reach their limits.
But that's next year--for now the indexes will likely stay in their ranges until year-end. Once into January we could see a sharp but temporary decline--the question is...
HOW DO WE MAKE MONEY ON IT?
We've got two excellent looking trades lined up this week and as you may have guessed they are both bearish. The good news about these two is we don't have to wait until some New Year's breakdown to profit because they've both broken support and are heading south right now.
And if the breakdown does come in January it will likely add greatly to the downside momentum of both of these stocks--and with their options relatively inexpensive the profit potential is huge.
We've got two great plays lined up on a market teetering on the edge--so let's get to it...
For more information on everything you receive with your Pearly Gates subscription click on www.cashflowheaven.com/pg
RIMM BLEW AWAY ESTIMATES LAUNCHING OUR JAN 65 CALLS TO A FOUR-DAY SIXTY-TWO PERCENT PROFIT!
Plus our other new play for the week--the BGZ--is already in profit territory but if things play out like we think there will be HUGE gains to be made in the New Year.
We've got some new cash to work with and two new outstanding new plays to multiply it with--but before we get to them let's take a good look at...
WHICH WAY THIS MARKET IS HEADED
The SP-500 continues to trade sideways with no conviction one way or the other. This looks like fund managers biding their time to sell in the new tax year--and this coming week's holiday low-trading volume won't likely change the sideways trend seen above.
The Nasdaq remains at the top end of its range helped by the same big cap techs that kept the S&P afloat on Friday. RIMM, APPL and CELG were the big Nasdaq stars.
The Nasdaq has moved from a bullish uptrend to a rising wedge pattern and this pattern normally resolves to the downside rather than breaking higher--although the trend above looks up this is actually a bearish pattern.
Unfortunately there is little news over the next two weeks to power techs to a breakout. All the major tech stocks have reported earnings and we are approaching the point before the pre-earnings season where earnings warnings are more likely than guidance upgrades.
The continued failure at resistance on the SP-500 is a sign there is no bullish conviction. Traders are buying the dips but they are also shorting the highs. The charts suggest the level that will fail first is support rather than resistance.
The dollar rally last week was the strongest in eight months. Fueling the rise was the ongoing debt crisis in Dubai and sovereign debt downgrades on Greece, Spain, Italy and Mexico. Analysts believe it will only be a matter of time before the UK loses its AAA rating as well.
Plus other credit issues in Europe are heating up--the PIIGS (Portugal, Ireland, Italy, Greece and Spain) are weak and the threat of an Eastern European collapse is weighing on banks--especially European banks.
Some analysts believe this dollar strength is just profit-taking as traders exit their positions before year-end. The "short the dollar, long commodities" trade is getting old and it appears to be reversing--at least for awhile. Gold is struggling to hold the $1,000 level and we saw what happened to crude oil when the dollar spike began.
If this is just an end of year position adjustment then early January could see another reversal. However, every time we get more news about an improving US economy we get that much closer to a Fed rate hike--and when that happens the dollar will begin a long-term rally just like it did when rates went up back in '80.
The problem now is the US government itself would have a very difficult time paying higher interest rates on its own debt because the amount of debt is so monstrously out of control and there appear to be no intentions for reeling it back in.
Debt in the US is at extreme levels and it spans from the government, to the states, to municipalities, to individuals. Banks borrowed $285 billion in total last year and 75% of them have paid back their TARP funds at the cost of diluted stock holder equity. Unfortunately, Freddie Mac, Fannie Mae, AIG and GMAC require immediate funding and these bailouts could reach $1 trillion. The needs of these 'too-big-to-fail' entities will vastly exceed what has been paid back by the banks, creating a new cash outflow and an even more unsustainable debt.
Personal balance sheets are also weak and in the last few days we learned that credit card defaults are on the rise. Almost 15% of all mortgages are either delinquent or are in foreclosure. And less than half of all baby boomers have even $100,000 saved for retirement. Baby boomers represent a full 25% of the total US population so this workforce moving form tax contributors to tax consumers doesn't bode well for the country's long term economic prospects. Don't take this information as 'gloom and doom'--it's just facts to take into consideration.
Unfortunately the nations--and the worlds--debts won't go away by printing more money. The only real result of that action is deeper debt and less options for the indebted. The majority of the market believes 2010 will close higher than it opens--and it may--it's just a little difficult to understand where all this organic (real) growth is going to come from.
As much as has been said about the faster growing emerging markets they are still dependent on consumption from the developed nations--and there is still too much debt for consumer demand to revive in the foreseeable future. Within the coming year we'll also see the up until now 'infinite' resources of the Federal government reach their limits.
But that's next year--for now the indexes will likely stay in their ranges until year-end. Once into January we could see a sharp but temporary decline--the question is...
HOW DO WE MAKE MONEY ON IT?
We've got two excellent looking trades lined up this week and as you may have guessed they are both bearish. The good news about these two is we don't have to wait until some New Year's breakdown to profit because they've both broken support and are heading south right now.
And if the breakdown does come in January it will likely add greatly to the downside momentum of both of these stocks--and with their options relatively inexpensive the profit potential is huge.
We've got two great plays lined up on a market teetering on the edge--so let's get to it...
For more information on everything you receive with your Pearly Gates subscription click on www.cashflowheaven.com/pg
Monday, December 14, 2009
This past week the markets bounced around bouncing us out of several positions...
This past week the markets bounced around bouncing us out of several positions...
F5 NETWORKS (FFIV) REVERSED STOPPING US OUT OF OUR CALLS AT A MODEST FIVE PERCENT PROFIT!
PLUS MARIETTA MATERIALS (MLM) DIPPED BELOW OUR PROFIT TRIGGER AND THEN REVERSED GAINING A NINE PERCENT PROFIT ON OUR PUTS!
Those gains are small but we still appreciate them but they were overshadowed by losses on Chicos FAS (CHS) and Pepsi (PEP). When you set exit points on both the upside and downside you never know when a rogue spike will take you out of a play--sometimes it's at a gain, but in the case of Pepsi it was at a loss.
The key is to not let the losses dominate the portfolio--which is why we use stops. The other key is to make your winnings much more plentiful--which is exactly what we are going to work on right now by taking a good look at...
WHICH WAY THIS MARKET IS HEADED
Talk about a range bound market--the S&P-500 dipped to 1085 once again on Wednesday and then returned to 1110 right on cue. The S&P bounced to 1085 four times over the last four weeks and each time rebounded to 1100.
The Nasdaq could not stay positive Friday and finished with a loss of -4 points for the week. The midweek decline totaled -40 points but it recovered nearly all of that loss.
The resistance on the Nasdaq at 2200 has been rock solid since Nov-16th. However, we do have a pattern of higher lows and the Nasdaq is wedging nicely into a breakout pattern. Techs are expected to lead the way in 2010 so investors are continuing to buy the dip and any move higher will show another higher high.
China's factory production hitting 19% in November was a big reason for the market to rally last week. However, that is now old news and there is a Fed meeting in our immediate future. Stocks are not likely to rally much ahead of the Fed for fear of some rate raising language whacking stock prices.
Once past the Fed meeting we will be hitting the holiday vacations and volume will fall off dramatically. While late December has shown some nice rallies in the past there is cause for concern.
Many funds and institutions are sitting on gigantic gains from the rebound since March. The Dow is up +61% from its lows and the S&P +66%. That is a good decade of gains and it came in only nine months. There are many funds, institutions and money managers just counting the days until January so they can close those positions and lock in profits. If they sell them now in 2009 they have to pay taxes almost immediately. If they wait three weeks and sell them in January they can postpone those taxes for a year.
Which means quite a few managers are trying to sit tight for the next couple of weeks and praying that the market doesn't implode. The wildcard here is professional traders trying to front run any potential January dip. Do they sell into any Santa Claus rally or do they tag along for the ride into January? It will be interesting to find out. Meanwhile we need to keep our stops tight.
The economic reports for the last couple weeks have produced some big expectations for Q4 GDP. Whisper numbers are starting to move over 5%---including one analyst from JP Morgan.
That would be a huge number and would create significant ripples in the market and more pointedly at the Fed. It would force a rethinking of GDP estimates for all of 2010 and force the Fed to start thinking about raising rates. The Q4 GDP estimates are going to be the big story over the next month because the first official Q4 release is not until Jan-29th. Expect a lot of talk about the GDP as we near that release because official estimates are only for 2.6% GDP for all of 2010.
The calendar for next week is dominated by the FOMC meeting on Tue/Wed. That will be the sole focus for analysts until after the announcement on Wednesday. We have a pretty good idea nothing is going to change because Bernanke said as much in his testimony last week. However, in light of the recent economic improvements there could be some change in the language other than the "extended period" comment that will show the Fed is setting up for a bias change. This possible change in bias is going to be the overriding worry for the markets this week.
In addition to the Fed will be the Best Buy earnings on Tuesday and the FedEx, ORCL, RIMM and PALM earnings on Thursday. These reports will be key--especially in the case of Best Buy. As the largest electronics retailer--and without Circuit City to undercut their prices this year---BBY earnings should be decent. Of course it won't be the earnings that attract the most attention but the guidance for Q4. With only two weeks left in the shopping season Best Buy should be in a position to call the game for the rest of the year. If they say sales are good then everyone will benefit. If they warn about weaker sales and smaller margins because of the heavy discounting then the whole sector will head south.
After weeks of incredible volatility where every uptick in the dollar produced losses in equities and commodities a strange thing happened on Friday. The dollar broke out to a six-week high and commodities did not tank. Equities rallied as well. There is normally a direct inverse relationship between the dollar and stocks but that changed on Friday.
The reason for the change was the jump in consumer sentiment, retail sales and the first rise in business inventories in 13 months. For analysts that means the U.S. economy is improving faster than expected and that produces a stronger dollar. The best of both worlds is the dollar and equities both rising--and that may be the case right up until the Fed talks about raising rates--at that point stocks will plunge and the dollar will continue heading higher.
Recent economic reports are showing some catalysts suggesting the U.S. economy as well as China's is gaining traction. These reports are putting upward pressure on the dollar and making some investors more comfortable with the outlook for 2010. However, this range bound market is also telling us that the bullish sentiment from the +60% rally from March may be fading.
There are signs that some money managers may be just biding time until January to dump stocks for tax reasons. That could also lead to some additional window dressing into year-end driving stocks higher--the question is...
HOW DO WE MAKE MONEY ON IT?
We've got two high-probability plays lined up for this week--one bullish and the other bearish.
Our bullish trade is on a stock with an excellent chance of gapping higher this week. The reason is its past history--we're coming up on an event that virtually always makes this one explode--and this time it looks like it's heading higher. Fortunately we've got time to buy some great calls that should rocket higher by the end of the week--calls we'll be getting into Monday.
Our next play is on a company that sells a product that is dropping in price--and the stock shows it. This one has a perfect pattern of lower highs and lower lows--and we just hit one of the those lower highs setting us up for the perfect downside play.
We've got two great looking positions and a market ready to move so let's get to it...
For more information on everything you receive with your Pearly Gates subscription click on www.cashflowheaven.com/pg
F5 NETWORKS (FFIV) REVERSED STOPPING US OUT OF OUR CALLS AT A MODEST FIVE PERCENT PROFIT!
PLUS MARIETTA MATERIALS (MLM) DIPPED BELOW OUR PROFIT TRIGGER AND THEN REVERSED GAINING A NINE PERCENT PROFIT ON OUR PUTS!
Those gains are small but we still appreciate them but they were overshadowed by losses on Chicos FAS (CHS) and Pepsi (PEP). When you set exit points on both the upside and downside you never know when a rogue spike will take you out of a play--sometimes it's at a gain, but in the case of Pepsi it was at a loss.
The key is to not let the losses dominate the portfolio--which is why we use stops. The other key is to make your winnings much more plentiful--which is exactly what we are going to work on right now by taking a good look at...
WHICH WAY THIS MARKET IS HEADED
Talk about a range bound market--the S&P-500 dipped to 1085 once again on Wednesday and then returned to 1110 right on cue. The S&P bounced to 1085 four times over the last four weeks and each time rebounded to 1100.
The Nasdaq could not stay positive Friday and finished with a loss of -4 points for the week. The midweek decline totaled -40 points but it recovered nearly all of that loss.
The resistance on the Nasdaq at 2200 has been rock solid since Nov-16th. However, we do have a pattern of higher lows and the Nasdaq is wedging nicely into a breakout pattern. Techs are expected to lead the way in 2010 so investors are continuing to buy the dip and any move higher will show another higher high.
China's factory production hitting 19% in November was a big reason for the market to rally last week. However, that is now old news and there is a Fed meeting in our immediate future. Stocks are not likely to rally much ahead of the Fed for fear of some rate raising language whacking stock prices.
Once past the Fed meeting we will be hitting the holiday vacations and volume will fall off dramatically. While late December has shown some nice rallies in the past there is cause for concern.
Many funds and institutions are sitting on gigantic gains from the rebound since March. The Dow is up +61% from its lows and the S&P +66%. That is a good decade of gains and it came in only nine months. There are many funds, institutions and money managers just counting the days until January so they can close those positions and lock in profits. If they sell them now in 2009 they have to pay taxes almost immediately. If they wait three weeks and sell them in January they can postpone those taxes for a year.
Which means quite a few managers are trying to sit tight for the next couple of weeks and praying that the market doesn't implode. The wildcard here is professional traders trying to front run any potential January dip. Do they sell into any Santa Claus rally or do they tag along for the ride into January? It will be interesting to find out. Meanwhile we need to keep our stops tight.
The economic reports for the last couple weeks have produced some big expectations for Q4 GDP. Whisper numbers are starting to move over 5%---including one analyst from JP Morgan.
That would be a huge number and would create significant ripples in the market and more pointedly at the Fed. It would force a rethinking of GDP estimates for all of 2010 and force the Fed to start thinking about raising rates. The Q4 GDP estimates are going to be the big story over the next month because the first official Q4 release is not until Jan-29th. Expect a lot of talk about the GDP as we near that release because official estimates are only for 2.6% GDP for all of 2010.
The calendar for next week is dominated by the FOMC meeting on Tue/Wed. That will be the sole focus for analysts until after the announcement on Wednesday. We have a pretty good idea nothing is going to change because Bernanke said as much in his testimony last week. However, in light of the recent economic improvements there could be some change in the language other than the "extended period" comment that will show the Fed is setting up for a bias change. This possible change in bias is going to be the overriding worry for the markets this week.
In addition to the Fed will be the Best Buy earnings on Tuesday and the FedEx, ORCL, RIMM and PALM earnings on Thursday. These reports will be key--especially in the case of Best Buy. As the largest electronics retailer--and without Circuit City to undercut their prices this year---BBY earnings should be decent. Of course it won't be the earnings that attract the most attention but the guidance for Q4. With only two weeks left in the shopping season Best Buy should be in a position to call the game for the rest of the year. If they say sales are good then everyone will benefit. If they warn about weaker sales and smaller margins because of the heavy discounting then the whole sector will head south.
After weeks of incredible volatility where every uptick in the dollar produced losses in equities and commodities a strange thing happened on Friday. The dollar broke out to a six-week high and commodities did not tank. Equities rallied as well. There is normally a direct inverse relationship between the dollar and stocks but that changed on Friday.
The reason for the change was the jump in consumer sentiment, retail sales and the first rise in business inventories in 13 months. For analysts that means the U.S. economy is improving faster than expected and that produces a stronger dollar. The best of both worlds is the dollar and equities both rising--and that may be the case right up until the Fed talks about raising rates--at that point stocks will plunge and the dollar will continue heading higher.
Recent economic reports are showing some catalysts suggesting the U.S. economy as well as China's is gaining traction. These reports are putting upward pressure on the dollar and making some investors more comfortable with the outlook for 2010. However, this range bound market is also telling us that the bullish sentiment from the +60% rally from March may be fading.
There are signs that some money managers may be just biding time until January to dump stocks for tax reasons. That could also lead to some additional window dressing into year-end driving stocks higher--the question is...
HOW DO WE MAKE MONEY ON IT?
We've got two high-probability plays lined up for this week--one bullish and the other bearish.
Our bullish trade is on a stock with an excellent chance of gapping higher this week. The reason is its past history--we're coming up on an event that virtually always makes this one explode--and this time it looks like it's heading higher. Fortunately we've got time to buy some great calls that should rocket higher by the end of the week--calls we'll be getting into Monday.
Our next play is on a company that sells a product that is dropping in price--and the stock shows it. This one has a perfect pattern of lower highs and lower lows--and we just hit one of the those lower highs setting us up for the perfect downside play.
We've got two great looking positions and a market ready to move so let's get to it...
For more information on everything you receive with your Pearly Gates subscription click on www.cashflowheaven.com/pg
Monday, December 7, 2009
THREE HUGE PROFITS!
This past week's volatility bounced us out of several trades with great results...
WELLS FARGO (WFC) PLUNGED BELOW OUR TRAILING TRIGGER THURSDAY FOR A MUCH APPRECIATED TWENTY-FIVE PERCENT PROFIT!
THEN SYNAPICS (SYNA) GAPPED HIGHER FRIDAY MORNING SHOOTING OUR JAN 27.50 CALLS TO A FAST THIRTY-FIVE PERCENT WINNER!
AND THE BEST PLAY OF ALL WAS OUR DEC 14 PUTS ON DELL CLOSED FRIDAY FOR AN OUTRAGEOUS ONE-HUNDRED-FOURTEEN PERCENT GAIN!
It was a great week and by the looks of things there are more profits on the way. MLM reversed sharply lower adding value to our Dec 85 puts, and F5 Networks (FFIV) just traded above our trailing trigger and looks ready to blast higher again on Monday.
We've done great and now it's time to keep the momentum going with two new plays. To find the profits let's start by taking a good look at...
WHICH WAY THIS MARKET IS HEADING
The November Non-Farm Payroll report blew away estimates for 130,000 job losses with only 11,000 jobs actually lost in November. Plus the losses previously reported for September and October were revised lower by 159,000.
The September jobs report originally came in as a loss of 263,000--however the report on Friday adjusted September to only 139,000 jobs lost. That is an improvement of +124,000 jobs over the last 60-days. The October job loss was originally reported as 190,000 and that was revised lower by 79,000 jobs to a loss of only 111,000 jobs.
Add up those two major reversions with only 11,000 jobs lost in November and this was a shockingly strong report.
The unemployment rate dropped to 10.0% from 10.2%--it isn't much but at least it was finally headed in the right direction. Despite the market reaction to the numbers there were some problems not reported in the news.
The unemployment rate dropped because 98,000 workers fell off the survey as their unemployment benefits ended. The labor force participation rate fell to 65% which is a new record low for this recession.
Another reason for the drop in job losses was the sharp increase in temporary seasonal workers. For instance FedEx hired over 35,000 seasonal workers and UPS more than 50,000. After this holiday season most of those workers will likely end up back in the unemployment line.
The nearly positive jobs report caused a giant short squeeze in the dollar as it rebounded to 75.91 on the dollar index. After trading as low as 74.26 on Tuesday this was a monumental rebound. It was pure short squeeze as analysts revised their estimates about when the Fed might raise rates. Any rise in interest rates will strengthen the dollar--and pummel the price of commodities--and that is exactly what we saw on Friday.
We started to see the gleam fade from gold on Thursday as savvy traders sold their gold positions ahead of the jobs report. Gold hit a new high of $1,225 on Wednesday evening and then headed lower resulting in a $20 drop on Thursday followed by a $55 plunge on Friday.
In spite of the better than expected jobs numbers the Fed is not going to raise rates for months to come and the U.S. is still selling record amounts of debt. As long as the Fed is on hold and the government is going deeper into debt the value of the dollar will continue to decline. It may not fall for a few days because there are still shorts that need to cover. That means gold could also decline further--but the dip will be temporary as the US Treasury and Fed continues to degrade the dollar.
For example this week we'll see $135 billion in new debt being auctioned. There is $74.3 billion in 3, 10, 30-year notes/bonds and $61 billion 3 and 6 month bills. The Treasury will sell $40 billion in 3-year notes on Tuesday, $21 billion in 10-year notes on Wednesday and $13 billion in 30-year bonds on Thursday. Those 30-year bonds will be the most watched auction of the week.
Plus we've got an Fed FOMC meeting coming up on the 15th--a week from Tuesday. Don't expect the Fed's comments to change much--the Fed understands that this jobs report reflects seasonal hiring and not a big improvement in conditions. They won't change their bias because to do so would crash the markets and the economy. Everyone still expects unemployment to be well over 10% by mid 2010--the Fed can't raise rates in that environment.
The Fed normally begins raising rates 18-20 months after the first uptick in employment. That first uptick would have been last February and "normally" we could expect rate hikes somewhere July-August 2010. However these conditions are not normal as we have just undergone the Great Recession, the worst since the 1930s. The Fed will want to make very sure the rebound has traction before acting.
Another reason rates aren't going to rise is the administration is talking about another stimulus package of some sort and possibly even a payroll tax holiday. The Fed can't raise rates when the government is talking about additional stimulus. The jobs were a fluke and it may take the markets a couple days to return to the past pattern but it will happen.
We'll likely see dollar strength on Monday from additional short covering and then fear of the Fed for the rest of the week. Hopefully investors will realize that the Fed can't act when the administration is proposing additional stimulus. Bernanke has not been confirmed yet so he should be toeing the party line for another week.
The bottom line is we'll likely see a bit more upside in the dollar and a bit more downside in commodities including gold--but after Tuesday the 15th we'll likely be right back to where we were last week with rising stocks, rising commodities and a falling dollar--the question is...
HOW DO WE MAKE MONEY ON IT?
If you don't have a long term position in gold or silver yet this week may be your chance to get one. As far as our plays go we're interested in making as much money in as short a time as possible--and we've got two great plays lined up to do exactly that.
Our first trade is bullish and it's on a company that is seen as recession proof. They do well in good economies and bad and have been doing especially well lately. They're growing earnings in the double digits and this coming year their prospects look especially attractive--and investors know it. The chart has one of the steadiest uptrends you'll ever see and this play should be as easy as jumping on the escalator with the right calls--a move we'll be making first thing Monday morning!
Our next play is bearish and it's on a health care stock that looks scared their profit cart might be upset by health-care reform The stock just broke key support Friday on huge volume and has a long way to fall--a ride we'll be taking with some high-potential puts for more outstanding profits!
We've got two great plays lined up on a market ready to move so let's get to it...
For more information on everything you receive with your Pearly Gates subscription click on www.cashflowheaven.com/pg
WELLS FARGO (WFC) PLUNGED BELOW OUR TRAILING TRIGGER THURSDAY FOR A MUCH APPRECIATED TWENTY-FIVE PERCENT PROFIT!
THEN SYNAPICS (SYNA) GAPPED HIGHER FRIDAY MORNING SHOOTING OUR JAN 27.50 CALLS TO A FAST THIRTY-FIVE PERCENT WINNER!
AND THE BEST PLAY OF ALL WAS OUR DEC 14 PUTS ON DELL CLOSED FRIDAY FOR AN OUTRAGEOUS ONE-HUNDRED-FOURTEEN PERCENT GAIN!
It was a great week and by the looks of things there are more profits on the way. MLM reversed sharply lower adding value to our Dec 85 puts, and F5 Networks (FFIV) just traded above our trailing trigger and looks ready to blast higher again on Monday.
We've done great and now it's time to keep the momentum going with two new plays. To find the profits let's start by taking a good look at...
WHICH WAY THIS MARKET IS HEADING
The November Non-Farm Payroll report blew away estimates for 130,000 job losses with only 11,000 jobs actually lost in November. Plus the losses previously reported for September and October were revised lower by 159,000.
The September jobs report originally came in as a loss of 263,000--however the report on Friday adjusted September to only 139,000 jobs lost. That is an improvement of +124,000 jobs over the last 60-days. The October job loss was originally reported as 190,000 and that was revised lower by 79,000 jobs to a loss of only 111,000 jobs.
Add up those two major reversions with only 11,000 jobs lost in November and this was a shockingly strong report.
The unemployment rate dropped to 10.0% from 10.2%--it isn't much but at least it was finally headed in the right direction. Despite the market reaction to the numbers there were some problems not reported in the news.
The unemployment rate dropped because 98,000 workers fell off the survey as their unemployment benefits ended. The labor force participation rate fell to 65% which is a new record low for this recession.
Another reason for the drop in job losses was the sharp increase in temporary seasonal workers. For instance FedEx hired over 35,000 seasonal workers and UPS more than 50,000. After this holiday season most of those workers will likely end up back in the unemployment line.
The nearly positive jobs report caused a giant short squeeze in the dollar as it rebounded to 75.91 on the dollar index. After trading as low as 74.26 on Tuesday this was a monumental rebound. It was pure short squeeze as analysts revised their estimates about when the Fed might raise rates. Any rise in interest rates will strengthen the dollar--and pummel the price of commodities--and that is exactly what we saw on Friday.
We started to see the gleam fade from gold on Thursday as savvy traders sold their gold positions ahead of the jobs report. Gold hit a new high of $1,225 on Wednesday evening and then headed lower resulting in a $20 drop on Thursday followed by a $55 plunge on Friday.
In spite of the better than expected jobs numbers the Fed is not going to raise rates for months to come and the U.S. is still selling record amounts of debt. As long as the Fed is on hold and the government is going deeper into debt the value of the dollar will continue to decline. It may not fall for a few days because there are still shorts that need to cover. That means gold could also decline further--but the dip will be temporary as the US Treasury and Fed continues to degrade the dollar.
For example this week we'll see $135 billion in new debt being auctioned. There is $74.3 billion in 3, 10, 30-year notes/bonds and $61 billion 3 and 6 month bills. The Treasury will sell $40 billion in 3-year notes on Tuesday, $21 billion in 10-year notes on Wednesday and $13 billion in 30-year bonds on Thursday. Those 30-year bonds will be the most watched auction of the week.
Plus we've got an Fed FOMC meeting coming up on the 15th--a week from Tuesday. Don't expect the Fed's comments to change much--the Fed understands that this jobs report reflects seasonal hiring and not a big improvement in conditions. They won't change their bias because to do so would crash the markets and the economy. Everyone still expects unemployment to be well over 10% by mid 2010--the Fed can't raise rates in that environment.
The Fed normally begins raising rates 18-20 months after the first uptick in employment. That first uptick would have been last February and "normally" we could expect rate hikes somewhere July-August 2010. However these conditions are not normal as we have just undergone the Great Recession, the worst since the 1930s. The Fed will want to make very sure the rebound has traction before acting.
Another reason rates aren't going to rise is the administration is talking about another stimulus package of some sort and possibly even a payroll tax holiday. The Fed can't raise rates when the government is talking about additional stimulus. The jobs were a fluke and it may take the markets a couple days to return to the past pattern but it will happen.
We'll likely see dollar strength on Monday from additional short covering and then fear of the Fed for the rest of the week. Hopefully investors will realize that the Fed can't act when the administration is proposing additional stimulus. Bernanke has not been confirmed yet so he should be toeing the party line for another week.
The bottom line is we'll likely see a bit more upside in the dollar and a bit more downside in commodities including gold--but after Tuesday the 15th we'll likely be right back to where we were last week with rising stocks, rising commodities and a falling dollar--the question is...
HOW DO WE MAKE MONEY ON IT?
If you don't have a long term position in gold or silver yet this week may be your chance to get one. As far as our plays go we're interested in making as much money in as short a time as possible--and we've got two great plays lined up to do exactly that.
Our first trade is bullish and it's on a company that is seen as recession proof. They do well in good economies and bad and have been doing especially well lately. They're growing earnings in the double digits and this coming year their prospects look especially attractive--and investors know it. The chart has one of the steadiest uptrends you'll ever see and this play should be as easy as jumping on the escalator with the right calls--a move we'll be making first thing Monday morning!
Our next play is bearish and it's on a health care stock that looks scared their profit cart might be upset by health-care reform The stock just broke key support Friday on huge volume and has a long way to fall--a ride we'll be taking with some high-potential puts for more outstanding profits!
We've got two great plays lined up on a market ready to move so let's get to it...
For more information on everything you receive with your Pearly Gates subscription click on www.cashflowheaven.com/pg
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