This past week the big Himalayan adventure was canceled which was a surprise---but it's good to be back with you watching the markets---especially as stocks continue their steady climb higher...
TRANSOCEAN (RIG) TOUCHED ITS PROFIT TRIGGER TUESDAY AND REVERSED BLASTING US OUT OF OUR OCT 60 CALLS AT A PROFIT!
That was the good news--the bad news is the last of our bearish trades--the EUO and DELL--were finally stopped out as the markets continued higher. So all we have left is our strangle on BAC and our two new high-odds spread trades from last week. In other words what hasn't been working has been cleared off the decks and we now have a much more promising portfolio to start this week.
The big question now is--will the markets continue to climb or are we in for a bearish reversal? To help answer that question let's take a good look at...
WHICH WAY THIS MARKET IS HEADED
The markets really shot higher on Friday extending an incredible month of gains. So far this month the Dow is up an incredible +843 points from the August 31 close logging an 8.4% gain--performance that would be good for an entire year. The SP-500 is up an amazing +9.4% and the Nasdaq launched an even more incredible +12.6%. If this trend holds this could be the biggest bullish move in September since 1939 according to Reuters--quite the contrary action for a month that is typically the most bearish of the year.
Friday's spike higher was impressive but it was NOT investors suddenly deciding to buy stocks--it was another huge short-covering rally. After the market decline on Wednesday and Thursday--with Thursday ending on the lows for the week---the shorts were loaded up again with expectations of a big plunge after such a steep climb. However two 'less bad' economic reports before the open panicked the short sellers into instantly buying back their positions launching the markets straight up.
The S&P gained +22 points in the first 45 minutes as shorts covered in panic--but for the next five hours it gained only two additional points. In a real rally the markets rise all day--in a short squeeze they rise at the open, move sideways all day and then see an "I give up" spike higher at the close as those shorts hoping for a reprieve are forced to cover before the close.
Be that as it may the charts are still showing some very bullish price action that will likely be continued at least for a little while longer. We've got earnings starting the first full week of October and there is usually some bullish excitement going into earnings season--especially with year over year expectations as high as they are.
The problem is that after the most bullish September in the last seven decades fund managers have a lot of profits on the table that are at risk in any downturn. Add in the fact that October 31st is fiscal year-end for the vast majority of mutual funds and managers have a strong incentive to lock in gains.
Any portfolio adjustments for year-end statements and taxable events have to be finished in October. Hundreds of stocks have risen more than 100% since the 2009 lows so any fund managers eye-balling a bonus may be itching to lock in those profits. If they do it early in October they can use that cash to buy the normal October dip in preparation for what should be a much better 2011.
The markets have risen on economic news that is lukewarm at best which is an indication of just how much money is sloshing around right now trying to find a home. Bond yields are hovering toward all-time lows so money is trying to find better returns in the stock market. ANY news that is perceived as being 'less bad' is being bought on the spot--and negative news is generally ignored in a classic display of bullish sentiment.
For example the existing home sales report on Thursday surprised investors with a moderate jump to a rate of 4.13 million homes compared to the 3.83 million pace in July. The increase in sales was small but broad based while months of available inventory fell from 12.5 to 11.6.
Then on Friday was another "less bad" report from the housing sector sparking this latest round of short-covering. Sales of new homes came in at 288,000---near a record low but still better than the 276,000 rate from July. Analysts were expecting another decline in sales and the uptick, despite it being tiny, was a positive surprise. The number of new homes on the market declined but the average price slipped another -1%. These are far from great numbers but they are slowly heading in the right direction and investors bought the news.
Another less bad report was the Durable Goods numbers for August. The headline was a negative -1.3% for the biggest drop in over a year but the internal components showed signs of improvement. Core capital goods rebounded +4.1% in August after a -5.3% decline in July. Capital goods orders are up +18% over the same period in 2009 and +30% since the recession lows. The increase in core orders prompted some analysts to start talking about a possible +2% GDP for the quarter.
What the market really liked though was the FOMC statement that the Fed is going to take 'further action' if the economy does not improve soon. That means more quantitative easing (massive dollar printing) and continuing low interest rates. Unfortunately all this dollar dilution in an effort to jump start the economy is already showing up as weakness in the dollar against other currencies, and higher hard commodity costs.
The dollar index has fallen almost 5% since the end of August and there appears to be no end in sight. Friday's close at 79.39 was already a seven-month low but the dollar is likely to keep on falling. The drop is based on worries the U.S. economy is not improving and the Fed is likely to launch another trillion dollar money flooding program that will further devalue the currency. This makes commodities like gold and oil rise in price because it takes more dollars to buy the same amount of product.
There may not be any official inflation but if you look at real tangible commodities inflation is taking off like a rocket--which is tough on the manufacturers especially if they can't pass those costs on in their finished products. Copper, lumber, wheat, corn, and metals are all soaring. The reason both has to do with the fall in the value of the dollar, and the rest of the world still seeing rapid growth and the demand that goes with it. Just because the U.S. and Europe are stagnant doesn't mean the rest of the world is contracting as well--the growth in Asia and South America is still impressive--especially compared to the developed economies.
So we've got a rising market, positive anticipation coming into earnings season, a falling dollar, slightly improving economic reports and a possible institutional sell-off in October--the question is...
HOW DO WE MAKE MONEY ON IT?
The trick in this market is to take advantage of the current trend--which is up--and make our profits fast to avoid any potential reversal in October. We've got two straight options plays that look absolutely perfect--they both have extremely low-cost options and need to move very little to lock in some outstanding profits.
The first is a commodity play---this one bottomed recently and is now heading higher--and with options this cheap it won't take much to make a bundle on the right calls--a move we'll be jumping on first thing Monday.
Our second play looks equally attractive--it's a high tech stock in a sector that is gaining a lot of traction. The stock has super cheap options and it's heading higher--and once again it won't take much to knock down a small fortune on the right calls.
This market wants to move higher and we're going to take advantage of it with two well-positioned plays for immediate profits--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, September 27, 2010
Friday, September 24, 2010
When the Market is Rising You HAVE to Take Advantage of this Strategy
Stocks give clues to an impending breakout--and if you position yourself ahead of time you can make a fortune...
When the Market is Rising You HAVE to Take Advantage of this Strategy
When a stock is trending higher AND has a potentially positive news event on the horizon you can position yourself ahead of time for some fantastic profits.
Here is a great example---Two weeks ago (September 8th), MHS was featured as the "long of the day" because they have a beautifully up-trending chart and as a pharmacy benefit management provider they stand to really benefit from the new national healthcare plan. Sure enough today Newton Juhng from FBR Capital Markets upgraded the stock and it took off like a rocket making subscribers a quick fortune.
When the stock was added to the Daily Report subscribers could have purchased the October $47.50 calls for just $1.00. Today, those same calls launched as high as $5.20 turning a modest $1000 investment into more than $5000 dollars!
That's an astounding 400% winner in just 2 weeks!
This market has more room to run. Sign up for the Daily Report and you'll get two new stock picks each day and access to the Live Update table that shows you exactly what to trade. Get your subscription along with a Trading Package that puts your new money machine on autopilot by clicking right here. http://www.cashflowheaven.com/os
Market Commentary - The market has rallied 8% in less than three weeks and it looked a little tired this morning. It has ignored deteriorating economic data and weak seasonality for good reason. Interest rates are at historic lows and stocks are attractively priced.
This week, the FOMC released its statement. It gave the market exactly what it wanted and stocks were able to push through horizontal resistance at SPY 113. The Fed cited weakening economic conditions and they hinted that quantitative easing (QE2) might be around the corner--a strategy that would weaken the dollar and help our exports.
This morning, initial jobless claims came in at 465,000. Last week’s number was also revised higher and both pieces of information weighed on the market. As long as the unemployment scene does not deteriorate too badly, the market could easily move higher. In this jobless recovery, money is shifting out of bonds and into stocks.
Tomorrow, durable goods orders will be released. This is a very volatile number and traders tend to take it with a grain of salt. The demand for big-ticket items has declined 3 straight months and worst-case scenarios are priced in. The economic calendar will be quiet in the early part of next week and then starting Thursday, it will build.
On September 30, GDP, initial claims and Chicago PMI will be released. On Friday, personal income, consumer sentiment, construction spending and ISM manufacturing will be released. GDP was revised down from 2.4% to 1.6% a month ago and analysts expect it to remain at 1.6% so this low number should not have much of a market impact. Perhaps the most interesting number will be ISM manufacturing. It increased more than expected last month, contradicting Empire Manufacturing, the Philly Fed and Chicago PMI. However it is likely to decline and last month’s number will be revised lower.
China’s PMI will also influence trading Friday morning. The Chinese government halted steel production for 20 days, fearing an inventory buildup. If this number is anywhere near 50, the market will decline. All hopes of an economic recovery are tied to China. This is truly the one potential “fly in the ointment” and could quickly spoil this rally.
In two weeks, ISM services, ADP Employment, initial claims, wholesale inventories and the Unemployment Report will be released. ISM services fell to 51.5 and that is just above the level that signals economic contraction. The service sector accounts for 80% of our economic activity and it is a very important number. Jobless claims have been improving slightly and that should bode well for the employment number.
Interest rates in Europe are rising and that is a future warning sign. The demand during recent bond auctions has been strong and fears of a European credit crisis have eased but that could change very quickly.
On a technical basis, the market closed below major support at SPY 113 today--a short-term sell signal--we could be in for some more downside before the rally resumes.
Asset Managers are waiting for a pullback so that they can “buy-in”---with everyone lining up with the same game plan any pullback should be short and shallow.
Companies with pricing power (chemicals, commodities) are performing well. Option implied volatilities are cheap which is a good time to buy options. Get a great play list lined up with the strongest stocks by subscribing to the Daily Report now BEFORE this dip bottoms and rebounds higher.
Trade Well,
Pete
When the Market is Rising You HAVE to Take Advantage of this Strategy
When a stock is trending higher AND has a potentially positive news event on the horizon you can position yourself ahead of time for some fantastic profits.
Here is a great example---Two weeks ago (September 8th), MHS was featured as the "long of the day" because they have a beautifully up-trending chart and as a pharmacy benefit management provider they stand to really benefit from the new national healthcare plan. Sure enough today Newton Juhng from FBR Capital Markets upgraded the stock and it took off like a rocket making subscribers a quick fortune.
When the stock was added to the Daily Report subscribers could have purchased the October $47.50 calls for just $1.00. Today, those same calls launched as high as $5.20 turning a modest $1000 investment into more than $5000 dollars!
That's an astounding 400% winner in just 2 weeks!
This market has more room to run. Sign up for the Daily Report and you'll get two new stock picks each day and access to the Live Update table that shows you exactly what to trade. Get your subscription along with a Trading Package that puts your new money machine on autopilot by clicking right here. http://www.cashflowheaven.com/os
Market Commentary - The market has rallied 8% in less than three weeks and it looked a little tired this morning. It has ignored deteriorating economic data and weak seasonality for good reason. Interest rates are at historic lows and stocks are attractively priced.
This week, the FOMC released its statement. It gave the market exactly what it wanted and stocks were able to push through horizontal resistance at SPY 113. The Fed cited weakening economic conditions and they hinted that quantitative easing (QE2) might be around the corner--a strategy that would weaken the dollar and help our exports.
This morning, initial jobless claims came in at 465,000. Last week’s number was also revised higher and both pieces of information weighed on the market. As long as the unemployment scene does not deteriorate too badly, the market could easily move higher. In this jobless recovery, money is shifting out of bonds and into stocks.
Tomorrow, durable goods orders will be released. This is a very volatile number and traders tend to take it with a grain of salt. The demand for big-ticket items has declined 3 straight months and worst-case scenarios are priced in. The economic calendar will be quiet in the early part of next week and then starting Thursday, it will build.
On September 30, GDP, initial claims and Chicago PMI will be released. On Friday, personal income, consumer sentiment, construction spending and ISM manufacturing will be released. GDP was revised down from 2.4% to 1.6% a month ago and analysts expect it to remain at 1.6% so this low number should not have much of a market impact. Perhaps the most interesting number will be ISM manufacturing. It increased more than expected last month, contradicting Empire Manufacturing, the Philly Fed and Chicago PMI. However it is likely to decline and last month’s number will be revised lower.
China’s PMI will also influence trading Friday morning. The Chinese government halted steel production for 20 days, fearing an inventory buildup. If this number is anywhere near 50, the market will decline. All hopes of an economic recovery are tied to China. This is truly the one potential “fly in the ointment” and could quickly spoil this rally.
In two weeks, ISM services, ADP Employment, initial claims, wholesale inventories and the Unemployment Report will be released. ISM services fell to 51.5 and that is just above the level that signals economic contraction. The service sector accounts for 80% of our economic activity and it is a very important number. Jobless claims have been improving slightly and that should bode well for the employment number.
Interest rates in Europe are rising and that is a future warning sign. The demand during recent bond auctions has been strong and fears of a European credit crisis have eased but that could change very quickly.
On a technical basis, the market closed below major support at SPY 113 today--a short-term sell signal--we could be in for some more downside before the rally resumes.
Asset Managers are waiting for a pullback so that they can “buy-in”---with everyone lining up with the same game plan any pullback should be short and shallow.
Companies with pricing power (chemicals, commodities) are performing well. Option implied volatilities are cheap which is a good time to buy options. Get a great play list lined up with the strongest stocks by subscribing to the Daily Report now BEFORE this dip bottoms and rebounds higher.
Trade Well,
Pete
Monday, September 20, 2010
OUR NEW BULLISH PLAY ON TRANSOCEAN (RIG) IS ALREADY UP AND NOW LOOKS SET TO BREAK THROUGH ITS TRAILING TRIGGER ADDING HUGE VALUE TO OUR 60 CALLS!
This past week our most recent plays fared extremely well...
OUR NEW BULLISH PLAY ON TRANSOCEAN (RIG) IS ALREADY UP AND NOW LOOKS SET TO BREAK THROUGH ITS TRAILING TRIGGER ADDING HUGE VALUE TO OUR 60 CALLS!
AND GOLDMAN SACHS (GS) ALREADY SHOT THROUGH THE ROOF BLASTING US OUT OF THE PLAY AT A STUNNING THREE-HUNDRED-TWENTY-EIGHT-PERCENT PROFIT!
Those trades feel pretty good but they were offset by expiring positions in the SDS and QQQQ--plus we got out of RTN at a loss earlier in the week and we were finally stopped out of UHS on Friday for another loss. Our new bullish plays have done pretty well but our old bearish trades just got killed as the markets zoomed higher.
The weird thing is the giant disconnect between some very bearish fundamentals and a market that continues to climb--which makes it even more important to take a good look at...
WHICH WAY THIS MARKET IS HEADED
The markets have put in a phenomenal two weeks but are now looking overbought. The Dow and Nasdaq ended with gains on Friday that put them on a streak of 11 wins out of the last 13 trading days. The S&P has been up 10 of the last 13 days.
The S&P finally rallied to test strong resistance at 1130 on Friday but the index was slammed back to 1122 trading sideways the rest of the day. The opening spike to 1131 was a result of quadruple witching---the closing value on the S&P options are determined by the opening print on the S&P on Friday so there is plenty of incentive to cover shorts at the open driving the SP-500 to a temporary spike higher.
The Nasdaq jumped higher on individual stock news---Oracle (ORCL) reported earnings of 42-cents compared to analyst estimates of 37-cents and the shares jumped +8%.
Texas Instruments announced a $7.5 billion stock buyback and raised its dividend by 8% which pushed the semiconductor index higher even though the news doesn't imply increasing sales for the sector. TXN shares jumped +3% to $25.73.
Quadruple witching expiration plus the boost from Oracle's earnings and Texas Instrument's $7.5 billion buyback combined to push the Nasdaq over strong horizontal resistance at 2300 marking a breakout. The problem is in spite of good news out of ORCL and TXN there is little on the tech landscape to inspire confidence. PC sales estimates are still slow with FBR cutting Microsoft estimates and chip sales forecasts still coming in negative. It's hard to see what is pushing the Nasdaq higher since most of the tech news is negative.
And that's not the only negative news out right now---the preliminary number for September Consumer Sentiment released Friday declined to 66.6 from 68.9 recording the lowest level since August 2009. The decline came exclusively from the expectations component, which fell from 62.9 to 59.1. The -3.8 point fall in expectations is substantial and suggests the short term rebound from the back to school season has faded.
Sentiment expectations are often news driven as the month saw more jobs lost---home sales fell a cliff and home prices are declining again. Politicians are talking down the economy in order to explain how they would fix it and none of that is helping consumer sentiment.
Of course sentiment goes beyond the news--people are feeling the drop in their net wealth over the last year as both the stock market and the real estate market--the two most popular asset classes--have fallen over the past five months.
Unfortunately sentiment isn't likely to improve with the news coming out this week. There are four major housing reports coming out over the next few days and they should all be negative. Expect a decline in prices and a rise in inventories. This bearish news will test the resolve of the stock market bulls unless there is a very unexpected improvement in sales.
Real estate analysts have been lowering numbers almost weekly for the last month in order to remove the optimism from their prior estimates. Even with the downgrades existing home sales are projected to have risen slightly in August but it is only a calendar blip as the last rush of home sales to close before the school year. Moody's is predicting another 8% decline in home prices because of the number of pending foreclosures. They expect the market to bottom in Q3-2011--which is quite a ways off for most folks.
The most closely watch economic event this week is the FOMC meeting on Tuesday. There are conflicting expectations for another round of easing however it's hard to see how further easing could help since rates are about as low as they can go right now.
The Jobless Claims on Thursday will also be a huge key for any continuing rally. The next reading is the one that will correct for any abnormalities in the Labor Day reporting cycle. Moody's is saying it would take a +2.9% GDP rate to produce a positive jobs picture. Anything under 2.9% would result in a net jobs drain. Based on current estimates our Q3 GDP should be something in the 1.3% growth range or less than half what it would take to actually grow jobs. That suggests negative net employment will be with us for quite awhile.
Another economic bellwether came in bearish when FedEx announced on Thursday it was closing 100 of its trucking terminals and cutting 1,700 jobs due to lack of demand. The closures will come on Jan-30th after the holiday shipping season. FedEx reported earnings of $1.20 per share for Q2 and that missed analyst estimates by a penny. The FedEx freight division has been a drag on profits because the demand for shipping items like refrigerators and washing machines continues to be weak.
So we've got deteriorating fundamentals and a bullish but overbought stock market--the question is...
HOW DO WE MAKE MONEY ON IT?
Fortunately for us options traders there are lots of ways to skin a cat--and we're going to trade one of the most effective this week. This is a perfect way to trade when you are interested in big returns but can't watch the market as closely as you would like.
As you know I'm heading out this week to the remote reaches of the Himalayas and won't be able to check on the markets---except on the rare occasion when an Internet connection is available--but I would still like a way for us to knock down some impressive results. After looking high and low I've found two incredible trades that promise outstanding returns over the next month---with VERY little risk. It doesn't get a whole lot better than this and when you see what we have planned you are going to get super excited.
By the time I get back to the States the first week of November we should have a substantially bigger chunk of money in our accounts than we do right now--so let's get started...
For more information on everything you receive with your Pearly Gates subscription click on www.cashflowheaven.com/pg
OUR NEW BULLISH PLAY ON TRANSOCEAN (RIG) IS ALREADY UP AND NOW LOOKS SET TO BREAK THROUGH ITS TRAILING TRIGGER ADDING HUGE VALUE TO OUR 60 CALLS!
AND GOLDMAN SACHS (GS) ALREADY SHOT THROUGH THE ROOF BLASTING US OUT OF THE PLAY AT A STUNNING THREE-HUNDRED-TWENTY-EIGHT-PERCENT PROFIT!
Those trades feel pretty good but they were offset by expiring positions in the SDS and QQQQ--plus we got out of RTN at a loss earlier in the week and we were finally stopped out of UHS on Friday for another loss. Our new bullish plays have done pretty well but our old bearish trades just got killed as the markets zoomed higher.
The weird thing is the giant disconnect between some very bearish fundamentals and a market that continues to climb--which makes it even more important to take a good look at...
WHICH WAY THIS MARKET IS HEADED
The markets have put in a phenomenal two weeks but are now looking overbought. The Dow and Nasdaq ended with gains on Friday that put them on a streak of 11 wins out of the last 13 trading days. The S&P has been up 10 of the last 13 days.
The S&P finally rallied to test strong resistance at 1130 on Friday but the index was slammed back to 1122 trading sideways the rest of the day. The opening spike to 1131 was a result of quadruple witching---the closing value on the S&P options are determined by the opening print on the S&P on Friday so there is plenty of incentive to cover shorts at the open driving the SP-500 to a temporary spike higher.
The Nasdaq jumped higher on individual stock news---Oracle (ORCL) reported earnings of 42-cents compared to analyst estimates of 37-cents and the shares jumped +8%.
Texas Instruments announced a $7.5 billion stock buyback and raised its dividend by 8% which pushed the semiconductor index higher even though the news doesn't imply increasing sales for the sector. TXN shares jumped +3% to $25.73.
Quadruple witching expiration plus the boost from Oracle's earnings and Texas Instrument's $7.5 billion buyback combined to push the Nasdaq over strong horizontal resistance at 2300 marking a breakout. The problem is in spite of good news out of ORCL and TXN there is little on the tech landscape to inspire confidence. PC sales estimates are still slow with FBR cutting Microsoft estimates and chip sales forecasts still coming in negative. It's hard to see what is pushing the Nasdaq higher since most of the tech news is negative.
And that's not the only negative news out right now---the preliminary number for September Consumer Sentiment released Friday declined to 66.6 from 68.9 recording the lowest level since August 2009. The decline came exclusively from the expectations component, which fell from 62.9 to 59.1. The -3.8 point fall in expectations is substantial and suggests the short term rebound from the back to school season has faded.
Sentiment expectations are often news driven as the month saw more jobs lost---home sales fell a cliff and home prices are declining again. Politicians are talking down the economy in order to explain how they would fix it and none of that is helping consumer sentiment.
Of course sentiment goes beyond the news--people are feeling the drop in their net wealth over the last year as both the stock market and the real estate market--the two most popular asset classes--have fallen over the past five months.
Unfortunately sentiment isn't likely to improve with the news coming out this week. There are four major housing reports coming out over the next few days and they should all be negative. Expect a decline in prices and a rise in inventories. This bearish news will test the resolve of the stock market bulls unless there is a very unexpected improvement in sales.
Real estate analysts have been lowering numbers almost weekly for the last month in order to remove the optimism from their prior estimates. Even with the downgrades existing home sales are projected to have risen slightly in August but it is only a calendar blip as the last rush of home sales to close before the school year. Moody's is predicting another 8% decline in home prices because of the number of pending foreclosures. They expect the market to bottom in Q3-2011--which is quite a ways off for most folks.
The most closely watch economic event this week is the FOMC meeting on Tuesday. There are conflicting expectations for another round of easing however it's hard to see how further easing could help since rates are about as low as they can go right now.
The Jobless Claims on Thursday will also be a huge key for any continuing rally. The next reading is the one that will correct for any abnormalities in the Labor Day reporting cycle. Moody's is saying it would take a +2.9% GDP rate to produce a positive jobs picture. Anything under 2.9% would result in a net jobs drain. Based on current estimates our Q3 GDP should be something in the 1.3% growth range or less than half what it would take to actually grow jobs. That suggests negative net employment will be with us for quite awhile.
Another economic bellwether came in bearish when FedEx announced on Thursday it was closing 100 of its trucking terminals and cutting 1,700 jobs due to lack of demand. The closures will come on Jan-30th after the holiday shipping season. FedEx reported earnings of $1.20 per share for Q2 and that missed analyst estimates by a penny. The FedEx freight division has been a drag on profits because the demand for shipping items like refrigerators and washing machines continues to be weak.
So we've got deteriorating fundamentals and a bullish but overbought stock market--the question is...
HOW DO WE MAKE MONEY ON IT?
Fortunately for us options traders there are lots of ways to skin a cat--and we're going to trade one of the most effective this week. This is a perfect way to trade when you are interested in big returns but can't watch the market as closely as you would like.
As you know I'm heading out this week to the remote reaches of the Himalayas and won't be able to check on the markets---except on the rare occasion when an Internet connection is available--but I would still like a way for us to knock down some impressive results. After looking high and low I've found two incredible trades that promise outstanding returns over the next month---with VERY little risk. It doesn't get a whole lot better than this and when you see what we have planned you are going to get super excited.
By the time I get back to the States the first week of November we should have a substantially bigger chunk of money in our accounts than we do right now--so let's get started...
For more information on everything you receive with your Pearly Gates subscription click on www.cashflowheaven.com/pg
Monday, September 13, 2010
This Week You've Got a Chance to Bag an Annualized Rate of Return of 110% with an over 91% Probability of Success!
A few months back at the 'How to Always Know the Perfect Time to Exit a Spread' webinar we talked about how to "Take the Money and Run!" That is, whenever a credit spread has less than $0.05 cents remaining, we close out the trade and bag our profits no matter how much time we have left.
As we approach October expiration, let's consider closing out of any plays that have earned the vast majority of their credit---from about Wednesday on the market makers typically widen their bid/ask spreads making our exits less efficient so either Tuesday’s close or Wednesday’s open would be a great time to close trades early. And depending on your risk tolerance, you may also even consider closing them out a bit earlier.
Of course there’s always the “option” to ride your trades to expiration and avoid further commissions---they’ll just expire worthless and you'll keep all the credit---a great position to be in!
There's a lot more details on these and other exit strategies inside the Package Buyers' area of the website--for those of you with The Winning Secret trading package, you can just log in, click on the Video Tutorials tab and select the webinar you'd like to watch. And if you don't have the package yet, you can add this critical information to your trading library right here.
Trader’s Tip:
Historically,
• September is the biggest percentage losing month for the S&P, Dow and NASDAQ.
• The S&P 500 tends to have a disappointing closing for the month because of mutual fund restructuring.
• September is a Triple-Witching month which is always dangerous especially the week after expiration!
Key Dates:
• September 16th--options expiration for some indices.
• September 17th--options expiration for all equity and all other index options.
• October 14th--options expiration for some indices.
• October 15th--options expiration for all equity and all other index options.
• Friday, September 17th, is a bearish, triple witching, trading day.
Market Outlook
The Dow has been up 7 out of the last 8 days on economic optimism, continuing the rally which began nearly two weeks ago thanks to a few 'slightly better' economic reports. The latest report indicated that wholesale inventories shot up in July---a sign that confidence in retail sales is improving. It seems consumer confidence is definitely picking up and the labor market, although weak, is improving too. Slow but steady progress.
So far, the September rally only paused once and that was when concerns about the European financial systems ignited again. With such recent pessimism about the economy any glimmer of hope seems good enough to please investors and launch the markets higher and higher.
Also just announced...better-than-expected 2nd quarter growth and a new $11 billion stimulus package for Japan. It seems Japan's economy wasn’t quite as weak as first reported---but, of course, they still need help. Their revised numbers showed their GDP rose to an annualized rate of 1.5% during the April-June period---a major improvement over the 0.4% reported last month putting Japan on par with U.S. growth rates.
Meanwhile, back here in the good ole USA, hopes are rising as jobless claims continue to decrease and new filings for jobless benefits tumbled to a two-month low. The Labor Department reported new claims for unemployment dropped 27,000 to 451,000---an encouraging sign even as the overall economy continues to lose momentum.
In another positive sign, the government announced the trade deficit has narrowed significantly as exports climbed to their highest level in two years. These recent reports combined with “less bad news” mindset seem to have eased fears about the economy and maybe, just maybe, the US might not be falling back into a recession after all.
Still, this historically bearish time of year versus the unusual bull rally we’ve seen over the last few weeks has most investors pulling out their hair. Fortunately for us, we’re not very concerned about market direction---only about the magnitude of the move. And with that mindset, we wrap up October with two new high probability, high profitability trades...
What are the Secrets of the Week?
Our first play has been trading in a consolidation pattern since June and is now pushing up against institutional resistance--a sign that it could be heading downhill again soon. Our second play has been trading well within our short strikes since May--a perfect neutral candidate for a high-probability iron condor.
Both plays are on ETFs and generate a generous 8-10% profit with an over 91% probability of success---and with only about a month’s time for these trades to play out, we definitely have the trade winds blowing in the right direction as we set our sails toward profitability. Let's get started...
You can get in on this week's trades along with two new high-probability trades per week by clicking here now: www.cashflowheaven.com/ws
Stack the Deck on Every Trade,
Robert
As we approach October expiration, let's consider closing out of any plays that have earned the vast majority of their credit---from about Wednesday on the market makers typically widen their bid/ask spreads making our exits less efficient so either Tuesday’s close or Wednesday’s open would be a great time to close trades early. And depending on your risk tolerance, you may also even consider closing them out a bit earlier.
Of course there’s always the “option” to ride your trades to expiration and avoid further commissions---they’ll just expire worthless and you'll keep all the credit---a great position to be in!
There's a lot more details on these and other exit strategies inside the Package Buyers' area of the website--for those of you with The Winning Secret trading package, you can just log in, click on the Video Tutorials tab and select the webinar you'd like to watch. And if you don't have the package yet, you can add this critical information to your trading library right here.
Trader’s Tip:
Historically,
• September is the biggest percentage losing month for the S&P, Dow and NASDAQ.
• The S&P 500 tends to have a disappointing closing for the month because of mutual fund restructuring.
• September is a Triple-Witching month which is always dangerous especially the week after expiration!
Key Dates:
• September 16th--options expiration for some indices.
• September 17th--options expiration for all equity and all other index options.
• October 14th--options expiration for some indices.
• October 15th--options expiration for all equity and all other index options.
• Friday, September 17th, is a bearish, triple witching, trading day.
Market Outlook
The Dow has been up 7 out of the last 8 days on economic optimism, continuing the rally which began nearly two weeks ago thanks to a few 'slightly better' economic reports. The latest report indicated that wholesale inventories shot up in July---a sign that confidence in retail sales is improving. It seems consumer confidence is definitely picking up and the labor market, although weak, is improving too. Slow but steady progress.
So far, the September rally only paused once and that was when concerns about the European financial systems ignited again. With such recent pessimism about the economy any glimmer of hope seems good enough to please investors and launch the markets higher and higher.
Also just announced...better-than-expected 2nd quarter growth and a new $11 billion stimulus package for Japan. It seems Japan's economy wasn’t quite as weak as first reported---but, of course, they still need help. Their revised numbers showed their GDP rose to an annualized rate of 1.5% during the April-June period---a major improvement over the 0.4% reported last month putting Japan on par with U.S. growth rates.
Meanwhile, back here in the good ole USA, hopes are rising as jobless claims continue to decrease and new filings for jobless benefits tumbled to a two-month low. The Labor Department reported new claims for unemployment dropped 27,000 to 451,000---an encouraging sign even as the overall economy continues to lose momentum.
In another positive sign, the government announced the trade deficit has narrowed significantly as exports climbed to their highest level in two years. These recent reports combined with “less bad news” mindset seem to have eased fears about the economy and maybe, just maybe, the US might not be falling back into a recession after all.
Still, this historically bearish time of year versus the unusual bull rally we’ve seen over the last few weeks has most investors pulling out their hair. Fortunately for us, we’re not very concerned about market direction---only about the magnitude of the move. And with that mindset, we wrap up October with two new high probability, high profitability trades...
What are the Secrets of the Week?
Our first play has been trading in a consolidation pattern since June and is now pushing up against institutional resistance--a sign that it could be heading downhill again soon. Our second play has been trading well within our short strikes since May--a perfect neutral candidate for a high-probability iron condor.
Both plays are on ETFs and generate a generous 8-10% profit with an over 91% probability of success---and with only about a month’s time for these trades to play out, we definitely have the trade winds blowing in the right direction as we set our sails toward profitability. Let's get started...
You can get in on this week's trades along with two new high-probability trades per week by clicking here now: www.cashflowheaven.com/ws
Stack the Deck on Every Trade,
Robert
SILVER WHEATON (SLW) BLASTED THROUGH OUR PROFIT TRIGGER AND REVERSED--AUTOMATICALLY EJECTING US FOR A SWEET EIGHT-DAY SEVENTY-SIX PERCENT PROFIT!
This past week the market continued its climb to the upside adding value to our new bullish plays…
SILVER WHEATON (SLW) BLASTED THROUGH OUR PROFIT TRIGGER AND REVERSED--AUTOMATICALLY EJECTING US FOR A SWEET EIGHT-DAY SEVENTY-SIX PERCENT PROFIT!
PLUS GOLDMAN SACHS (GS) DROPPED LAST TUESDAY GETTING US IN AT A ROCK BOTTOM PRICE ONLY TO LAUNCH THE REST OF THE WEEK FOR A ONE-HUNDRED-TEN PERCENT OPEN GAIN!
And the beauty of our GS play is that it’s still open so we’ll likely bag even MORE profit as the ‘king of the financials’ continues to rise.
Our recent plays have been going great—but we’ve still got a portfolio of bearish positions that are NOT doing so great. To find out what’s in store for them and where the profits may be found now let’s take a good look at…
WHICH WAY THIS MARKET IS HEADED
The SP-500 kept rising this past to hit up against its downtrend resistance line from May. From a technical standpoint it would not be surprising to see a roll-over right here. If it does continue to climb there is further resistance at 1120 and 1130. This is dangerous territory for the bulls as a roll-over could come at any time and from these levels it would likely be fast and furious. This next week should tell the tale as volume is likely to finally increase.
Even though the Nasdaq finally moved over initial resistance at 2225 it is now up against downtrend resistance and could roll-over right here. If it breaks through it has strong horizontal resistance at 2300. It is actually amazing the Nasdaq has done so well with almost daily warnings coming out of the chip sector. The overall chart of the Nasdaq still looks bearish in spite of the past few weeks uptrend—it would be smart to tread cautiously here.
The big influence on the Nasdaq is the semis which were knocked for a loss on Friday after Texas Instruments (TXN) and National Semi (NSM) both lowered their forecasts on Thursday. Silicon Labs (SLAB) also warned on Wednesday. Texas Instruments reduced their top end estimates but remained in the range analysts were expecting. After a steep intraday loss shares recovered to end flat.
National Semi had a more sober outlook. The NSM CEO warned, "We'd all like to believe that consumer spending is onward and upward but I don't think it is." Both companies said weak demand for personal computers was a problem and consumers were not spending the big bucks on other electronics purchases. Ron Slamaker of TXN said consumers appear to be buying fewer TVs this quarter.
If the CEOs of these companies are bearish we should pay attention because they have every incentive to be cheerleaders—plus few are in a better position to know what is really going on than the folks at the top of the companies that actually lead the chip industry.
These warnings are congruent with a new survey from Isupply which reported a glut of LCD-TVs in Q2 with 36% excess inventory, up from 25% in Q1. This over-supply is pushing prices down at an accelerated rate. Prices are already down -24% in 2010 compared to a -30% drop in all of 2009. Another analyst said the deflation in prices would probably continue through this holiday season as retailers dump inventory in an industry where technology is constantly making older product obsolete.
This weekly bad news in the chip sector is holding back the Nasdaq but it’s not nearly as bad as you would think--the SOX is still somehow holding above a 10-month low set in August.
Overall last week was light for economic reports with the Beige Book the only major event. However, we did see a sharp drop in new Jobless Claims of -21,000 to 451,000 and the lowest level since July 10th—a report that had a bullish effect on the markets.
However there are still more than 10 million people receiving unemployment insurance payments and several million more whose benefits have expired. That 21,000 drop was nice but keep in mind there were still 451,000 newly unemployed—so the ‘drop’ was really a ‘drop in the bucket’.
Wednesday's Fed Beige Book reported they were expecting continued growth but were also seeing “widespread deceleration" through the end of August. Of the 12 Fed regions five banks reported "economic growth at a moderate pace." Two Fed banks saw "positive developments" but the remaining five banks said conditions were "mixed or decelerating."
Frankly that’s not a very bullish Beige Book report. Economists are now predicting that GDP will fall back to just over +1.0% growth compared to the 3% estimates at the beginning of July definitely marking a "widespread deceleration."
Even though traders are bidding the markets higher the majority of consumers believe we are about to hit a double dip. A survey just released by StrategyOne claims consumers are becoming more bearish than ever.
The StrategyOne Survey discovered that 65% of Americans not only believe a double dip is about to occur but 44% believe the second dip will be worse than the first and 21% believing it will be "much more severe."
Only 21% believe the economy will recover by the end of 2011, but another 23% don't believe the economy will EVER fully recover.
Meanwhile 71% believe that America is fundamentally broken and not working. Since the American consumer is characteristically optimistic and resilient this marks a significant and somewhat alarming departure. Confidence has been materially damaged and real doubts are emerging about the economic future of the country. High unemployment and extreme government debt is proving to be very tough on sentiment.
For example 41% of those surveyed are planning to cut back on their spending over the next 3–4 months, compared with 8% who plan to increase it.
And 35% say they will plan to cut back their online spending over the next to 3–4 months, compared with 12% who plan to increase it.
A whopping 79% say they are planning to spend less money for Christmas this year while 87% say they do not plan to make a big-ticket purchase--such as a house or car--in the next 3–4 months.
Meanwhile 49% have already delayed making a big-ticket purchase during the past few months and 26% of Americans don't expect their personal finances to fully recover from the downturn until after 2011, and just as many--26%--think their personal finances won't ever fully recover.
Of course that could all change if house prices started to rise and folks started going back to work—but even the most optimistic economists don’t expect that to happen until the end of NEXT year at the earliest. It has been 34 months since this recession began and normally it would already be over by now—which is an indication in itself how extreme the economic imbalances are that need to be worked out.
So in the face of all this negativity why are stocks going up?
For one thing the closer we get to the elections—and the higher likelihood of a more balanced Congress with its resulting gridlock--the more positive the markets are likely to be.
Plus there is some good news the bulls are grabbing on to--wholesale inventories rose +1.3% for the biggest gain in two years. The trade deficit on Thursday was better than expected and jobless claims fell by -21,000. Corporate cash is at extremely high levels and companies are starting to announce stock buybacks again. Mergers and acquisitions are at a pace not seen in three years and corporations are selling debt at a record pace to lock in cheap rates---and at some point they will have to put that money to work. Q3 earnings are expected to rise +25% or more at a time when there is zero inflation. And finally the nonfarm payrolls showed private hiring was slow but still positive.
Granted the gains over the last two weeks have come on extremely low volume but they are still gains. Friday's 5.6 billion shares was the lowest volume in two weeks and volume for September month to date is -31% below 2009 levels.
However volume should increase this week--traders will be back at work and funds will have to make decisions on quarter end and year-end positioning. Will they start selling in anticipation of a September decline or position for a slow grind higher into the elections? With conflicting data and a stubbornly climbing market the real question is…
HOW DO WE MAKE MONEY ON IT?
With the markets buck up against resistance it could go either way—which makes it more important than ever to pick stocks bound to go in their respective directions no matter which way the market decides to head—fortunately we’ve got two such picks lined up for this week.
Our first play is bullish and it’s on a stock that just got a huge cloud removed from its future prospects—plus it’s trading at a ridiculously low multiple and investors are looking for a reason to climb on board which should drive our brand new calls through the roof!
Our next play is bearish and just got downgraded Thursday--and for good reason! This one is pointing straight down and should easily run through our trigger point very soon for some stellar downside profits.
We’ve got two outstanding new plays lined up on a market ready to move so let’s get going…
For more information on everything you receive with your Pearly Gates subscription click on www.cashflowheaven.com/pg
SILVER WHEATON (SLW) BLASTED THROUGH OUR PROFIT TRIGGER AND REVERSED--AUTOMATICALLY EJECTING US FOR A SWEET EIGHT-DAY SEVENTY-SIX PERCENT PROFIT!
PLUS GOLDMAN SACHS (GS) DROPPED LAST TUESDAY GETTING US IN AT A ROCK BOTTOM PRICE ONLY TO LAUNCH THE REST OF THE WEEK FOR A ONE-HUNDRED-TEN PERCENT OPEN GAIN!
And the beauty of our GS play is that it’s still open so we’ll likely bag even MORE profit as the ‘king of the financials’ continues to rise.
Our recent plays have been going great—but we’ve still got a portfolio of bearish positions that are NOT doing so great. To find out what’s in store for them and where the profits may be found now let’s take a good look at…
WHICH WAY THIS MARKET IS HEADED
The SP-500 kept rising this past to hit up against its downtrend resistance line from May. From a technical standpoint it would not be surprising to see a roll-over right here. If it does continue to climb there is further resistance at 1120 and 1130. This is dangerous territory for the bulls as a roll-over could come at any time and from these levels it would likely be fast and furious. This next week should tell the tale as volume is likely to finally increase.
Even though the Nasdaq finally moved over initial resistance at 2225 it is now up against downtrend resistance and could roll-over right here. If it breaks through it has strong horizontal resistance at 2300. It is actually amazing the Nasdaq has done so well with almost daily warnings coming out of the chip sector. The overall chart of the Nasdaq still looks bearish in spite of the past few weeks uptrend—it would be smart to tread cautiously here.
The big influence on the Nasdaq is the semis which were knocked for a loss on Friday after Texas Instruments (TXN) and National Semi (NSM) both lowered their forecasts on Thursday. Silicon Labs (SLAB) also warned on Wednesday. Texas Instruments reduced their top end estimates but remained in the range analysts were expecting. After a steep intraday loss shares recovered to end flat.
National Semi had a more sober outlook. The NSM CEO warned, "We'd all like to believe that consumer spending is onward and upward but I don't think it is." Both companies said weak demand for personal computers was a problem and consumers were not spending the big bucks on other electronics purchases. Ron Slamaker of TXN said consumers appear to be buying fewer TVs this quarter.
If the CEOs of these companies are bearish we should pay attention because they have every incentive to be cheerleaders—plus few are in a better position to know what is really going on than the folks at the top of the companies that actually lead the chip industry.
These warnings are congruent with a new survey from Isupply which reported a glut of LCD-TVs in Q2 with 36% excess inventory, up from 25% in Q1. This over-supply is pushing prices down at an accelerated rate. Prices are already down -24% in 2010 compared to a -30% drop in all of 2009. Another analyst said the deflation in prices would probably continue through this holiday season as retailers dump inventory in an industry where technology is constantly making older product obsolete.
This weekly bad news in the chip sector is holding back the Nasdaq but it’s not nearly as bad as you would think--the SOX is still somehow holding above a 10-month low set in August.
Overall last week was light for economic reports with the Beige Book the only major event. However, we did see a sharp drop in new Jobless Claims of -21,000 to 451,000 and the lowest level since July 10th—a report that had a bullish effect on the markets.
However there are still more than 10 million people receiving unemployment insurance payments and several million more whose benefits have expired. That 21,000 drop was nice but keep in mind there were still 451,000 newly unemployed—so the ‘drop’ was really a ‘drop in the bucket’.
Wednesday's Fed Beige Book reported they were expecting continued growth but were also seeing “widespread deceleration" through the end of August. Of the 12 Fed regions five banks reported "economic growth at a moderate pace." Two Fed banks saw "positive developments" but the remaining five banks said conditions were "mixed or decelerating."
Frankly that’s not a very bullish Beige Book report. Economists are now predicting that GDP will fall back to just over +1.0% growth compared to the 3% estimates at the beginning of July definitely marking a "widespread deceleration."
Even though traders are bidding the markets higher the majority of consumers believe we are about to hit a double dip. A survey just released by StrategyOne claims consumers are becoming more bearish than ever.
The StrategyOne Survey discovered that 65% of Americans not only believe a double dip is about to occur but 44% believe the second dip will be worse than the first and 21% believing it will be "much more severe."
Only 21% believe the economy will recover by the end of 2011, but another 23% don't believe the economy will EVER fully recover.
Meanwhile 71% believe that America is fundamentally broken and not working. Since the American consumer is characteristically optimistic and resilient this marks a significant and somewhat alarming departure. Confidence has been materially damaged and real doubts are emerging about the economic future of the country. High unemployment and extreme government debt is proving to be very tough on sentiment.
For example 41% of those surveyed are planning to cut back on their spending over the next 3–4 months, compared with 8% who plan to increase it.
And 35% say they will plan to cut back their online spending over the next to 3–4 months, compared with 12% who plan to increase it.
A whopping 79% say they are planning to spend less money for Christmas this year while 87% say they do not plan to make a big-ticket purchase--such as a house or car--in the next 3–4 months.
Meanwhile 49% have already delayed making a big-ticket purchase during the past few months and 26% of Americans don't expect their personal finances to fully recover from the downturn until after 2011, and just as many--26%--think their personal finances won't ever fully recover.
Of course that could all change if house prices started to rise and folks started going back to work—but even the most optimistic economists don’t expect that to happen until the end of NEXT year at the earliest. It has been 34 months since this recession began and normally it would already be over by now—which is an indication in itself how extreme the economic imbalances are that need to be worked out.
So in the face of all this negativity why are stocks going up?
For one thing the closer we get to the elections—and the higher likelihood of a more balanced Congress with its resulting gridlock--the more positive the markets are likely to be.
Plus there is some good news the bulls are grabbing on to--wholesale inventories rose +1.3% for the biggest gain in two years. The trade deficit on Thursday was better than expected and jobless claims fell by -21,000. Corporate cash is at extremely high levels and companies are starting to announce stock buybacks again. Mergers and acquisitions are at a pace not seen in three years and corporations are selling debt at a record pace to lock in cheap rates---and at some point they will have to put that money to work. Q3 earnings are expected to rise +25% or more at a time when there is zero inflation. And finally the nonfarm payrolls showed private hiring was slow but still positive.
Granted the gains over the last two weeks have come on extremely low volume but they are still gains. Friday's 5.6 billion shares was the lowest volume in two weeks and volume for September month to date is -31% below 2009 levels.
However volume should increase this week--traders will be back at work and funds will have to make decisions on quarter end and year-end positioning. Will they start selling in anticipation of a September decline or position for a slow grind higher into the elections? With conflicting data and a stubbornly climbing market the real question is…
HOW DO WE MAKE MONEY ON IT?
With the markets buck up against resistance it could go either way—which makes it more important than ever to pick stocks bound to go in their respective directions no matter which way the market decides to head—fortunately we’ve got two such picks lined up for this week.
Our first play is bullish and it’s on a stock that just got a huge cloud removed from its future prospects—plus it’s trading at a ridiculously low multiple and investors are looking for a reason to climb on board which should drive our brand new calls through the roof!
Our next play is bearish and just got downgraded Thursday--and for good reason! This one is pointing straight down and should easily run through our trigger point very soon for some stellar downside profits.
We’ve got two outstanding new plays lined up on a market ready to move so let’s get going…
For more information on everything you receive with your Pearly Gates subscription click on www.cashflowheaven.com/pg
Tuesday, September 7, 2010
This Week You've Got a Chance to Bag an Annualized Rate of Return of 101% with an over 92% Probability of Success!
As we celebrate this Labor Day holiday and fire up the grill one more time, let's remember that September has traditionally been a leading indicator of "things to come" as portfolio managers clean house after returning home from their summer vacations.
This week’s activity in the markets has proven strikingly similar to previous years--the first few trading days in September have been historically bullish with the S&P being up 11 out of the last 14 years. These triple-digit moves are commonplace when there is major uncertainty--the key is to do what we always do---hedge our bets.
Trader’s Tip:
Historically,
• Fund managers, returning after the Labor Day holiday, tend to clean out their portfolios.
• September is the biggest percentage losing month for the S&P, Dow and NASDAQ.
• The S&P 500 tends to have a disappointing closing for the month because of mutual fund restructuring.
• September is a Triple-Witching month which is always dangerous especially the week after – terrible!
Key Dates:
• September 16th--options expiration for some indices.
• September 17th--options expiration for all equity and all other index options.
• October 14th--options expiration for some indices.
• October 15th--options expiration for all equity and all other index options
Market Outlook
Investors were upbeat about a report released last Friday that showed the U.S. service sector had grown for the 8th straight month (although its pace has slowed considerably). The service sector is the primary job creator for the US accounting for about 80% of the nation’s workforce-- so although it is a bit of good news, it’s also another indicator that the recovery has slowed considerably.
Consumers are keeping a tight lid on their spending habits as unemployment remains high. Employers have been reluctant to add back the millions of jobs lost in the downturn in an effort to keep costs low and profits high.
The unemployment rate has hovered above 9% for 16 straight months and will continue to remain high well into next year. At this rate, we should break the record for 19 straight months of +9% last seen back in the 1982-83 recession. Nearly 15 million people are unemployed and this will certainly put pressure on the 'powers that be' as we head into the mid-term November elections.
Even with the current depressed situation in the global economy, the stock market had its first winning week in more than a month thanks to the latest round of good news. Friday’s 128 point rally marked the 4th straight day of gains for the Dow and, for the moment, remains a noteworthy turnaround as compared to the dismal performance seen last month.
Even with the Labor Department’s report that private employers added 67,000 jobs last month, but it's still a far cry from what’s needed to revive the economy. The US needs to add 100,000 jobs per month to avoid slipping back into another recession--and around 150,000 to actually absorb all the new workers coming into the economy.
Another factor leading to this week’s rally was a sign that manufacturing is up both in the U.S. and China. But even with the 4-day rally, the index is still down 6.38% from the April 2010 high and economic growth is forecasted to be at less than 2% for the remainder of the year. So with that kind of anemic growth forecast how do we continue making outstanding returns--let's find out...
What are the Secrets of the Week?
We have two high odds Iron Condors this week: both on ETFs that take advantage of the neutrality in their market sectors--and BOTH with over 90% probabilities of success. Let's get started.
You can get in on this week's trades along with two new high-probability trades per week by clicking here now. www.cashflowheaven.com/ws
This week’s activity in the markets has proven strikingly similar to previous years--the first few trading days in September have been historically bullish with the S&P being up 11 out of the last 14 years. These triple-digit moves are commonplace when there is major uncertainty--the key is to do what we always do---hedge our bets.
Trader’s Tip:
Historically,
• Fund managers, returning after the Labor Day holiday, tend to clean out their portfolios.
• September is the biggest percentage losing month for the S&P, Dow and NASDAQ.
• The S&P 500 tends to have a disappointing closing for the month because of mutual fund restructuring.
• September is a Triple-Witching month which is always dangerous especially the week after – terrible!
Key Dates:
• September 16th--options expiration for some indices.
• September 17th--options expiration for all equity and all other index options.
• October 14th--options expiration for some indices.
• October 15th--options expiration for all equity and all other index options
Market Outlook
Investors were upbeat about a report released last Friday that showed the U.S. service sector had grown for the 8th straight month (although its pace has slowed considerably). The service sector is the primary job creator for the US accounting for about 80% of the nation’s workforce-- so although it is a bit of good news, it’s also another indicator that the recovery has slowed considerably.
Consumers are keeping a tight lid on their spending habits as unemployment remains high. Employers have been reluctant to add back the millions of jobs lost in the downturn in an effort to keep costs low and profits high.
The unemployment rate has hovered above 9% for 16 straight months and will continue to remain high well into next year. At this rate, we should break the record for 19 straight months of +9% last seen back in the 1982-83 recession. Nearly 15 million people are unemployed and this will certainly put pressure on the 'powers that be' as we head into the mid-term November elections.
Even with the current depressed situation in the global economy, the stock market had its first winning week in more than a month thanks to the latest round of good news. Friday’s 128 point rally marked the 4th straight day of gains for the Dow and, for the moment, remains a noteworthy turnaround as compared to the dismal performance seen last month.
Even with the Labor Department’s report that private employers added 67,000 jobs last month, but it's still a far cry from what’s needed to revive the economy. The US needs to add 100,000 jobs per month to avoid slipping back into another recession--and around 150,000 to actually absorb all the new workers coming into the economy.
Another factor leading to this week’s rally was a sign that manufacturing is up both in the U.S. and China. But even with the 4-day rally, the index is still down 6.38% from the April 2010 high and economic growth is forecasted to be at less than 2% for the remainder of the year. So with that kind of anemic growth forecast how do we continue making outstanding returns--let's find out...
What are the Secrets of the Week?
We have two high odds Iron Condors this week: both on ETFs that take advantage of the neutrality in their market sectors--and BOTH with over 90% probabilities of success. Let's get started.
You can get in on this week's trades along with two new high-probability trades per week by clicking here now. www.cashflowheaven.com/ws
KNOCKING THE ABSOLUTE STUFFING OUT OF EVERY BEARISH TRADE WE OWN!
What a week! From the depths of bearishness to the heights of manic glee--in just three days the market shot through the roof--
KNOCKING THE ABSOLUTE STUFFING OUT OF EVERY BEARISH TRADE WE OWN!
Last week's action really would have been a disaster if we had to sell out of all of our positions right now---but we don't! And markets have an eerie way of retracing themselves after extreme (and unwarranted) runs to the upside.
Plus don't forget--everything we own isn't down--our brand new calls on Silver Wheaton (SLW) are already up FIFTY-FOUR PERCENT this week alone and look likely to add even more in the days ahead. Heck we already ran up to within 2 cents of our profit target on Friday so it won't take much to zoom right past it.
That's some consolation--but the 800 pound criminally unstable gorilla in the room is all our other plays. For that reason it's more important than ever to take a good hard look at...
WHICH WAY THIS MARKET IS HEADED
As you can see the markets are in strong moves higher--the question is where will they stop and when will they turn?
The S&P-500 gapped up to 1105 on Friday and then wandered down and sideways all day only to close with another spurt that took it back to 1104--all strong signs of short-covering. If we move over 1106 on Tuesday the SPX could climb all the way to 2225--but after that the odds are for a big downside move.
The Nasdaq rallied +6.3% in three days totally on short covering. As recently as Tuesday the Gartner Group cut their estimates for 2010 PC sale by another 2% and Dan Niles was saying short anything with chips--the scenario that caused those events hasn't changed one bit.
There is little fundamental basis for these gains but should they stick on Tuesday there will be some nervous fund managers not wanting to miss the train--and even more short-covering. It's nice to know the reasons behind a rally but it's a rally no matter what caused it--and we need to adjust our trading accordingly.
However fundamentals do tell us how much of a chance the rally has of extending itself into a new bull market. The truth is the economic news was only slightly better than expected---and the gains were mostly on the opening gap and the closing spike. Shorts cover at the open and before the close. The S&P does not rally +6.5% in three days because investors suddenly want to own stocks. Traders were heavily short on Tuesday after a two-week slide and the change in economic sentiment forced them to cover.
If this market seems challenging to trade it is---we've had nine reversals that averaged 7% this year and each reversal occurred in less than ten days. If you are an average trader how do you deal with a 7% change in direction every two weeks? This radical volatility will probably end at the beginning of November and we'll likely see a sustained move to the upside--but until then expect more wild swings. The good news for us is we could us a 'wild swing' after this big updraft plays out--a wild swing to the downside. And this isn't just wishful thinking--the market action of the last several months--and the fundamentals--say we'll get it.
So what was the 'great news' the sparked this rally? It started with China's PMI on Wednesday. The index rose for the first time in four months. This started the global rally but there was some other news as well. India announced it was upgrading its GDP estimates significantly. Plus Australia reported its economy grew at the fastest pace in three years in the second quarter due mostly to demand from China and Asia. Australia did not decline as much as the rest of the world due in part to Asia's voracious appetite for coal and minerals produced in Australia---exports grew by +5.6% in Q2.
When you add in the current economic boom in South America the global picture is really improving. The U.S. is lagging the globe but the prospects for continued slow growth are increasing. We'll find out more about the US situation when the Fed Beige Book minutes are reported on Wednesday.
The news wasn't all good though---the ISM Non-Manufacturing number came in at 51.5---well below the consensus estimate of 53.5 and the prior level of 54.3. The headline reading was the lowest level since January. Declines in employment and new orders drove the index lower. New orders dropped -4 points to 52.4 and employment turned negative at 48.2. Order backlogs fell -2 points to 50.5 and right on the verge of falling into contraction territory.
Since analysts tell us we are now a service economy rather than a manufacturing economy the drop in the services ISM is a bearish indicator. In August the gap between the Manufacturing ISM at 56.3 and the Services ISM at 51.5 was the largest since November 2008. Since the service sector is commonly believed to be the strongest creator of new jobs this does not bode well for the next few months and another reason we'll likely see another swoon to the downside in the next few weeks.
The real weight slowing down the economy is the 15 million unemployed workers out there with many more fearing for their jobs. There is no real recovery without a recovery in employment. There may be slow growth with minimal increases in employment but no real recovery.
The Non-Farm Payrolls reported Friday was 'less bad' than expected but keep in mind we've added just 650,000 jobs in the first seven months of 2010. We lost 8.4 million jobs in the recession that started in December 2007. It would take YEARS to just get back to even at this pace.
High unemployment means weak sentiment, weak housing, weak consumption, and a weak recovery. It does not mean the stock market will not go up. Companies have cut their expenses to the bone in anticipation of a double dip. They are highly profitable even though much of their profits are still derived from cost cutting. For Q3 earnings are now expected to be over 25% and that is an improvement from just a couple weeks ago.
So is this the start of the new bull market? Not likely--remember the volume was very low on this breakout. On both Thursday and Friday volume was only 6.5 billion shares versus the over 8 billion we normally see. It was a holiday week and this week will be light as well.
The biggest report of this week is the Fed's Beige Book on Wednesday. Last month the Fed did not see a lot of light at the end of the tunnel. The labor market was "mixed" and they felt manufacturing "continued to slowly move up." All of those comments showed a Fed that was struggling for a positive way to describe a stagnant economy that is hopefully improving.
In the absence of other economic report this week's FOMC comments released on Wednesday could be a market mover--the question is...
HOW DO WE MAKE MONEY ON IT?
We've got a lot of open plays right now and we don't need to baby-sit two more that may work out--which is why this week we've got two plays that we should be out of VERY quickly for some nice gains.
The first is bullish and it's on a stock that blasted higher Friday on big volume. This stock really tends to take off when it goes as you'll see from its chart--and we only need it to move a paltry 2% to make some really good money. Once you see the stock and the chart you'll realize we could get the move we need in a couple of days--or maybe even just one!
Our next play is a 'both ways' position on a stock hovering right between two strike prices and since it has dollar strikes we don't need it to move much either way to get out at a nice profit, The real beauty of this play is it's not directional--we're buying both puts AND calls for a cumulative cost of only .80 cents--AND we're buying out to October! That means this play is about as close to a 'lock' as you can get!
We've got two very safe plays lined up on a very volatile market--so let's get to it...
For more information on everything you receive with your Pearly Gates subscription click on www.cashflowheaven.com/pg
KNOCKING THE ABSOLUTE STUFFING OUT OF EVERY BEARISH TRADE WE OWN!
Last week's action really would have been a disaster if we had to sell out of all of our positions right now---but we don't! And markets have an eerie way of retracing themselves after extreme (and unwarranted) runs to the upside.
Plus don't forget--everything we own isn't down--our brand new calls on Silver Wheaton (SLW) are already up FIFTY-FOUR PERCENT this week alone and look likely to add even more in the days ahead. Heck we already ran up to within 2 cents of our profit target on Friday so it won't take much to zoom right past it.
That's some consolation--but the 800 pound criminally unstable gorilla in the room is all our other plays. For that reason it's more important than ever to take a good hard look at...
WHICH WAY THIS MARKET IS HEADED
As you can see the markets are in strong moves higher--the question is where will they stop and when will they turn?
The S&P-500 gapped up to 1105 on Friday and then wandered down and sideways all day only to close with another spurt that took it back to 1104--all strong signs of short-covering. If we move over 1106 on Tuesday the SPX could climb all the way to 2225--but after that the odds are for a big downside move.
The Nasdaq rallied +6.3% in three days totally on short covering. As recently as Tuesday the Gartner Group cut their estimates for 2010 PC sale by another 2% and Dan Niles was saying short anything with chips--the scenario that caused those events hasn't changed one bit.
There is little fundamental basis for these gains but should they stick on Tuesday there will be some nervous fund managers not wanting to miss the train--and even more short-covering. It's nice to know the reasons behind a rally but it's a rally no matter what caused it--and we need to adjust our trading accordingly.
However fundamentals do tell us how much of a chance the rally has of extending itself into a new bull market. The truth is the economic news was only slightly better than expected---and the gains were mostly on the opening gap and the closing spike. Shorts cover at the open and before the close. The S&P does not rally +6.5% in three days because investors suddenly want to own stocks. Traders were heavily short on Tuesday after a two-week slide and the change in economic sentiment forced them to cover.
If this market seems challenging to trade it is---we've had nine reversals that averaged 7% this year and each reversal occurred in less than ten days. If you are an average trader how do you deal with a 7% change in direction every two weeks? This radical volatility will probably end at the beginning of November and we'll likely see a sustained move to the upside--but until then expect more wild swings. The good news for us is we could us a 'wild swing' after this big updraft plays out--a wild swing to the downside. And this isn't just wishful thinking--the market action of the last several months--and the fundamentals--say we'll get it.
So what was the 'great news' the sparked this rally? It started with China's PMI on Wednesday. The index rose for the first time in four months. This started the global rally but there was some other news as well. India announced it was upgrading its GDP estimates significantly. Plus Australia reported its economy grew at the fastest pace in three years in the second quarter due mostly to demand from China and Asia. Australia did not decline as much as the rest of the world due in part to Asia's voracious appetite for coal and minerals produced in Australia---exports grew by +5.6% in Q2.
When you add in the current economic boom in South America the global picture is really improving. The U.S. is lagging the globe but the prospects for continued slow growth are increasing. We'll find out more about the US situation when the Fed Beige Book minutes are reported on Wednesday.
The news wasn't all good though---the ISM Non-Manufacturing number came in at 51.5---well below the consensus estimate of 53.5 and the prior level of 54.3. The headline reading was the lowest level since January. Declines in employment and new orders drove the index lower. New orders dropped -4 points to 52.4 and employment turned negative at 48.2. Order backlogs fell -2 points to 50.5 and right on the verge of falling into contraction territory.
Since analysts tell us we are now a service economy rather than a manufacturing economy the drop in the services ISM is a bearish indicator. In August the gap between the Manufacturing ISM at 56.3 and the Services ISM at 51.5 was the largest since November 2008. Since the service sector is commonly believed to be the strongest creator of new jobs this does not bode well for the next few months and another reason we'll likely see another swoon to the downside in the next few weeks.
The real weight slowing down the economy is the 15 million unemployed workers out there with many more fearing for their jobs. There is no real recovery without a recovery in employment. There may be slow growth with minimal increases in employment but no real recovery.
The Non-Farm Payrolls reported Friday was 'less bad' than expected but keep in mind we've added just 650,000 jobs in the first seven months of 2010. We lost 8.4 million jobs in the recession that started in December 2007. It would take YEARS to just get back to even at this pace.
High unemployment means weak sentiment, weak housing, weak consumption, and a weak recovery. It does not mean the stock market will not go up. Companies have cut their expenses to the bone in anticipation of a double dip. They are highly profitable even though much of their profits are still derived from cost cutting. For Q3 earnings are now expected to be over 25% and that is an improvement from just a couple weeks ago.
So is this the start of the new bull market? Not likely--remember the volume was very low on this breakout. On both Thursday and Friday volume was only 6.5 billion shares versus the over 8 billion we normally see. It was a holiday week and this week will be light as well.
The biggest report of this week is the Fed's Beige Book on Wednesday. Last month the Fed did not see a lot of light at the end of the tunnel. The labor market was "mixed" and they felt manufacturing "continued to slowly move up." All of those comments showed a Fed that was struggling for a positive way to describe a stagnant economy that is hopefully improving.
In the absence of other economic report this week's FOMC comments released on Wednesday could be a market mover--the question is...
HOW DO WE MAKE MONEY ON IT?
We've got a lot of open plays right now and we don't need to baby-sit two more that may work out--which is why this week we've got two plays that we should be out of VERY quickly for some nice gains.
The first is bullish and it's on a stock that blasted higher Friday on big volume. This stock really tends to take off when it goes as you'll see from its chart--and we only need it to move a paltry 2% to make some really good money. Once you see the stock and the chart you'll realize we could get the move we need in a couple of days--or maybe even just one!
Our next play is a 'both ways' position on a stock hovering right between two strike prices and since it has dollar strikes we don't need it to move much either way to get out at a nice profit, The real beauty of this play is it's not directional--we're buying both puts AND calls for a cumulative cost of only .80 cents--AND we're buying out to October! That means this play is about as close to a 'lock' as you can get!
We've got two very safe plays lined up on a very volatile market--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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