This past week we had plenty of action on our two 'explosive trades'--
BED BATH AND BEYOND (BBBY) SHOT HIGHER AFTER EARNINGS THIS PAST THURSDAY AND THEN QUICKLY REVERSED BLASTING US OUT OF THE TRADE FOR A QUICK ELEVEN PERCENT PROFIT!
THE DAY BEFORE WALGREEN'S (WAG) DID THE SAME WITH MORE GENEROUS RESULTS FOR A FAST THIRTY-FOUR PERCENT PROFIT!
AND THIS PAST MONDAY RIMM DROPPED SUDDENLY STOPPING US OUT OF BOTH SIDES OF THAT TRADE FOR A JUICY FORTY-FIVE PERCENT WINNER!
The idea on these 'both ways' trades is for one side of the trade to make up the combined cost of both position plus turn a profit--and it did in all three cases. But the real beauty of these trades is the protection you have in both directions because even the most reliable of chart patterns can throw us a surprise once in a while--and if you are betting all in one direction with short term options a reversal can be devastating.
So--are we permanently changing the way we trade? Not necessarily--sometimes the overall market and an individual stock is so determined to charge in a certain direction that trading in that direction makes a lot of sense.
We've got two such directional trades today and you'll be amazed at their potential--tiny entry prices with huge potential upside. To help see why these two trades make sense let's take a good look at...
WHICH WAY THIS MARKET IS HEADED
Both the SP-500 and Nasdaq are still showing nice uptrends--but in most years we'll see profit taking in January. With the amazing runs we've had since August it wouldn't be surprising to see a pull back--in fact most analysts are predicting it.
And if there is a dip should we buy it? Strengthening economics and a whole lot of newly minted money trying to find a home suggests we should. The whole debt-built house of cards will come crashing down at some point but this market could climb quite a bit higher before that happens.
For one thing the all-important American consumer is started to warm those credit cards up again. Americans spent $36.4 billion in the 2010 holiday-shopping season, an impressive 15.4% increase from the prior year, according to a new survey.
The survey from MasterCard Advisors SpendingPulse, released on Wednesday, tracks national retail and services sales. It measured the period between Oct. 31 and Dec. 24.
“Today, e-commerce accounts for a much larger share of overall retail sales compared to a few years ago. And during this holiday season, it registered double-digit growth for 6 out of 7 weeks,” noted Michael McNamara, vice president at MasterCard Advisors SpendingPulse.
The survey showed consumers spent the most on apparel, with online apparel sales accounting for 18.8% of total sales for that category against 16.9% in 2009. Online electronics also logged big gains.
There were six days during the 2010 shopping season during which sales topped $1 billion against 3 days in 2009.
Since the consumer still makes up approximately two-thirds of the US economy a strong holiday season is a very positive sign.
Elaine Garzarelli was a partner and managing director at Lehman Brothers prior to starting her own company Garzarelli Research--in 1995. She was the analyst that correctly predicted the 1987 market crash. Elaine has thirteen indicators she follows and claims they are at the most bullish level in a decade at 71% positive. Above 65% is a buy signal, below 30% is a sell signal. Before the 1987 crash they declined to 9% prompting her to make her famous market crash prediction.
She said we should take a lesson from Japan and their QE program. When they implemented the program aggressively to lift themselves out of their recession the Nikkei rallied 50%. The second time they did it aggressively the market rallied 80%. When they stopped QE the market declined 50%. She claims QE does not specifically help the economy but it always spikes the stock market.
With the Fed facing another six months of QE2 Elaine says this is the best time to buy stocks in the last decade--and she may be right unless rising interest rates derail the party. Rates should be your 'canary in the coal mine' because if they keep rising the economy will contract.
It's ironic then that rising interest rates are actually helping to fuel this rally at least temporarily--as rising rates are killing the bond market. The bond bubble of 2010 is evaporating and that money is flowing into equities. The decline in the dollar is making equities more attractive and the rise in interest rates is making bonds less attractive. We are seeing a classic asset allocation rally.
While almost every analyst is expecting a strong market in 2011 most believe stocks are due for a pullback in January. Katie Stockton, Chief Market Technician at MKM Partners, said although stocks are overdue for some short-term weakness there is a silver lining. She wrote in a research note, while the S&P and most of its components are technically overbought, the index's ability to forge higher is a "phenomenon that is characteristic of strong and sustainable uptrends."
The S&P has risen +6% in December and +24% since the July lows. There were 3,400 new highs on the NYSE so far in December. Bullish investor sentiment is nearly 60% and clearly bearish by contrarian standards. The VIX hit a new nine month low on Thursday. By any measure we are watching what some would call irrational exuberance but there is still a lack of real conviction by the bulls.
Chances are excellent that before we'll see a new sustained leg higher there will be a pullback. The general consensus is for a 5% to 7% correction in January. Most analysts recommend taking profits early and then looking for an opportunity to get back in on the dip. The long-term view has not changed so any January dip should be considered a buying opportunity.
The third-year of a presidential term is typically bullish. That along with strong momentum, solid earnings, low interest rates, improving economic conditions, low taxes and QE2 should provide a good start to the year. So we've got generally bullish conditions with an excellent chance for a pullback, the question is---
HOW DO WE MAKE MONEY ON IT?
We've got two directional trades this week--one bullish and the other bearish. The beauty of these two is they both look totally determined to run in their respective directions no matter what the overall market is doing.
Plus they are cheap to trade--we can buy our positions for around .60 cents each and at that price it won't take much movement to really rack up the profits. We've got a low volume week ahead of us where a small amount of money can really move these stocks so let's get going...
For more information on everything you receive with your Pearly Gates subscription click on www.cashflowheaven.com/pg
Monday, December 27, 2010
Monday, December 20, 2010
This Week We're Knocking Down a 18% Return with an 89% Probability of Success!
As the U.S. economy continues its recovery, there’s a renewed sense of optimism during this holiday season. However, the markets are becoming increasingly complacent so be cautiously optimistic on bullish directional plays as we should expect to see more bad news coming out of the euro-nations in the coming months.
With the VIX dropping 8.5% to 16.11 this week, the cost of using options as insurance against the S&P 500 continues its decline and is now down from this year’s earlier high of 45.79 back in May. As a famous investor once said, “Be fearful when others are greedy and be greedy when others are fearful.” Regardless of sentiment or market direction, subscribers of “the Winning Secret” never give the Grinch a chance to ruin their holiday season. For this week, we’re looking at three great plays to start off the New Year:
For February:
• 88.95% - 89.16% probability of win, 15.74% - 17.65% return on investment.
• 87.96% - 88.87% probability of win, 12.87% - 13.90% return on investment.
For January:
• 90.24% - 88.38% probability of win, 8.70% - 13.64% return on investment.
The Markets and How They Affect Us
On Friday’s close, the U.S. stock market gained for a 3rd straight week, sending the S&P 500 to a two-year high, as better-than-estimated data on retail, manufacturing and housing boosted economic confidence.
The S&P 500 rose 0.3% to 1,243.91, finishing a 3-week rally which had been the longest run since Nov. 5th. The Dow also gained 81.59 points, 0.7%, to finish at 11,491.91. With strong corporate earnings, there is a renewed sense of optimism driven by the expectation that profits will continue to be strong.
As the U.S. recovery continues, investors may see growth between 3 - 3.5% next year. The economy grew at an annualized pace of 2.5% during the 3rd quarter - the U.S. economy definitely has some momentum building.
Overseas, there is growing concern that Europe’s debt crisis is worsening as Ireland’s credit rating was reduced due to declining financial strength and the cost associated with bailing out their lenders. Additionally, six Greek banks are currently under review for a possible downgrade a day after the country’s bond rating was put on a watch for a possible reduction.
Finally, Visa and MasterCard, the world’s two largest credit card companies, fell 17% and 13% after the Fed’s proposal on new rules that would offer to cut debit-card transaction fees by 84%; thereby, significantly impacting their business model.
What are the Secrets of the Week?
We have three plays for the week, two on equities and one on an ETF so 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.
Stack the Deck on Every Trade,
Robert
With the VIX dropping 8.5% to 16.11 this week, the cost of using options as insurance against the S&P 500 continues its decline and is now down from this year’s earlier high of 45.79 back in May. As a famous investor once said, “Be fearful when others are greedy and be greedy when others are fearful.” Regardless of sentiment or market direction, subscribers of “the Winning Secret” never give the Grinch a chance to ruin their holiday season. For this week, we’re looking at three great plays to start off the New Year:
For February:
• 88.95% - 89.16% probability of win, 15.74% - 17.65% return on investment.
• 87.96% - 88.87% probability of win, 12.87% - 13.90% return on investment.
For January:
• 90.24% - 88.38% probability of win, 8.70% - 13.64% return on investment.
The Markets and How They Affect Us
On Friday’s close, the U.S. stock market gained for a 3rd straight week, sending the S&P 500 to a two-year high, as better-than-estimated data on retail, manufacturing and housing boosted economic confidence.
The S&P 500 rose 0.3% to 1,243.91, finishing a 3-week rally which had been the longest run since Nov. 5th. The Dow also gained 81.59 points, 0.7%, to finish at 11,491.91. With strong corporate earnings, there is a renewed sense of optimism driven by the expectation that profits will continue to be strong.
As the U.S. recovery continues, investors may see growth between 3 - 3.5% next year. The economy grew at an annualized pace of 2.5% during the 3rd quarter - the U.S. economy definitely has some momentum building.
Overseas, there is growing concern that Europe’s debt crisis is worsening as Ireland’s credit rating was reduced due to declining financial strength and the cost associated with bailing out their lenders. Additionally, six Greek banks are currently under review for a possible downgrade a day after the country’s bond rating was put on a watch for a possible reduction.
Finally, Visa and MasterCard, the world’s two largest credit card companies, fell 17% and 13% after the Fed’s proposal on new rules that would offer to cut debit-card transaction fees by 84%; thereby, significantly impacting their business model.
What are the Secrets of the Week?
We have three plays for the week, two on equities and one on an ETF so 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.
Stack the Deck on Every Trade,
Robert
UPS SPIKED HIGHER THURSDAY THEN DROPPED FRIDAY STOPPING US OUT OF OUR JAN 72.50 CALLS AT A SWEET FIFTY-SIX PERCENT PROFIT!
The volatility of this past week did our current positions a world of good..
UPS SPIKED HIGHER THURSDAY THEN DROPPED FRIDAY STOPPING US OUT OF OUR JAN 72.50 CALLS AT A SWEET FIFTY-SIX PERCENT PROFIT!
PLUS MATTEL (MAT) SPIKED HIGHER RIGHT AS WE ENTERED OUR SELL ORDERS FOR A GENEROUS SIXTY-SEVEN PERCENT WINNER!
AND OUR OPEN PLAY ON RESEARCH IN MOTION (RIMM) IS SHOWING A NICE THIRTY-FIVE PERCENT OPEN PROFIT AFTER FRIDAY'S EXPIRATION!
It was a good week and by the looks of things it's going to get better. Our sold December options on RIMM expired worthless Friday exactly as we hoped--and now we own both the January puts and calls for a fraction of their current worth.
Now as the markets wind down toward Christmas are there still opportunities? You bet there are--and we can start by taking a good look at...
WHICH WAY THIS MARKET IS HEADED
The SP-500 traded mostly sideways this past week but with a slight upward bias. The volatility seems to have left this market as the index only varied by about 6 points--extremely unusual for a quadruple witching Friday. The VIX is less than a dollar from its yearly low closing Friday at 16.11.
The Nasdaq spiked to a new intraday high not seen since the end of 2007. This index looks bullish as well but at these lofty levels we could easily see a correction in January.
The markets typically trade higher right through the new year and then swoon going into February--something to keep in mind with new bullish positions as the markets edge higher.
There are reasons the markets are edging higher and we've seen some of them this past week. The Conference Board index of leading economic indicators rose by a very sharp +1.1 points for November. That was the biggest gain since March. Nine of the survey's ten components increased (real estate being the obvious exception).
The internal components point to a 3.0% rate of GDP growth in Q4. The odds of a double dip recession are decreasing every time a new positive economic report is released.
Hiring is improving at least on a temporary basis and it is expected to accelerate in the spring of 2011. Jobless Claims declined only slightly last week but it was enough to push the four-week moving average to 423,000---the lowest level in two years.
The headline number on the Philly Fed Manufacturing Survey for December rose to 24.3 from 22.5 in November. That may not sound like a big gain but the consensus estimates were for a decline to 15.0. Compared to an expected drop it was a great number---the highest level for the index since 2005.
The tax deal signed on Friday is also bullish as it should improve employment fairly quickly because of the accelerated write offs for business. The passing of this bill should remove one more reason for worry from the markets with a tax freeze for the next two years and some additional benefits for employers.
For next week the only material report will be the final GDP revision for Q3 on Wednesday---estimates are for a small rise to +2.6% growth.
The positives for this market are improving economics and a new flood of money still trying to find a home in every asset available (with the obvious exception of real estate). Stocks are not the only assets rising--copper, gold, silver, food and oil prices are all hovering at multi-year highs. The uptrend in almost every asset class within a still tepid economy relates more this new flood of dollars and their declining buying power than increased demand.
Unfortunately all the money printing and new debt is going to put a lid on the stock market at some point. As interest rates rise money will flow from stocks to bonds. And interest rates have been rising--and in spite of the Fed trying to keep rates low they will continue to rise.
Two-year Treasury yields have doubled in 29 trading days. Five-year yields have surged 102 basis points, or 1.02 percentage points, while 10-year yields just hit a seven-month high. What's more, thirty-year municipal bond yields soared to a 16-month high, and thirty-year mortgage rates jumped to the highest since the tail end of the spring home buying season.
Plus inflation is rising in spite of what the official government reports say. Since the first of this month the price of corn is up more than 3 percent, coffee is up more than 8 percent, sugar is up 8.49 percent, oats are up nearly 6 percent, while cotton prices are up more than 16 percent--in less than a month. It's hard to imagine what they'll be in a year.
The problem is these trends are not going to reverse--the fundamental facts tell us they are going to accelerate. So we've got a stock market trending higher with debt, inflation and interest rates massing to kill the rally--the question is...
HOW DO WE MAKE MONEY ON IT?
The key in an uncertain market like this one is to set yourself up to profit no matter which way stocks go. With volatility hovering toward its lows for the year we can get in on 'both ways' trades for less than ever giving us a very low profit threshold.
Our first play is a 'both ways' position on a big box retailer that just formed a horizontal wedge patter famous for predicting a big move--one way or the other. We'll be setting ourselves up to profit on that move first thing Monday!
Our next play is also a 'both ways' trade on a company with great growth and earnings in the past--and an earnings event coming up in the near future. Whether or not traders like their earning is immaterial because we'll be set up to profit in both directions on some very cheap options!
We've got two great play set-ups on a market ready to rock--so let's get going...
For more information on everything you receive with your Pearly Gates subscription click on www.cashflowheaven.com/pg
UPS SPIKED HIGHER THURSDAY THEN DROPPED FRIDAY STOPPING US OUT OF OUR JAN 72.50 CALLS AT A SWEET FIFTY-SIX PERCENT PROFIT!
PLUS MATTEL (MAT) SPIKED HIGHER RIGHT AS WE ENTERED OUR SELL ORDERS FOR A GENEROUS SIXTY-SEVEN PERCENT WINNER!
AND OUR OPEN PLAY ON RESEARCH IN MOTION (RIMM) IS SHOWING A NICE THIRTY-FIVE PERCENT OPEN PROFIT AFTER FRIDAY'S EXPIRATION!
It was a good week and by the looks of things it's going to get better. Our sold December options on RIMM expired worthless Friday exactly as we hoped--and now we own both the January puts and calls for a fraction of their current worth.
Now as the markets wind down toward Christmas are there still opportunities? You bet there are--and we can start by taking a good look at...
WHICH WAY THIS MARKET IS HEADED
The SP-500 traded mostly sideways this past week but with a slight upward bias. The volatility seems to have left this market as the index only varied by about 6 points--extremely unusual for a quadruple witching Friday. The VIX is less than a dollar from its yearly low closing Friday at 16.11.
The Nasdaq spiked to a new intraday high not seen since the end of 2007. This index looks bullish as well but at these lofty levels we could easily see a correction in January.
The markets typically trade higher right through the new year and then swoon going into February--something to keep in mind with new bullish positions as the markets edge higher.
There are reasons the markets are edging higher and we've seen some of them this past week. The Conference Board index of leading economic indicators rose by a very sharp +1.1 points for November. That was the biggest gain since March. Nine of the survey's ten components increased (real estate being the obvious exception).
The internal components point to a 3.0% rate of GDP growth in Q4. The odds of a double dip recession are decreasing every time a new positive economic report is released.
Hiring is improving at least on a temporary basis and it is expected to accelerate in the spring of 2011. Jobless Claims declined only slightly last week but it was enough to push the four-week moving average to 423,000---the lowest level in two years.
The headline number on the Philly Fed Manufacturing Survey for December rose to 24.3 from 22.5 in November. That may not sound like a big gain but the consensus estimates were for a decline to 15.0. Compared to an expected drop it was a great number---the highest level for the index since 2005.
The tax deal signed on Friday is also bullish as it should improve employment fairly quickly because of the accelerated write offs for business. The passing of this bill should remove one more reason for worry from the markets with a tax freeze for the next two years and some additional benefits for employers.
For next week the only material report will be the final GDP revision for Q3 on Wednesday---estimates are for a small rise to +2.6% growth.
The positives for this market are improving economics and a new flood of money still trying to find a home in every asset available (with the obvious exception of real estate). Stocks are not the only assets rising--copper, gold, silver, food and oil prices are all hovering at multi-year highs. The uptrend in almost every asset class within a still tepid economy relates more this new flood of dollars and their declining buying power than increased demand.
Unfortunately all the money printing and new debt is going to put a lid on the stock market at some point. As interest rates rise money will flow from stocks to bonds. And interest rates have been rising--and in spite of the Fed trying to keep rates low they will continue to rise.
Two-year Treasury yields have doubled in 29 trading days. Five-year yields have surged 102 basis points, or 1.02 percentage points, while 10-year yields just hit a seven-month high. What's more, thirty-year municipal bond yields soared to a 16-month high, and thirty-year mortgage rates jumped to the highest since the tail end of the spring home buying season.
Plus inflation is rising in spite of what the official government reports say. Since the first of this month the price of corn is up more than 3 percent, coffee is up more than 8 percent, sugar is up 8.49 percent, oats are up nearly 6 percent, while cotton prices are up more than 16 percent--in less than a month. It's hard to imagine what they'll be in a year.
The problem is these trends are not going to reverse--the fundamental facts tell us they are going to accelerate. So we've got a stock market trending higher with debt, inflation and interest rates massing to kill the rally--the question is...
HOW DO WE MAKE MONEY ON IT?
The key in an uncertain market like this one is to set yourself up to profit no matter which way stocks go. With volatility hovering toward its lows for the year we can get in on 'both ways' trades for less than ever giving us a very low profit threshold.
Our first play is a 'both ways' position on a big box retailer that just formed a horizontal wedge patter famous for predicting a big move--one way or the other. We'll be setting ourselves up to profit on that move first thing Monday!
Our next play is also a 'both ways' trade on a company with great growth and earnings in the past--and an earnings event coming up in the near future. Whether or not traders like their earning is immaterial because we'll be set up to profit in both directions on some very cheap options!
We've got two great play set-ups on a market ready to rock--so let's get going...
For more information on everything you receive with your Pearly Gates subscription click on www.cashflowheaven.com/pg
Thursday, December 16, 2010
Inflation is Already Rocketing--How to Protect Yourself
November's Producer Price Index (PPI) for finished goods surged 0.8%, almost double most economists' estimates. On an annualized basis, that's nearly 10% per year which is WAY too high---but this monster is just beginning to roar.
For the last two weeks in November--the most recent data we have---the price of corn is up more than 3% ... coffee is up more than 8% ... sugar is up 8.49% ... oats are up nearly 6% ... cotton prices are up more than 16%....the price of fruit is up an alarming 14%....and egg prices jumped an outrageous 23%---all in just two weeks!
And the majority of the 'funny money' the Fed has printed hasn't even made its way into the economy yet.
Can you imagine what will happen to the products you consume every day when it does?
Inflation isn't some far off threat that we can deal with when and if it arrives--it's here now.
Click here to find out why you need to act--and what you can do about it.
Keep up the good work,
Peter
For the last two weeks in November--the most recent data we have---the price of corn is up more than 3% ... coffee is up more than 8% ... sugar is up 8.49% ... oats are up nearly 6% ... cotton prices are up more than 16%....the price of fruit is up an alarming 14%....and egg prices jumped an outrageous 23%---all in just two weeks!
And the majority of the 'funny money' the Fed has printed hasn't even made its way into the economy yet.
Can you imagine what will happen to the products you consume every day when it does?
Inflation isn't some far off threat that we can deal with when and if it arrives--it's here now.
Click here to find out why you need to act--and what you can do about it.
Keep up the good work,
Peter
Wednesday, December 15, 2010
How to Avoid the 2011 Debt Crash--Live Webinar This Thursday Night
Just two short years ago panicked governments attempting to prevent a global collapse embarked on the most expensive program of financial bailouts, economic stimulus, and money printing in the history of mankind.
They managed to shore up their economies for awhile--but none of these great rescues came without a terrible cost. Sovereign governments of the United States and Europe have gutted their own finances, instantly creating the largest peacetime deficits of all time.
And now even as the stock market hits new two years highs the first signs of a devastating crash are appearing.
The tell tale sign is rising interest rates in spite of the largest debt buying spree the Fed has ever embarked on.
The good news? It's not too late to protect yourself---but it is critically important you act immediately--which is why we put together this emergency webinar.
Click Here for the Details
Keep up the good work,
Peter
They managed to shore up their economies for awhile--but none of these great rescues came without a terrible cost. Sovereign governments of the United States and Europe have gutted their own finances, instantly creating the largest peacetime deficits of all time.
And now even as the stock market hits new two years highs the first signs of a devastating crash are appearing.
The tell tale sign is rising interest rates in spite of the largest debt buying spree the Fed has ever embarked on.
The good news? It's not too late to protect yourself---but it is critically important you act immediately--which is why we put together this emergency webinar.
Click Here for the Details
Keep up the good work,
Peter
Tuesday, December 14, 2010
Play the rally while you can but be prepared for a debt driven/rising interest rate crash...
This morning, retail sales came in much better than expected. Sales rose .8% and the National Federation of Retailers raised their forecast. This positive news more than offset negative earnings from Best Buy. A loss in market share (not overall electronics demand) is to blame for the poor performance. Business inventories were "market friendly" and sales rose 1.3%. The PPI came in "hot" at .8%. Normally, this might have sparked concern, but the Fed wants prices to rise. They believe disinflation/deflation is a greater foe but once prices really start rising that Pandora may be tough to put back.
Spain and Portugal will hold bond auctions this week. Expect the ECB to actively participate and that should stabilize PIIGS interest rates. The ECB disclosed yesterday that it purchased €2.7 billion worth of bonds last week and that was up from €2 billion the week before. They are increasing their participation to prop up prices. European credit concerns will be an issue early in 2011, but they won't interfere with this year-end rally.
The problems in Europe are festering. The Italian Prime Minister (Berlusconi) narrowly escaped a no-confidence vote. Their debt is enormous and interest rates are moving higher. The country will be faced with tough decisions and this vote (314/311) shows that it will be tough for him to cut deficit spending. Belgium's bond rating was lowered by Standard & Poor's--now they are officially on the sovereign debt radar. The ECB is aware of the warning signs around them and it wants to increase the bailout slush fund. It will ask EU members for more money in the near future.
The opposing market forces will lead to a nice orderly rally into year end. Excellent earnings, strong balance sheets, low interest rates, improving economic conditions, growth in China and QE2 are providing the strength. Rising interest rates and credit concerns in Europe will keep the rally in check. If rates throughout Europe suddenly spike in many countries at the same time, a massive stock market correction will immediately follow. It appears that the ECB will try to bailout every country until member countries stop contributing to the bailout fund. We probably will not see a sovereign bankruptcy--instead they will march closer to the edge of the cliff together.
Play the rally while you can but be prepared for a debt driven/rising interest rate crash--when it happens it will happen fast. Come to this Thursday's debt crisis webinar for your best defensive and profit producing strategies: https://www2.gotomeeting.com/register/734666107
Spain and Portugal will hold bond auctions this week. Expect the ECB to actively participate and that should stabilize PIIGS interest rates. The ECB disclosed yesterday that it purchased €2.7 billion worth of bonds last week and that was up from €2 billion the week before. They are increasing their participation to prop up prices. European credit concerns will be an issue early in 2011, but they won't interfere with this year-end rally.
The problems in Europe are festering. The Italian Prime Minister (Berlusconi) narrowly escaped a no-confidence vote. Their debt is enormous and interest rates are moving higher. The country will be faced with tough decisions and this vote (314/311) shows that it will be tough for him to cut deficit spending. Belgium's bond rating was lowered by Standard & Poor's--now they are officially on the sovereign debt radar. The ECB is aware of the warning signs around them and it wants to increase the bailout slush fund. It will ask EU members for more money in the near future.
The opposing market forces will lead to a nice orderly rally into year end. Excellent earnings, strong balance sheets, low interest rates, improving economic conditions, growth in China and QE2 are providing the strength. Rising interest rates and credit concerns in Europe will keep the rally in check. If rates throughout Europe suddenly spike in many countries at the same time, a massive stock market correction will immediately follow. It appears that the ECB will try to bailout every country until member countries stop contributing to the bailout fund. We probably will not see a sovereign bankruptcy--instead they will march closer to the edge of the cliff together.
Play the rally while you can but be prepared for a debt driven/rising interest rate crash--when it happens it will happen fast. Come to this Thursday's debt crisis webinar for your best defensive and profit producing strategies: https://www2.gotomeeting.com/register/734666107
Monday, December 13, 2010
This Week We're Knocking Down a 13% Return with an 89% Probability of Success!
Welcome to expiration week and our last newsletter for the December/January credit spreads. We’ll select three new plays this week before moving on from January to February. Again, as with every expiration week (not including weeklys), let’s consider closing out any plays that have already earned most of our credit.
As mentioned in earlier editions, whenever a credit spread has less than $0.05 remaining, that’s a great time to close out the trade and “Take the Money and Run!”
From about Wednesday on, the market makers often start widening spreads plus gamma risk increases so either Tuesday’s close or Wednesday’s open would be a great time to exit our plays.
Finally, there’s always the “option” to just let them ride into expiration. The advantage here is that you don’t have to pay any more commission to close your plays. They’ll just expire worthless, and you'll keep all the credit--a nice position to be in.
The Markets and How They Affect Us
Since lower volatility is our friend let's take a quick look at what is affecting market volatility and how it might affect our positions. International market volatility for new debt securities continued in the 3rd quarter after the initial shock of the European sovereign crisis sidelined investors in the 2nd quarter as reported from the Bank for International Settlements yesterday.
Back in May, when the crisis in Greece first flared up, volatility increased to a point where, for about 6 weeks, there weren’t any significant issuances of debt securities.
However, investors eventually breathed a sigh of relief by the government’s announcement of a Greek bailout fund and the European banks’ stress-tests. And with that, the primary markets were reopened but not to every bank. The larger banks of Ireland struggled to raise funding in the international debt securities market last quarter.
As it turns out, the Irish banking sector became the root cause of the country’s problems and Ireland became the second European nation to ask for international help due to the crisis.
As debt concerns continued to keep interest rates low across the globe, corporations took advantage of these low yields to issue some $140 billion during this time which was the highest amount since the 2nd quarter - 2009, when companies sought to sell
Closer to home, oil options volatility weakened on Friday after China acted to counter inflation which could possibly slow their economic growth and demand for the largest energy-consuming country in the world.
Implied volatility for ATM options with March expiration was down along with futures and crude oil deliveries for January after China required lenders to increase their financial reserves.
What are the Secrets of the Week?
We have three new trades this week, two on equities and one on an ETF, so 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
To all our subscribers, God Bless and have an awesome trading week!
As mentioned in earlier editions, whenever a credit spread has less than $0.05 remaining, that’s a great time to close out the trade and “Take the Money and Run!”
From about Wednesday on, the market makers often start widening spreads plus gamma risk increases so either Tuesday’s close or Wednesday’s open would be a great time to exit our plays.
Finally, there’s always the “option” to just let them ride into expiration. The advantage here is that you don’t have to pay any more commission to close your plays. They’ll just expire worthless, and you'll keep all the credit--a nice position to be in.
The Markets and How They Affect Us
Since lower volatility is our friend let's take a quick look at what is affecting market volatility and how it might affect our positions. International market volatility for new debt securities continued in the 3rd quarter after the initial shock of the European sovereign crisis sidelined investors in the 2nd quarter as reported from the Bank for International Settlements yesterday.
Back in May, when the crisis in Greece first flared up, volatility increased to a point where, for about 6 weeks, there weren’t any significant issuances of debt securities.
However, investors eventually breathed a sigh of relief by the government’s announcement of a Greek bailout fund and the European banks’ stress-tests. And with that, the primary markets were reopened but not to every bank. The larger banks of Ireland struggled to raise funding in the international debt securities market last quarter.
As it turns out, the Irish banking sector became the root cause of the country’s problems and Ireland became the second European nation to ask for international help due to the crisis.
As debt concerns continued to keep interest rates low across the globe, corporations took advantage of these low yields to issue some $140 billion during this time which was the highest amount since the 2nd quarter - 2009, when companies sought to sell
Closer to home, oil options volatility weakened on Friday after China acted to counter inflation which could possibly slow their economic growth and demand for the largest energy-consuming country in the world.
Implied volatility for ATM options with March expiration was down along with futures and crude oil deliveries for January after China required lenders to increase their financial reserves.
What are the Secrets of the Week?
We have three new trades this week, two on equities and one on an ETF, so 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
To all our subscribers, God Bless and have an awesome trading week!
DRIVING OUR NEW UPS CALLS TO A FAST FIVE DAY THIRTY-SEVEN PERCENT OPEN PROFIT!
This past week the markets continued their relentless climb higher...
DRIVING OUR NEW UPS CALLS TO A FAST FIVE DAY THIRTY-SEVEN PERCENT OPEN PROFIT!
In addition our Mattel (MAT) calls are trading in profit territory and our CRUS calls are hovering on either side of break-even. This has been a good market for straight calls played to the upside--but will it continue? To help find out let's take a good look at...
WHICH WAY THIS MARKET IS HEADED
This market is on fire---the S&P closed at the high of the week and the high of the past two years.
The Nasdaq finally broke through overhead resistance at 2590 and ran for some nice gains. For four days resistance held but the Nasdaq was still able to stretch its consecutive winning streak gaining 100 points in eight days. Support should now be 2590 but after eight days of gains there will likely be a buying opportunity in our immediate future as some event provides an excuse for profit taking.
This bull run is broad based---Friday was a new two-year high for the Nasdaq, S&P, Russell, Wilshire 5000, NYSE Composite and the Dow Transports.
Along with a flood of new money trying to find a home some economic numbers are fueling the rally as well. The new Jobless Claims reported on Thursday came in at 421,000 bringing the four week moving average down to 427,500---the lowest level since August 2008. The headline number was a drop of -17,000 over the prior week. We could be very close to a headline number under 400,000. The most recent low was 410,000 two weeks ago.
Also helping push the markets higher was a stronger than expected Consumer Sentiment report for December. The headline number jumped to 74.2 from 71.6 in November. This is the highest level we have seen since June's 76.0 reading. The summer decline ahead of the elections appears to have ended and sentiment has surged +6.5 points in just the last two months.
The rebound in December was due to a strong increase in the present conditions component from 82.1 to 85.7. This is the highest level for that component since January 2008. The expectations component rose from 64.8 to 66.8. Consumers appear to be pleased with the outcome of the election and the possibility of tax rates staying relatively low.
Once the tax compromise is passed there could be another large spike. The House Democrats are putting up strong opposition to the President's compromise and have refused to pass it. The House has enough Democratic votes to prevent it from passing if they really want to stand united. We saw a rally as soon as the compromise was reported but then Democrats instantly began vowing to defeat it. The markets want the tax cuts extended and they will probably continue sideways until the fate of the compromise is decided. If the measure fails expect a big decline but if it passes we should see an acceleration of the rally. Consumers and investors are always happy about keeping more of their own money.
On the negative side the budget deficit for November was -$150.4 billion--a 25% increase over November 2009 and the largest November deficit on record. Revenues were up +12% but outlays increased by +18%. The government's fiscal year begins in October and for the first two months the deficit has totaled $290.8 billion. The government is projecting a $1.3 trillion deficit for the entire year or 9% of GDP. Perhaps instead of raising taxes the government might consider cutting spending.
On Thursday the Treasury Dept auctioned off $13 billion in 30-year securities and surprisingly the auction was very strongly bid. Recent long-term auctions have had weak demand. The bid-to-cover ratio at 2.74 was the highest level since August with foreign central banks buying the largest amount--49.5% of the offering. The Fed is buying in the 3-7 year range so it was not a result of the Fed supporting the bidding. After two days of declines this rejuvenated the bond market but Friday the bond market sold off again with yields on the 10-year approaching six-month highs
Pimco, the world's largest bond fund, is raising its forecast for U.S. growth next year as policy makers pump in a "massive amount" of stimulus into the economy, according to CEO Mohamed El-Erian. Pimco raised their estimates for growth to the 3.0-3.5% range from 2.0-2.5%. JP Morgan raised their estimate to 3.5% and Morgan Stanley raised estimates to 4% from 2.9%. This increasing growth rate should continue fueling the markets higher.
Edward Yardeni said in an interview on Friday his 2011 year-end target is between 1400-1500 because of improving global fundamentals and expected earnings on the S&P of $100 in 2011. He also reminded everyone the third year of a presidential election cycle has averaged a 20% gain since 1962. That historical trend along with the post recession rebound could produce a surprising rally in 2011.
China's economy is doing so well right now inflation is becoming a problem. The country's consumer prices rose +5.1% driven by higher costs for food. That was well above the 4.7% consensus by analysts. It was also significantly higher than the 4.4% rate in October. Producer prices rose by 6.1% and a full point over estimates. Industrial output rose +13.3%, also stronger than analyst estimates. Retail sales jumped +18.7% and fixed asset investments rose by 24.9% year to date, also higher than expected. Their trade surplus was $22.9 billion. (That compares to our trade deficit of $38.7 billion) Broad money supply or M2 rose by 19.5% and the fastest gain in six months.
An 18.7% jump in retail sales in November is outrageous--the U.S. by comparison is expecting a +1% increase when sales are reported on Tuesday. The Chinese Government is going to have to apply the brakes or their ballooning economy will inflate to the bursting point. Chinese auto sales spiked +27% in November to 1.7 million vehicles--sales for the year have already reached 16.4 million vehicles with 18 million expected by year-end. Streets are becoming so crowded some cities are rationing license plates. In Shanghai the available plates are sold at auction with prices averaging $6,000 or more. Those numbers are astounding and a graphic illustration of how fast wealth is moving to the far-east.
Even if China raises rates sharply the impact to our markets should be minimal. The expectations from the FOMC meeting on Tuesday are also already priced in after a week of consolidation. In either case it will probably take a highly unexpected action to produce a meaningful dip and any dip is likely to be bought--the question is...
HOW DO WE MAKE MONEY ON IT?
The major indices are moving higher and will likely continue to--but certain stocks will outperform the markets as a whole and we've got two exceptional candidates lined up.
The first is a 'both ways' trade on a mobile device maker that has been trending higher lately but just pulled back to its uptrend line--and with earnings coming out soon this one is likely to explode. Fortunately we've got a unique strategy lined up to profit almost no matter what the stock does!
Our next play is on a commodity investors just can't seem to get enough of--in fact it's so hot it's outperformed gold over the past year and will likely continue to. This one also looks ripe for a new entry point and we'll be climbing on board with some well-placed calls first thing Monday morning!
We got a market climbing higher along with two well-placed trades to ride it--so let's get going...
For more information on everything you receive with your Pearly Gates subscription click on www.cashflowheaven.com/pg
DRIVING OUR NEW UPS CALLS TO A FAST FIVE DAY THIRTY-SEVEN PERCENT OPEN PROFIT!
In addition our Mattel (MAT) calls are trading in profit territory and our CRUS calls are hovering on either side of break-even. This has been a good market for straight calls played to the upside--but will it continue? To help find out let's take a good look at...
WHICH WAY THIS MARKET IS HEADED
This market is on fire---the S&P closed at the high of the week and the high of the past two years.
The Nasdaq finally broke through overhead resistance at 2590 and ran for some nice gains. For four days resistance held but the Nasdaq was still able to stretch its consecutive winning streak gaining 100 points in eight days. Support should now be 2590 but after eight days of gains there will likely be a buying opportunity in our immediate future as some event provides an excuse for profit taking.
This bull run is broad based---Friday was a new two-year high for the Nasdaq, S&P, Russell, Wilshire 5000, NYSE Composite and the Dow Transports.
Along with a flood of new money trying to find a home some economic numbers are fueling the rally as well. The new Jobless Claims reported on Thursday came in at 421,000 bringing the four week moving average down to 427,500---the lowest level since August 2008. The headline number was a drop of -17,000 over the prior week. We could be very close to a headline number under 400,000. The most recent low was 410,000 two weeks ago.
Also helping push the markets higher was a stronger than expected Consumer Sentiment report for December. The headline number jumped to 74.2 from 71.6 in November. This is the highest level we have seen since June's 76.0 reading. The summer decline ahead of the elections appears to have ended and sentiment has surged +6.5 points in just the last two months.
The rebound in December was due to a strong increase in the present conditions component from 82.1 to 85.7. This is the highest level for that component since January 2008. The expectations component rose from 64.8 to 66.8. Consumers appear to be pleased with the outcome of the election and the possibility of tax rates staying relatively low.
Once the tax compromise is passed there could be another large spike. The House Democrats are putting up strong opposition to the President's compromise and have refused to pass it. The House has enough Democratic votes to prevent it from passing if they really want to stand united. We saw a rally as soon as the compromise was reported but then Democrats instantly began vowing to defeat it. The markets want the tax cuts extended and they will probably continue sideways until the fate of the compromise is decided. If the measure fails expect a big decline but if it passes we should see an acceleration of the rally. Consumers and investors are always happy about keeping more of their own money.
On the negative side the budget deficit for November was -$150.4 billion--a 25% increase over November 2009 and the largest November deficit on record. Revenues were up +12% but outlays increased by +18%. The government's fiscal year begins in October and for the first two months the deficit has totaled $290.8 billion. The government is projecting a $1.3 trillion deficit for the entire year or 9% of GDP. Perhaps instead of raising taxes the government might consider cutting spending.
On Thursday the Treasury Dept auctioned off $13 billion in 30-year securities and surprisingly the auction was very strongly bid. Recent long-term auctions have had weak demand. The bid-to-cover ratio at 2.74 was the highest level since August with foreign central banks buying the largest amount--49.5% of the offering. The Fed is buying in the 3-7 year range so it was not a result of the Fed supporting the bidding. After two days of declines this rejuvenated the bond market but Friday the bond market sold off again with yields on the 10-year approaching six-month highs
Pimco, the world's largest bond fund, is raising its forecast for U.S. growth next year as policy makers pump in a "massive amount" of stimulus into the economy, according to CEO Mohamed El-Erian. Pimco raised their estimates for growth to the 3.0-3.5% range from 2.0-2.5%. JP Morgan raised their estimate to 3.5% and Morgan Stanley raised estimates to 4% from 2.9%. This increasing growth rate should continue fueling the markets higher.
Edward Yardeni said in an interview on Friday his 2011 year-end target is between 1400-1500 because of improving global fundamentals and expected earnings on the S&P of $100 in 2011. He also reminded everyone the third year of a presidential election cycle has averaged a 20% gain since 1962. That historical trend along with the post recession rebound could produce a surprising rally in 2011.
China's economy is doing so well right now inflation is becoming a problem. The country's consumer prices rose +5.1% driven by higher costs for food. That was well above the 4.7% consensus by analysts. It was also significantly higher than the 4.4% rate in October. Producer prices rose by 6.1% and a full point over estimates. Industrial output rose +13.3%, also stronger than analyst estimates. Retail sales jumped +18.7% and fixed asset investments rose by 24.9% year to date, also higher than expected. Their trade surplus was $22.9 billion. (That compares to our trade deficit of $38.7 billion) Broad money supply or M2 rose by 19.5% and the fastest gain in six months.
An 18.7% jump in retail sales in November is outrageous--the U.S. by comparison is expecting a +1% increase when sales are reported on Tuesday. The Chinese Government is going to have to apply the brakes or their ballooning economy will inflate to the bursting point. Chinese auto sales spiked +27% in November to 1.7 million vehicles--sales for the year have already reached 16.4 million vehicles with 18 million expected by year-end. Streets are becoming so crowded some cities are rationing license plates. In Shanghai the available plates are sold at auction with prices averaging $6,000 or more. Those numbers are astounding and a graphic illustration of how fast wealth is moving to the far-east.
Even if China raises rates sharply the impact to our markets should be minimal. The expectations from the FOMC meeting on Tuesday are also already priced in after a week of consolidation. In either case it will probably take a highly unexpected action to produce a meaningful dip and any dip is likely to be bought--the question is...
HOW DO WE MAKE MONEY ON IT?
The major indices are moving higher and will likely continue to--but certain stocks will outperform the markets as a whole and we've got two exceptional candidates lined up.
The first is a 'both ways' trade on a mobile device maker that has been trending higher lately but just pulled back to its uptrend line--and with earnings coming out soon this one is likely to explode. Fortunately we've got a unique strategy lined up to profit almost no matter what the stock does!
Our next play is on a commodity investors just can't seem to get enough of--in fact it's so hot it's outperformed gold over the past year and will likely continue to. This one also looks ripe for a new entry point and we'll be climbing on board with some well-placed calls first thing Monday morning!
We got a market climbing higher along with two well-placed trades to ride it--so let's get going...
For more information on everything you receive with your Pearly Gates subscription click on www.cashflowheaven.com/pg
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