the mad hedge fund trader “special earthshaking issue’” with john thomas from san francisco,...
TRANSCRIPT
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The Mad Hedge Fund Trader“Special Earthshaking Issue’”
With John Thomasfrom San Francisco, CA
August 27, 2014www.madhedgefundtrader.com
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Trade Alert PerformanceStill Another New All Time High!
*January Final +3.05%, *July Final +4.18% *February Final +6.41%, *August MTD 5.86%*March Final -2.52%*April Final +3.32%*May Final +4.61%*June Final +4.24%
2014 YTD +29.78%, versus 3% for the Dow,an outperformance of 26%
*First 185 weeks of Trading +152%!
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Portfolio Review- Running Out of Positions!Everything worked! (almost)
current capital at risk
Risk On
(TBT) short Treasury bond ETF 10.00%
Risk Off
none
total net position 10.00%
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Trailing 12 Month Return +60%
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44 Months Since Inception-50 BP Short of All Time High
+152%, Averaged annualized +40.5%
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Strategy Outlook-*Collapsing bond interest rates in Europe has become the main global driver of all asset classes
*Watch the German 10 year bund, now yielding 0.90%, targeting JGB’s at 0.50%
*Nothing else matters, not Ukraine, the Middle East, Libya, or Ebola
*”Normalization” is the word of the week in Jackson Hole
*Data says major growth improvement still in the cards for H2
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The Jim Parker ViewThe Mad Day Trader-On sale for a $1,500 upgrade
Technical Set Up of the week
Buy
*Grind up continues, (SPY) targeting at least 2,060
*No breaks until after month end
Sell Short – *Euro on next short covering rally*Yen 103.30 in cash market
Avoid –
*Bond market until melt up in Europe finishes
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The Global Economy-US Accelerating, Europe Decelerating
*US August Markit PMI up a strong 55.8 to 58.0
*German Q2 GDP drops -0.2%, threatening a recession, hugely negative for the Euro
*Fed meeting at Jackson Hole picks “normalization” as the new word du jour, meaning that interest rates will rise some time in the future
*China August Markit PMI drops 51.7 to 50.3
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Weekly Jobless Claims-The trend is your Friend-14,000 to 298,000, new 7 year lows!
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Bonds-Stand Aside Until Europe Tops Out
*Global bond rally continues, German 10 year bunds hit 0.90%%
*Fed tapers quantitative easing to zero in October, but interest rates rises not until late 2015
*Driven by geopolitics and a global cash glut
*Switch out of bonds into stocks about to become major factor
*2.33% was the spike low on the 10 year Treasury, next spike to 2.25% should hold
*Huge rally in (JNK) chases the stock market
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Ten Year Treasuries (TLT) 2.37%failure here is key, proves my top for the year call
stopped out 8/$117-$120 put spread expired at cost
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The (TLT) Expiration Short Squeeze
*Slow Friday
*Option expiration day
*False rumor of Russian invasion
*I covered short 15 minutes before it hit
*No one wanted to be short (TLT) over the weekend
*Anyone who acted late on the Trade Alert to cover got hurt
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30 Year Treasury Yield ($TYX)-Yield 3.13%
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Junk Bonds (HYG) 5.79% YieldThe New Lead Contract-Wow!
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2X Short Treasuries (TBT)long 10% position-keeping for a quick turnaround
volatility is low
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Investment Grade Corporate Bonds (LQD)3.56% Yield
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Emerging Market Debt (ELD) 3.14% Yield
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Municipal Bonds (MUB)-2.92% yield,Mix of AAA, AA, and A rated bonds
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MLP’s (LINE) 9.40% Yield-
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Stocks- Best August in 14 Years*There are still plenty of bears around, so the bull market in stocks is still on track
*Reallocation from bonds and stocks into cash us underway, stocks will lead the rebound
*Use the next dip to reload on Tech first and foremost, for a yearend rally,
*(SPY) could add 10% by yearendfrom the August low, provided that geopolitics stay on a low boil
*$125/share in S&P earnings X 16 earningsmultiple = (SPX) 2,000
*Volatility back down on the floor
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The Trend is Your Friend
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Dow Average
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NASDAQ (QQQ)-Still an Uptrend
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Europe Hedged Equity (HEDJ)-Weak Euro Helping Stocks
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(VIX)-Back to the Bottom
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Russell 2000 (IWM)-Recent lag is a concern
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Russell 2000 (IWM)-Channeling Too
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Technology Sector SPDR (XLK), (ROM)As predicted, it’s all about technology!
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Industrials Sector SPDR (XLI)
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Health Care Sector SPDR (XLV), (RXL)
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Financial Select SPDR (XLF)Hit by Strong Bond Market
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Apple (AAPL) – We got the Run to New Highsrebuy on next dip, but watch out for September
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Google (GOOGL)
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China-Positive PMI’s hint at breakout
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Japan (DXJ)-Weak on poor GDP figures
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Emerging Markets (EEM)
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India (EPI) – Still Grinding Up on EEM Strength
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Foreign Currencies-Here Comes Euro QE!
*Draghi absolutely has to cut interest rates and expand QE to head off a Russian sanctions induced recession, targeting $127 in the (FXE).
*Draghi hints of accelerated quantitative easing at Sept 4 ECB meeting accelerates the Euro downturn. “All available tools comment.”
*Ditto for BOJ governor Kurodaand the yen
*Ultra low bond interest ratesalso dragging down the Euro
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Euro (FXE)-The Freefall is Ontook profits on the 9/$133-$135 put spread
2% drop in (FXE) boosted our 2014 return by 4%
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Long Dollar Index (UUP) – Euro and Yen Collapse Great for Dollar
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British Pound (FXB)Ditto for Sterling
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Japanese Yen (FXY)-A Breakdown at Last!
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Short Japanese Yen ETF (YCS)
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Australian Dollar (FXA) – Flat lining on Neglect
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Chinese Yuan (CYB)-The bull market has resumed
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Emerging Market Currencies (CEW)
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Energy-Collapse!*Technical breakdown of the charts in ominous
*Contango weighing heavily on prices
*North Sea oil glut crushing Brent prices
*Libyan exports resume, potentially adding 1.5 million barrels/day to global supply
*Gasoline prices at one year lows
*Natural Gas sees 88BcF going into storage, largest weekly injection inhistory, but prices rally
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Oil- Back to Multi Year$77.50-$112.50 Range
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United States Oil Fund (USO)
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Natural Gas (UNG)-
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Copper-Don’t Chase
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Freeport McMoRan (FCX)-
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Global Copper Miners (COPX)
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Precious Metals-Gone Dead
*Gold trying to put in bottom on charts
*Simultaneous acceleration of quantitative easing in both Japan and Europe is very gold negative
*Seasonally support turning positive as Indian wedding and Chinese New Year approaches
*CME margin cut for all metals is price positive
*Gold imports by China and India waning in recent months
*Will India president Mordi dump gold import tariffs, as promised?
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Gold-Plunging Interest Rates Crushing Prices
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Barrack Gold (ABX)-
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Market Vectors Gold Miners ETF- (GDX)
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Silver (SLV)-Show Me the Rally
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Silver Miners (SIL)-
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Agriculture
* Most ag funds are heavily short, while prices are bouncing along a bottom, setting up a coming short squeeze
*Canadian wheat crop coming in 25% smaller than last year
*Ukraine, Russia, and Poland are producing wheat crops of lesser quality than last year, boosting international prices
*Farm incomes to plunge 14% in 2014
*Stand aside
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(CORN)-New Lows!
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(SOYB)-Free Fall!
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DB Commodities Index ETF (DBC)-
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Real Estate-An Autumn Revival?*Dramatic improvement in the data in July.
*33% of sales still for cash, which is amazing, given how low interest rates are, reflects institutional participation in market
*30 year fixed mortgage hits 4.15%, a new low for the year
*July existing home sales up 2.4%,to 5.14 million, a ten month high
*July Housing starts up 15.9%, an 8 month high
*July new home sales -2.4%(signed contracts)
*
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May S&P/Case–Shiller Home Price Index+9.3% down to +8.1% YOY
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(ITB)-US Home Construction Dow Sub indexpositive data is feeding into stocks
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Trade Sheet-keep positions small, better not to trade at all
than pursue marginal trades
*Stocks- buy the dips, but keep size small, with tech leading*Bonds- sell rallies across all fixed income, end is near*Commodities-stand aside*Currencies- sell every Euro rally forever, and the yen too*Precious Metals –stand aside, buy the next bottom*Volatility-stand aside, could be a long summer*The Ags –buy new lows*Real estate- stand aside
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Next Strategy Webinar 12:00 Wednesday, September 10, 2014, Live from San Francisco,
California
Good Luck and Good Trading!