The Mad Hedge Fund Trader “’The Alibaba Correction”

The Mad Hedge Fund Trader“’The Alibaba Correction”

With John Thomasfrom San Francisco, CA

September 24, 2014www.madhedgefundtrader.com

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% *September +0.94%*April Final +3.32%*May Final +4.61%*June Final +4.24%

2014 YTD +30.45%, versus 3% for the Dow,an outperformance of 26%

*First 185 weeks of Trading +152.95%!

Portfolio Review- The Correction is Here!

current capital at risk

Risk On

none 0.00%

Risk Off

(FXE) 10/$128-$130 put spread -10.00%(IWM) 11/$117-$120 put spread -10.00%

total net position -20.00%

Expiration P&L+34.26%

Trailing 12 Month Return +51.8%%

44 Months Since Inception-50 BP Short of All Time High

+152.95%, Averaged annualized +39.8%

Strategy Outlook-Risk is Still On

*Global bonds certainly peaked last week on ECB move

*Alibaba brought “RISK OFF” move across asset classes

*Now Alibaba is looming over global capital markets, triggering $20 billion in reallocations

*Initial ECB QE fails, warning of more to come

*Strong US dollar demolishing commoditiesacross the board, including gold, silver, oil, metals, and the ags

The Jim Parker ViewThe Mad Day Trader-On sale for a $1,500 upgrade

Technical Set Up of the week

Buy *The dollar in any form

Sell Short – *all foreign currencies*Oil above $92.60*Treasury bonds higher up

Avoid –*Emerging markets blowing up*Precious metals, too low to short

The Global Economy-QE is Breaking Out All Over

*Fed is having to over stimulate the US to offset new weakness in Europe and Japan

*QE cut by $15 billion a month, to end next month

*August CPI at -0.20% means deflation has arrived!

*US Q2 GDP growth at 4.2% is hotter than hot, may get revised up more!

*August University of Michigan Consumer Sentiment leaps from 82.5 to 84.6

*China launches its own QE, adds $81 billion in liquidity to 5 largest banks, cuts short term interest rates

Weekly Jobless Claims-The trend is your Friend-36,000 to 280,000, Touching new 14 year lows!

Bonds-Welcome to the new range

*Highs for the year were certainly put in for for Europe and the US last month, welcome to the new 2.40%-2.60% range for ten year Treasuries

*QE cut by $15 billion a month, to end next month

*Profit taking hits (TBT)

*Fed tapers quantitative easing to zero in next month, but interest rates rises not until late 2015early 2016

*New trade of the year is to Switch out of bonds

*Huge rally in (JNK) vaporizes

Ten Year Treasuries (TLT) 2.54%head and shoulders setting up?

30 Year Treasury Yield ($TYX)-Yield 3.25%Inverse Head and Shoulders setting Up?

Junk Bonds (HYG) 5.70% Yield

2X Short Treasuries (TBT)Got Out at Cost to Buy Back Lower

Investment Grade Corporate Bonds (LQD)3.49% Yield

Emerging Market Debt (ELD) 3.30% Yield

Municipal Bonds (MUB)-2.88% yield,Mix of AAA, AA, and A rated bonds

MLP’s (LINE) 9.40% Yield-Holding Up Against Falling Oil

Stocks-Alibaba Sucks the Oxygen out of the Market

*10 IPO’s scheduled for this week

*Alibaba doesn’t qualify for any index funds, Cayman Islands domicile

*During last two tightening cycles S&P 500 earnings rose 71%, takes us to $200/share, (SPX) to 3,420

*Corporate buy backs major driver his yeardown -27% QOQ

*77% of corporate free cash flow beingused to buy back stock in 2014

*Rising interest rates mean the next movewill be in the banks

S&P 500

Dow Average

NASDAQ (QQQ)-

Europe Hedged Equity (HEDJ)-Weak Euro Helping Stocks

(VIX)-Probing top end of range

Russell 2000 (IWM)-Targeting $108Long the 11/$117-$120 put spread

Technology Sector SPDR (XLK), (ROM)Watch Out for an Apple Drag!

Industrials Sector SPDR (XLI)

Health Care Sector SPDR (XLV), (RXL)

Financial Select SPDR (XLF)

Goldman Sachs (GS) Upside Breakout

Apple (AAPL) – We got the Run to New Highs10 million iPhone Sales in the First Weekend! $240 in parts

Google (GOOGL)

Stock of the Week-Alibaba (BABA)

*Don’t buy the Euphoria-Pros expect stock to fall, is why no Softbank rally, up 38% from IPO price, no money left for traders

*30 X PE multiple high for for a Chinese stock

*No dividend increases volatility

*50% of allocation to only 25 accounts, instead of thousands, create artificial demand, none for hedge funds

*Green Shoe added 15% to supply

*Can’t enter ETF’s for months or years

*Yahoo to sell to reinvigorate core business

GT Advanced Technologies (GTAT)No Sapphire for iPhone 6

Solar ETF (TAN)

China-The Upside breakout is Here!

Japan (DXJ)-Collapsing Yen Drives Upside breakout

Emerging Markets (EEM)-Rising rates a killer

India (EPI) –

Foreign Currencies-King Dollar Rules!

*First tranche of Euro QE a complete failure, only 82 billion of 300 billion in offered loans taking down, so more aggressive QE to come, Draghi promising 2% inflation, up from zero-Sell Euro!

*Medium term target of $127 hit, next comes $125, $120, and eventually $1.00

*Scotland votes against independence 55-45, rallying the pound

*Yen in freefall, but over due for a bounce,sell next rally!

*Dollar hits new multiyear high on risingrates, flight to safety, and strongereconomic growth

Euro (FXE)-The Freefall is Onlong the 10/%128-$130 put spread

Long Dollar Index (UUP) – Euro and Yen Collapse Great for Dollar

British Pound (FXB)The UK wins, 55-45!

Japanese Yen (FXY)-Catching its Breath!

Short Japanese Yen ETF (YCS)

Australian Dollar (FXA) – Commodity Collapse Finally Bites!

Chinese Yuan (CYB)-Only the Yuan is holding up against Uncle Buck

Emerging Market Currencies (CEW)

Energy-Collapse!

*Collapsing prices are forcing Russia to sell more oil to support weakening economy, accelerating the downturn

*Saudi Arabia fighting back to preserve market share, boosting production

*50 million barrel now at sea slow steaming awaiting storage

*Libyan exports resume, potentially adding 1.5 million barrels/day to global supply

Oil- Back to Multi Year$77.50-$112.50 Range

United States Oil Fund (USO)

Natural Gas Futures

Copper-It’s All About the Dollar

Freeport McMoRan (FCX)-

Precious Metals-The Anti Dollar Trade

*Simultaneous acceleration of quantitative easing in both Japan and Europe is very gold negative, Euro interest rate cut another nail in the gold coffin

*Although the geopolitical picture is scary, there is no spill over buying of gold

*Collapsing oil, ags and other commodities together dragging down gold

Gold-Yuk!

Barrack Gold (ABX)-

Market Vectors Gold Miners ETF- (GDX)

Silver (SLV)-Show Me the Rally

Silver Miners (SIL)-

Agriculture

*Perfect weather continues

*Too many farmers still waiting for a rally to sell into

*China buys 4.8 million tonnes of soybeans, now accounts for 60% of US exports

*Reserve stocks are now 24.7% of world annual consumption, an 11 year high

*Ukraine and Russia increasing acreageto boost exports and offset financial crisis

*Stand aside

(CORN)-New Lows! Blame This on the Dollar Too!

(SOYB)-Free Fall!

DB Commodities Index ETF (DBC)-Double Yuk!

Real Estate-An Autumn Revival?* Homeownership of under 30 Millennials has fallen from 44% to 36% over the past decade

*High prices pushing Institutional investors out of the market, falling from 30% to 20% to 12% of the market

*All household formation of past year has been among renters

* Homebuilder sentiment at 9 year low

*August housing starts -14.4%, permits -5.6%, existing home sales -1.8%, -5.3% YOY,new housing sales +18%, best since 1992

*Entry level buyer still a low 29%

*

May S&P/Case–Shiller Home Price Index+9.3% down to +8.1% YOY

(ITB)-US Home Construction Dow Sub indexpositive data is feeding into stocks

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, the top is in*Commodities-stand aside*Currencies- sell every Euro rally forever, and the yen too*Precious Metals –stand aside, buy the next bottom*Volatility-stand aside, range is too small*The Ags –wait for the final flush*Real estate- stand aside

To buy strategy luncheon tickets Please Go towww.madhedgefundtrader.com

Next Strategy Webinar 12:00 Wednesday, October 8, 2014, Live from San Francisco, California

Good Luck and Good Trading!