The Mad Hedge Fund Trader “The Black Swans Are Back” With John Thomas from San Francisco, CA...

The Mad Hedge Fund Trader“The Black Swans Are Back”

With John Thomasfrom San Francisco, CA

November 5, 2014www.madhedgefundtrader.com

Current capital at risk

World is Getting BetterRisk On

(TBT) short Treasury ETF 10.00%(BAC) 11/$15-$16 call spread 10.00%(SPY) 11/$179-$183 call spread 10.00%(BAC) 12/$15-$16 call spread 10.00%

World is Getting WorseRisk Off

total net position 40.00%

Portfolio ReviewRunning a Small Low Risk Book at the Top of a Massive Move

Adding to longs on small Dips

Trade Alert PerformanceStill Another New All Time High!

*January Final +3.05%, *July Final +4.18% *February Final +6.41%, *August Final 5.86%*March Final -2.52% *September Final 5.01%*April Final +3.32% *October Final 6.69%*May Final +4.61% * November MTD 0.36%*June Final +4.24%

2014 YTD +41.2%, versus 5% for the Dow,October was the best month of the year! survived the crash!

*First 204 weeks of Trading +163.7%!

Paid Subscriber Trailing 12 Month Return +64%

47 Months Since Inception Averaged annualized +42%

Strategy Outlook-Risk Back On

*Surprise Japanese QE is a game changer, signals global QE

*Stocks poised to hit new all time highs into yearend

*Commodities, oil, gold, silver, base metals, and foreign currencies break to new lows

*The bond top is in, reallocation out of bonds into stocks for the next 10 years

*Midterm elections on Tuesday, look forbrief market correction if Republicans fail totake the Senate, a win is already in the price

*The grains finally showing signs of a bottomdue to rail car crisis

*All other issues are just noise (Ebola, ISIL,Ukraine)

Midterm Elections-Gridlock Wins!

*Republican win guarantees gridlock for two more years, and the market loves gridlock

*There is no 2/3 majority to overrides a presidential veto, so Obama signature is required for anything congress passes

*Republicans will take yesterday’s win as a vindication of their policies and run ultra conservative candidates in 2016

*The calendar strongly favors the Democrats in 2016

*This leads to the Democrats taking the House, Senate, and the presidency in 2016

*The good news is that Hillary Clinton is market positive

The Market Loves Gridlock!Up 70% in 4 Years

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

Technical Set Up of the week-Wait for Thursday ECB Meeting

Buy

*Risk assets just bottomed again

*ECB meets Thursday morning, expect a lot of violence, stay flat ahead

Sell Short

*(FXE) on every rally(FXY), (YCS) yen could go to Y142

Avoid * John Thomas when he’s wrong

The Global Economy- Goldilocks is Back!

*US Q3 comes in at a very strong GDP 3.5%, off the back of strong defense spending, deflation is a major factor, Q4 to be better

*US company earnings have been telling is this all along, with blowout upside earnings

*ADP report hints at strong October nonfarm payroll on Friday

*Japan launches a surprise QE, sends asset prices everywhere rocketing,increase monetary expansion from Y60 trillion to Y80 trillion

*Japan Government Pension Investment Corp. plans to buy $200 billion in mostly US stocks

*Gasoline breaks $3/gallon nationallyis another stimulus/tax cut

Weekly Jobless Claims - The trend is your Friend-3,000 to 287,000, hugging 14 year lows!

Industrial Production is Rising

While Consumer Prices Are Falling

Bonds-The Top is In

*The ten year Treasury ran from 2.30% to 1.86% to 2.22% in just two days!

*Quantitative easing is over in the US, but is reborn in Japan and the US

*The top in bonds is in for the US

*Look for the ten year Treasury yield to break to a new 2.30%-2.60% range and then stay there for a long time

*Take profits on (TBT) when the ten year yield hits 2.60%

*Deflation is a growing factor in US GDP,dragged down by energy costs

*Fed not to raise interest rates until 2016.

Ten Year Treasuries (TLT) 2.20%Classic Blow Off Top

30 Year Treasury Yield ($TYX)-Yield 2.84%

Junk Bonds (HYG) 5.81% YieldThe New Lead Contract-A Classic High Volume Spike Bottom

2X Short Treasuries (TBT)Took Profits on half the 20% position

Investment Grade Corporate Bonds (LQD)3.54% Yield

Emerging Market Debt (ELD) 3.56% Yield

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

MLP’s (LINE) 11.60% Yield-Smashed by Oil

Stocks-Party On

*New All time highs, with many short sellers caught out

*Japan QE, and massive reallocation out of bonds into stocks were the decisive factors

*US corporate earnings upside blowout across the board

*Weak bond market give the lead to financials, with (BAC) leading

*Yearend rally coming, is now on

*(SPY) could add 15% by yearend from the October low, regardless of geopolitics

*Volatility peaked at 33%, a stunning returnto 14%

S&P 500Long 11/$179-$183 vertical bull call spread

stopped out of short $197-$202 call spread

Not Expensive

Dow Average-The Megaphone is Loud

NASDAQ (QQQ)-

Europe Hedged Equity (HEDJ)-

(VIX)-Yikes! The Top is In

Russell 2000 (IWM)-Breaking the Downtrend

Technology Sector SPDR (XLK), (ROM)

Industrials Sector SPDR (XLI)

Health Care Sector SPDR (XLV), (RXL)

Financial Select SPDR (XLF)

Consumer Discretionary SPDR (XLY)

Apple (AAPL) –

Google (GOOGL)-It Was a Great Entry Point for the Long Term

Bank of America (BAC)-long the 11/$15-$16 vertical bull call spread-run to expiration

long the 12/$15-$16 vertical bull call spread

China (FXI)-

Japan (DXJ)-Gone Ballisticon Shock and Awe QE

Yen versus Nikkei

25 Year Nikkei

Emerging Markets (EFA)-

India (EPI) –

Foreign Currencies-King Dollar Rules*Billions of dollars are pouring into the US seeking higher investment returns on all asset classes

*Dollar outflows shrinking thanks to energy price collapse

*BOJ moves prompts biggest gap down in the yen in 14 years

*25 banks fail ECB stress test, 12 banks need $12 billion in capital immediately

*Japanese and European QE’s looking to decimate their own currencies

*Germany caving on harsh monetary policies to save Europe and its huge export markets*Commodity collapse killing the Aussie

Euro (FXE)-The Freefall is Ontook profits on the 11/$127-$129 vertical bear put spreadtook profits on the 11/$128-$130 vertical bear put spread

Long Dollar Index (UUP)

British Pound (FXB)-

Japanese Yen (FXY)-

Short Japanese Yen ETF (YCS)

Australian Dollar (FXA) –Missing the Volatility

Chinese Yuan (CYB)-

Emerging Market Currencies (CEW)

Energy-Looking for a Bottom

*Every trader looking for a bottom is too early

*US oil production rocketing from 6 to 10 million b/d

*Gasoline break $3/gallon barrier nationally

*Oil collapse tears down natural gas as well

*US oil inventories at record highs and building

*US energy stocks overpriced relative to oil prices, look for another 10%-20% fall

Oil

Oil 3 Years

United States Oil Fund (USO)

Oil Services ETF (OIH)Feeling the Heat

Natural Gas (UNG)-

Copper-

Freeport McMoRan (FCX)

Precious Metals-Breakdown!

*Gold has ignored every positive seasonal influence

*Global QE is terrible news for all precious metals

*Flight to safety bid has gone missing in action, everyone is buying Treasury bonds instead

*Hard assets becoming worthless, paper is the new gold

*Look for new downside targets across the asset class

Gold-Targeting $1,000

Barrick Gold (ABX)

Market Vectors Gold Miners ETF- (GDX)No Friends

Silver (SLV)

Silver Miners (SIL)

Agriculture

•*Weather still perfect, prices falling, Corn targeting 15 billion bushels, the largest in history

*Far month futures now rallying hard, creating a backwardation in the futures market, is price positive

•*Exacerbated by rail car shortage created by oil demand

*The harvest is almost in,2014 was a disaster

*Focus on 2015

•

(CORN) –

(SOYB)-Not Much of a Rally

Ag Commodities ETF (DBA)

Real Estate-No Autumn Revival*August S&P Case Shiller +5.1% YOY, negative YOY comparisons coming

*New Home sales have started to fall in September, down 4% YOY, dragged down by buyer focus on the top end of the market.

*They are easing on existing homes as well, as more home owners finally get above water on pre crash mortgages

*September pending homes sales unchanged, inventory up 6% YOY, financing is the main drag

*Is online competition finally entering the real estate market?

*Homeownership rate falls to 20 year lows at 64.4%

May S&P/Case–Shiller Home Price Index+14% YOY down to +5.1%

US Home Construction Index (ITB)

Trade SheetSo What Do We Do About All This?

*Stocks- buy the dips, with Financials, technology and health care leading, we’re running to new highs*Bonds- sell rallies across all fixed income, the end is here*Commodities-stand aside until global economy recovers*Currencies- sell every Euro rally forever, and the yen too*Precious Metals –stand aside until the $1,000 bottom is in*Volatility-stand aside, the peak is in*The Ags –stand aside until next season*Real estate- stand aside, the dead cat bounce is done

Next Strategy Webinar 12:00 Wednesday, November 19, 2014 Live from San Francisco, CA

Good Luck and Good Trading!