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The Mad Hedge Fund Trader“Commodities Back from the Dead!”
With John Thomasfrom San Francisco, CA
February 4, 2015www.madhedgefundtrader.com
MHFT Global Strategy LuncheonsBuy tickets at www.madhedgefundtrader.com
Honolulu, HawaiiApril 3, 2015
Portfolio ReviewRunning a Small Hedged Risk Averse Book
Risk OnWorld is Getting Better
(FXY) 2/$84-$87 put spread 10.00%
Risk OffWorld is Getting Worse
(T) 2/$35-$37 put spread -10.00%
total net position 0.00%
Trade Alert PerformanceUp on the Year!
*January MTD +0.53% Final*February MTD +0.86% MTD
*Trailing 1 year return +28.7%
2014 FINAL +30.31%, versus 7% for the Dow
*First 216 weeks of Trading +154.2%!
Paid Subscriber Trailing 12 Month Return +28.7%
50 Months Since Inception Averaged annualized +37.0%
Strategy Outlook-Hiding on the Sidelines
*Collapsing oil and bond yield stall US stock markets, technical damage is worsening
*Plummeting US rig count triggers an oil short covering rally, but the bottom is not in
*Bonds continue bull run, targeting 1.37% for the 10 year
*Euro and yen are exhausted on the downside, taking a break
*Multiple crisis bring gold back to life
*Generous snow, and mild temperaturesbring new down leg for ags
The Jim Parker ViewThe Mad Day Trader-On sale for a $1,500 upgrade
Technical Set Up of the week-Waiting to see if stock rally holds
Buy
Biotechs, Industrials, Consumer Staples (PG)watch DAX for all risk guidancemight be another $2 in oil
Sell Short
Avoid
Gold is done for this cycleDollar, is topping outBonds until more convincing breakdown
The Global Economy-So it is the Economy!
*US Q4 GDP slows from 5% to 2.6%, still above trend.
*There is no recession on the horizon, but you have to let the fears work their way through the market first
*Euro Consumer prices down -0.6% YOY, deflation rules
*January Chicago PMI 58.8 to 59.4 on cheap gas
*Expect Greece to live in the headlines, but there will be no real consequences
*Expect to hear a lot about defaults in high cost oil producers, like Venezuela and Canada, presenting headline risk
Weekly Jobless Claims – New Lows!-43,000 to 265,000
Bonds-Reaching a CrescendoGunning for 1.36%
*All Fixed Income are Putting in Blow Off Tops
*German ten year bunds now lower than JGB yields
*US 10 Year Treasury poised to test record low 1.36% yield set in 2012, (TBT) aiming at $37 handle
*Fed not to raise interest rates until 2016, reinforced by oil and bond yield crashes
*Deflation is here to stay
*A short term top may be in
Ten Year Treasuries (TLT) 1.62%Is This the Top?
Ten Year Treasuries ($TNX) 1.62%
30 Year Treasury Yield ($TYX)-Yield 2.22%Ditto Here
Junk Bonds (HYG) 5.09% YieldThe New Lead Contract
2X Short Treasuries (TBT) stopped out of a 10% long position-Potential move to $37
Investment Grade Corporate Bonds (LQD)3.05% Yield
Emerging Market Debt (ELD) 5.20% Yield
Municipal Bonds (MUB)-2.62% yield, Mix of AAA, AA, and A rated bonds
Stocks-Turning the Corner
*This is another 5%-10% correction, not a new bear market, if bonds make a run to 1.36%, it will be 10% more than 5%
*Hard bounce in commodities and their stocks add 500 points to Dow in 2 days
*The entire commodity space moved in unison, including ags and solar
*This is creating a great entry point for 2015 for the best non oil sectors, like technology, health care, and solar
*Several technical services said the bottom was in on Tuesday,after the 500 point rally, ad that we are running to new highs
*Volatility to stay high
S&P 500-Consolidation Within Long Term Uptrend
took profits on the 2/$189/$194 call spread
A Perfect Head and Shoulders TopS&P 500 Equal Weight (RSP)
Dow Average-Targeting 16,400?
NASDAQ (QQQ)-
Equal Weight Technology (RYT)-A Head and Should Top that is breaking Down
Europe Hedged Equity (HEDJ)-Demolished by Russia
(VIX)-Setting up a Triple top
Russell 2000 (IWM)-Consolidating after BreakoutTook profits on the 2/$107-$112 vertical bull call spread
Technology Sector SPDR (XLK), (ROM)
Industrials Sector SPDR (XLI)
Health Care Sector SPDR (XLV), (RXL)another head and shoulders top
Equal Weight Consumer Discretionary (RCD)Yet, another head and shoulders top in an economically sensitive sector
Financial Select SPDR (XLF)-Complete Breakdown
Consumer Discretionary SPDR (XLY)
Apple (AAPL) –
Small Cap Financials (PSCF)-A head and shoulders top in an interest rate sensitive sector
Alcoa (AA)- took profits on the 2/$17-$18 vertical bear put spread
Gilead Sciences (GILD)- took profits on the 2/$85-$90 vertical bull call spread
guidance disappointment delivers 10% hit, and another entry point
AT&T (T)-long 2/$35-$37 vertical bear put spread
China (FXI)-
Japan (DXJ)-Hedged Japan Equity
Emerging Markets (EFA)-Biggest Beneficiaries of Cheap Oil-Go figure
India (EPI) –Biggest Beneficiary of Cheap Oil
Russia (RSX)
Foreign Currencies-Digesting Moves
*European QE arrives five years late, crashes Euro, as predicted here
*BOJ to buy Y80 trillion in bonds this year, the MOF to issue only Y40 trillion, the rest to be spent on stocks?
*Reserve Bank of Australia cuts rates to 25 BP to 2.25%, record low
*Currency area has gone to sleep to digest recent moves
Euro ($XEU), (FXE), (EUO)-Taking a RestTargeting $105, and then $85
Long Dollar Index (UUP)New Four Year High
British Pound (FXB)-
Japanese Yen (FXY)- long 2/$84-$87 vertical bear put spread
Short Japanese Yen ETF (YCS)
Australian Dollar (FXA) –New Four Year Low
Chinese Yuan- (CYB)
Emerging Market Currencies (CEW)Dragged down by commodities collapse
Energy-More Pain to Come
*New US fracking supplies still coming on stream, will add 500,000 b/d over next six months, Cushing rapidly approaching capacity at 1.5 million barrels
*US rig count plunge from 1,609 to 1,223 in 3 months triggers oil short covering rally
*Crude prices may keep falling until spring, when demand seasonally fades
*With 3%-3.5% global growth in 2015, 1.1 million b/d in new demand arises
*This year will be the bottom, but where and when is anybody’s guess,15% of US production now losing money
*Pros scaling into quality now,will continue for rest of year
*Chevron cuts capex by 13% to $35 billion
*We will be back to $70/barrelin 2 years
Oil-Trying to Find a Bottom
United States Oil Fund (USO)
Energy Select Sector SPDR (XLE)
MLP’s (LINE) 13% Yield-Capitulation Sell Offstopped out of a long a 10% Position, out a day early
Exxon (XOM)
Occidental Petroleum (OXY)stopped out of the 2/$70-$75 vertical bull call spread
Conoco Phillips (COP)
Natural Gas (UNG)-
Copper-
Freeport McMoRan (FCX)-New Lows
Precious Metals-A Bear Market Rally
*Vix spike creates a tradable rally
*But it may be over for now
*Charts starting to put in a convincing, multi month bottom, setting up a trading rally
*Gold is trading off oil like everything else, weak oil = strong gold, so expect more trading rallies to come
*Biggest moves in the Miners (GDX) and Barrack Gold (ABX)
Gold-An Upside breakout with a throwback
Barrick Gold (ABX)-
Market Vectors Gold Miners ETF- (GDX)New Friends
Silver (SLV)-
Silver Miners (SIL)
Agriculture
•*Oil rallies feeds into ags as well
*Snow cover with not too cold temperatures helping yields, hurting prices
*US grain now the world’s most expensive, thanks to strong dollar
*2015 will be another record crop without extreme weather
*Pass for now
•
(CORN) –
(SOYB)-
Ag Commodities ETF (DBA)
Real Estate-Gone to Sleep
*Big hits in housing stocks hint of slow market this year
*Waiting for new wage growth to boost demand, but it could be a long wait
*To see the market this quiet with interest rates this low is amazing
*Waiting for rising rents to drag up home prices
October S&P/Case–Shiller Home Price Index+14% YOY down to +4.5%, Still Slowing
US Home Construction Index (ITB)
Trade SheetSo What Do We Do About All This?
*Stocks- buy the dips, with technology and health care leading, we’re running to new highs*Bonds- stand aside, its gone crazy*Commodities-stand aside until global economy recovers*Currencies- sell every Euro rally forever, and the yen too*Precious Metals –don’t chase up here, wait for dip*Volatility-is peaking, get ready to sell*The Ags –stand aside until next season*Real estate- stand aside, the dead cat bounce is done
To buy strategy luncheon tickets Please go to:
www.madhedgefundtrader.com
Next Strategy Webinar 12:00 Wednesday, February 18, 2015 Live from Incline Village, NV
Good Luck and Good Trading!