Upload
clara-gilbert
View
216
Download
1
Tags:
Embed Size (px)
Citation preview
The Mad Hedge Fund Trader“Waiting for Mario”
With John Thomasfrom San Francisco, CA
January 21, 2015www.madhedgefundtrader.com
MHFT Global Strategy LuncheonsBuy tickets at www.madhedgefundtrader.com
Honolulu, HawaiiApril 3, 2015
Portfolio ReviewRunning a Big New Year Book Mostly Hedged
current capital at risk
World is Getting BetterRisk On
(TBT) short Treasury ETF 10.00%(LINN) units 10.00%(GILD) 1/$85-$90 call spread 10.00%(IWM) 2/$107-$112 call spread 10.00%(BAC) 2/$16-$17 call spread 10.00%(OXY) 2/$70-$75 call spread 10.00%
World is Getting WorseRisk Off
(AA) 2/$17-$18 put spread -10.00%(FXE) 2/$122-$124 put spread -10.00%(FXE) 2/$120-$122 put spread -10.00%
total net position 30.00%
Trade Alert PerformanceFour Year Anniversary!
*January MTD -2.50%
2014 FINAL +30.31%, versus 7% for the Dow
*First 214 weeks of Trading +152.8%!
Paid Subscriber Trailing 12 Month Return +22.2%
49 Months Since Inception Averaged annualized +36.8%
Strategy Outlook-Deflation is the New Driver
*Super weak oil and strong cancels the Christmas and New Year rallies, prompts global “RISK OFF” and profit taking, but the end is near
*Oil fell so fast that it is creating global systemic risks and uncertainty watch out for the unintended consequences (Texas housing, North Dakota jobs)
*Swiss franc shock further destabilizes the global trading system
*ECB announces QE of E$50 billion/month ofbond purchases for one year
*Multiple crisis bring gold back to life
*Grains in winter hibernation, a neutralUSDA January report
The Jim Parker ViewThe Mad Day Trader-On sale for a $1,500 upgrade
Technical Set Up of the week-Stuck in range until ECB on Thursday
Buy
Biotechs on dips (IBB)grains trying to bottom (JJG)gold on dips over $1,300 (GLD)
Sell Short
(FXE) too risky, $116.70 in cash triggers big rally(USO) if breaks oil $45.80
Avoid
Bonds (TLT) , could go higher
The Global Economy-Is America Slowing?
*Spate of weak US data prompt recession fears. There is no recession on the horizon, but you have to let the fears work their way through the market first
*Data is mixed, December PPI is a deflationary -0.3%, +1.1% YOY, December Philly Fed 24.5 to 6.3, December industrial production -0.1%, but January consumer sentiment jumps from 94.4 to 98.8, a ten year high, but market is only looking at negative data
*US dollar is rocketing, Euro is crashing, prompting concerns about foreign earnings
*We have to survive the collapse of the oil industry first, now 10% of the stock market
*Greek elections setting up another “RISK OFF” day
*Overnight 20% increase in Swiss franc interest andprincipal a new burden in Europe
Weekly Jobless Claims - The trend is your Friend+19,000 to 316,000
Bonds-Reaching a CrescendoGunning for 1.36%
*All Fixed Income are Putting in Blow Off Tops
*German ten year bunds at 0.45% are dragging down yields globally, JGB’s at 0.19%, and Swiss hit -0.4%, negative for the first time in history anywhere
*US 10 Year Treasury poised to test record low 1.36% yield set in 2012, (TBT) aiming at $37 handle
*Fed not to raise interest rates until 2016, reinforced by oil and bond yield crashes
*Deflation is here to stay
*Momentum may favor bonds for a few more months
Ten Year Treasuries (TLT) 2.00%The Trend is Your Enemy
Ten Year Treasuries ($TNX) 1.70%
30 Year Treasury Yield ($TYX)-Yield 2.40%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-A Buyable Dip is Close
*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%
*Outbreak of global uncertainty has stock buyers sitting on their hands
*This is creating a great entry point for 2015 for the best non oil sectors, like technology, health care, and solar
*Economic data is modestly weakening, giving fright of a potential slowdown
*58% of companies beating top line estimates (revenues)88% beating bottom line (profits)
*Bond rally has demolished financials
*China bans new margin lending for 3 monthsto cool market, market crashes 8%
S&P 500-Targeting 1,900?
Dow Average-Targeting 16,800?
NASDAQ (QQQ)-
Europe Hedged Equity (HEDJ)-Demolished by Russia
(VIX)-Setting up a Triple top
Russell 2000 (IWM)-Poised for a Breakoutlong 2/$107-$112 vertical bull call spread
Technology Sector SPDR (XLK), (ROM)
Industrials Sector SPDR (XLI)
Health Care Sector SPDR (XLV), (RXL)
Financial Select SPDR (XLF)-Demolished by bonds
Consumer Discretionary SPDR (XLY)
Apple (AAPL) –
Bank of America (BAC)-long 2/$14-$15 vertical bull call spread
two roll downs in one week
Alcoa (AA)- 12/$17-$18 vertical bear put spread
Gilead Sciences (GILD)- took profits on the 2/$85-$90 vertical bull call spread
AT&T (T)-long 2/$35-$37 vertical bear put spread
China (FXI)-
Japan (DXJ)-Hedged Japan Equity
Emerging Markets (EFA)-Biggest Beneficiaries of Cheap Oil-Go figure
India (EPI) –Biggest Beneficiary of Cheap Oil
Russia (RSX)
Foreign Currencies-Diverging Sharply
*Swiss National Bank ends Euro cap, prompts immediate 20% revaluation of the Swiss Franc against the Euro, sparks new round of Euro selling
*Euro (FXE) hits new 12 year low against greenback
*European court rules that QE is legal, paves the way for a new Euro leg down
*Oil industry collapse is weighing on Loonie
*Aussie hits new four year low on collapsing commodities and weaker growth, iron ore meltdown
*Emerging currencies in free fall
Currency of the Week
Euro ($XEU), (FXE), (EUO)Targeting $105, and then $85
took profits on long (FXE) 2/$122-124 vertical bear put spreadtook profits on long (FXE) 2/$120-122 vertical bear put spread
Long Dollar Index (UUP)New Four Year High
British Pound (FXB)-
Japanese Yen (FXY)- Global ‘RISK OFF” Means cover yen shorts
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-The New Subprime Crisis
*Bottom is here, or close, I don’t see the $30 handle
*Crude and product inventories through the roof, up by an amazing 11.50 million barrels last week
*A big cleanout of the industry is underway, with weaker players going under or taken over
*Oil carry trade is back on, 20% annual returns to buy spot, sell one year forward, and put into storage, a boom in old tankers
*Don’t expect a rapid bounce back,winding down 15 years of leverage accumulation
From 6.5 to 2.5 Million Barrels/day in 6 Years
Crashing Rig CountsFrom 1,650 to 1,350 rigs in 3 Months
Oil-Trying to Find a Bottom
United States Oil Fund (USO)
Energy Select Sector SPDR (XLE)
MLP’s (LINE) 13% Yield-Capitulation Sell Offlong a 10% Position, yielding 13% after a 47% dividend cut
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
*Flight to safety finally finds gold
*If you can’t hide in the Swiss franc, what else is left? Unreliability of SNB has made SF a higher risk currency
*Charts starting to put in a convincing, multi month bottom, setting up a trading rally
*Check out the new long gold/short yen ETF (GYEN) and the long gold/short Euro ETF (GEUO)
*Gold is pulling up silver as well
*Best potential is in the Miners (GDX) and Barrack Gold (ABX)
Gold-A More Convincing Bottom
Barrick Gold (ABX)-
Market Vectors Gold Miners ETF- (GDX)No Friends
Silver (SLV)-
Silver Miners (SIL)
Agriculture
•*Oil collapse is having a major positive impact on the profitability of all Ag sectors, fuel, fertilizer, distribution
*The flipside is that ethanol prices are collapsing on lower gasoline prices, inventories up from 17.5 to 20.20 million barrels
*Extreme cold weather boosting winter kill rates in the Midwest
*US grain now the world’s most expensive, thanks to strong dollar
*Volatility has gone out of the market, January USDA report was neutral, look elsewhere for better trades
*Focus on 2015, but it will be another record crop withoutextreme weather
•
(CORN) –
(SOYB)-
Ag Commodities ETF (DBA)
Real Estate-Looking Soft, But Better Next Year
*Ultra low 3.89% 30 year interest rates cause mortgage applications to pop 49% last, refi’s soar by 66%, and jumbo refi’s to rocket 400%
*Price cut on mortgage insurance by Obama is another boost
*Homebuilders getting hit with sudden collapse of entry level Texas market
*October S&P Case Shiller shows 4.5% YOY price gains in 20 cities
*December wage hike could finally give real estate the spur it needs.
October S&P/Case–Shiller Home Price Index+14% YOY down to +4.5%, Still Slowing
KB Homes (KBH)27% fall in 2 days on weak Texas sales
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 –there may be a short term trade here*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 4, 2015 Live from San Francisco, CA
Good Luck and Good Trading!