Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Stock Market SEASONAL TREND and ELECTION CYCLE - 24th Nov 20
Amazon Black Friday - Karcher K7 FC Pressure Washer Assembly and 1st Use - Is it Any Good? - 24th Nov 20
I Dislike Shallow People And Shallow Market Pullbacks - 24th Nov 20
Small Traders vs. Large Traders vs. Commercials: Who Is Right Most Often? - 24th Nov 20
10 Reasons You Should Trade With a Regulated Broker In UK - 24th Nov 20
Stock Market Elliott Wave Analysis - 23rd Nov 20
Evolution of the Fed - 23rd Nov 20
Gold and Silver Now and Then - A Comparison - 23rd Nov 20
Nasdaq NQ Has Stalled Above a 1.382 Fibonacci Expansion Range Three Times - 23rd Nov 20
Learn How To Trade Forex Successfully - 23rd Nov 20
Market 2020 vs 2016 and 2012 - 22nd Nov 20
Gold & Silver - Adapting Dynamic Learning Shows Possible Upside Price Rally - 22nd Nov 20
Stock Market Short-term Correction - 22nd Nov 20
Stock Market SPY/SPX Island Setups Warn Of A Potential Reversal In This Uptrend - 21st Nov 20
Why Budgies Make Great Pets for Kids - 21st Nov 20
How To Find The Best Dry Dog Food For Your Furry Best Friend?  - 21st Nov 20
The Key to a Successful LGBT Relationship is Matching by Preferences - 21st Nov 20
Stock Market Dow Long-term Trend Analysis - 20th Nov 20
Margin: How Stock Market Investors Are "Reaching for the Stars" - 20th Nov 20
World’s Largest Free-Trade Pact Inspiration for Global Economic Recovery - 20th Nov 20
Dating Sites Break all the Stereotypes About Distance - 20th Nov 20
THE STOCK MARKET BIG PICTURE - Video - 19th Nov 20
Reasons why Bitcoin is Treading at it's Highest Level Since 2017 and a Warning - 19th Nov 20
Media Celebrates after Trump’s Pro-Gold Fed Nominee Gets Blocked - 19th Nov 20
DJIA Short-term Stock Market Technical Trend Analysis - 19th Nov 20
Demoncracy Ushers in the Flu World Order How to Survive and Profit From What Is Coming - 19th Nov 20
US Bond Market: "When Investors Should Worry" - 18th Nov 20
Gold Remains the Best Pandemic Insurance - 18th Nov 20
GPU Fan Not Spinning FIX - How to Easily Extend the Life of Your Gaming PC System - 18th Nov 20
Dow Jones E-Mini Futures Tag 30k Twice – Setting Up Stock Market Double Top - 18th Nov 20
Edge Computing Is Leading the Next Great Tech Revolution - 18th Nov 20
This Chart Signals When Gold Stocks Will Explode - 17th Nov 20
Gold Price Momentous ally From 2000 Compared To SPY Stock Market and Nasdaq - 17th Nov 20
Creating Marketing Campaigns Using the Freedom of Information Act - 17th Nov 20
ILLEGITIMATE PRESIDENT - 17th Nov 20
Stock Market Uptrend in Process - 17th Nov 20
How My Friend Made $128,000 Investing in Stocks Without Knowing It - 16th Nov 20
Free-spending Biden and/or continued Fed stimulus will hike Gold prices - 16th Nov 20
Top Cheap Budgie Toys - Every Budgie Owner Should Have These Safe Bird Toys! - 16th Nov 20
Line Up For Your Jab to get your Covaids Freedom Pass and a 5% Work From Home Tax - 16th Nov 20
You May Have Overlooked These “Sleeper” Precious Metals - 16th Nov 20
Demystifying interesting facts about online Casinos - 16th Nov 20
What's Ahead for the Gold Market? - 15th Nov 20
Gold’s Momentous Rally From 2000 Compared To Stock Market SPY & QQQ - 15th Nov 20
Overclockers UK Quality of Custom Gaming System Build - OEM Windows Sticker? - 15th Nov 20
UK GCSE Exams 2021 CANCELLED! Grades Based on Mock Exams and Teacher Assessments - 15th Nov 20
Global "Debt Mountain": Beware of This "New Peak" - 13th Nov 20
Overclocking Zen 3 Ryzen 5600x, 5800x, 5900x and 5950x to 4.7ghz All Cores Cinebench R20 Scores - 13th Nov 20
Is Silver Leading Bitcoin or is Bitcoin Leading Silver? - 13th Nov 20
How Elliott Waves Simplify Your Technical Analysis - 13th Nov 20
How to buy Bitcoins using debit/credit card? - 13th Nov 20
Will COVID Vaccine Kill Gold and Silver? - 12th Nov 20
Access to Critical Market Reports - 12th Nov 20
Stock Market Dow Futures Reach 30,000 on News of COVID-19 Vaccine Trials Success - 12th Nov 20
8 Terms & Conditions You Must Know Before Asking For Life Insurance Policy Quotes - 12th Nov 20
Gold Stocks Post 2020 US Election Outlook - 11th Nov 20
Champions’ League Group Stage Draw: All You Need To Know - 11th Nov 20
Stock Market Secular Trend - 11th Nov 20
Stock Market Correction Curtailed by US Election - 11th Nov 20
What Causes a Financial Bubble? - 11th Nov 20
Ryzen 9 5900X RTX 3080 - Scan.co.uk vs Overclockers.co.uk UK Custom PC System Builder Review - 10th Nov 20
Killing Driveway Weeds FAST with a Pressure Washer - Saving Block Paving from LOTS of WEEDs - 10th Nov 20
Trump Fired, Biden Hired, What Next?  - 10th Nov 20
Looking for a Personal Loan? Here Is What You Have To Know  - 10th Nov 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Stock Market Wednesday Worries – Fed Speak Not Helping?

Stock-Markets / Stock Markets 2013 Nov 13, 2013 - 01:24 PM GMT

By: PhilStockWorld

Stock-Markets

Good golly, what a mess!

As you can see from Dave Fry's S&P chart, even yesterday's PATHETIC volume was too much for the bulls to maintain the illusion of strength. What little volume there was had 50% more decliners than advancers on the NYSE, led lower by energy stocks (as we expected) as oil collapses below that $95 line (as we expected).


It can also be seen in the bond market as TLT, for example, tumbles back to weakening support at $103.50. we used to like cgoing long on this line as recently as August but now we're done as the macro environment is getting less note-friendly as inflation rears it's ugly head everywhere but US Government data. As Dave notes:

Long-term Treasury Bonds (TLT) for example have been teetering on serious support. This is the result of the Fed potentially losing control over the market as investors fret over tapering. Without the Fed’s buying there is little in the way of a safety net to offer support. Sure, they won’t begin tapering in big chunks, but markets are forward looking and many will just get out of the way.

Small Caps (IWM) have been the most sensitive to Fed monetary policies, responding positively to dynamic QE but are more fearful of tapering than perhaps other sectors. This is demonstrated by the chart below courtesy of ZeroHedge showing the severe drop in shares outstanding recently. Obviously, there’s a dangerous and serious divergence between price and shares outstanding.

Wow, that's crazy-looking, right? As I keep warning people, the Banksters are propping up the MoMos and paying off their MSM talking heads to keep the sheeple buying while they are dumping every share they own. No wonder we added SQQQ shorts yesterday, as well as VXX longs (the Dec $19/21 bull call spread at $1, offset by the sale of the $20 puts for 0.95 for net .05 on the $2 spread) in our Member Chat Room yesterday morning. That was our first trade idea for the morning yesterday – not bad considering I was in a Las Vegas hotel room scrambling to get the wifi working!

This morning, we re-upped (or downed) our /NKD Futures shorts at 14,600 and we got our Dow cross below 15,700 (/YM) and 1,100 on the Russell (/TF) for some nice Egg McMuffin money already this morning. Those were the target levels I reminded our Members at yesterday's close and 1,100 has been the 10% line (top of the channel) on our Big Chart all year – there's nothing unpredictable going on here and nothing unprecidented either – it's just normal market movement, slightly overdone to the upside.

S&P 1,760 (/ES) is another shorting line we have as is Nas 3,650 (/NQ) – all are failing this morning. Oil, on the other hand, we are playing UP from the $93 line into inventories (10:30). That strategy did not work at $94 but, as we discussed in our Futures Trading Seminar in Las Vegas this weekend – that's why we pick those solid support lines to go long at - it we break under then, even just a little, we can quickly stop out with a small loss and wait for the next support opportunity.

With one week to go on the NYMEX December contract cycle, there are still 200,000 open orders for 200M barrels of oil to be delivered to Cushing, OK, which is kind of full and couldn't possibly take more than 20M barrels next month. So, in one way or the other, 180M barrels of fake, Fake, FAKE orders need to be dumped in order to maintain the completely artificial shortage of oil supplies in the US. Including today, that's 30M barrels of oil per day that have to get dumped into other months or cancelled (at a cost) or we will have stupendous builds next month and prices would plunge:


With almost 700,000 open orders in what is soon to be the front 3 months, I'm going to be liking a short on oil ($94, if we're lucky) or USO ($34, if we're lucky) or SCO long ($35, if we're lucky) assuming it peaks out around 10:30's report. Assuming oil goes to $85 (9.5%) between now and January, SCO should go up almost 20%, to about $42. That makes for some very exciting long opportunities and the Dec $33/37 bull call spread is just $2 and has the potential, without an offset, to make 150% if SCO simply goes up $2 (6%), which would take a 3% drop in oil to $91.20.

You could put 6% of your heating oil money into a trade like that and the only way SCO loses the $2 investment is if oil drops more than 3% but, if oil goes up 3%, you make 15% back on your 6% investment. That's hedging 101.

We already have our 5 New Trade Ideas that make 500% if the Market Falls from last week's posts, so no need to go over those again, right? The time to buy aggressive hedges like that is when the market is at or near the top going up, not AFTER it starts falling. As I said last week, when a rally begins to get overdone, you should begin to put about 1/3 of your additional gains into short positions. That way, you still make 66% of whatever move up remains but, on the way back down, the 33% you set aside for short positions can grow to 150% and lock in those gains for you!

Speaking of locking – Oil just hit $93.57 so shame on anyone who doesn't lock in $500 per share on our Futures longs (/CL) with a stop at $93.50 (or $93.45, actually as we don't mind a bounce off the line if it doesn't break), there should be resistance at $93.75 so a .10 stop there and then it's clear sailing to $94.50, which was where we expected to be at 10:30 today. Anything less than that is all the more reason for our SCO play.

We also like playing UUP up (Dollar ETF) on the $22 line and we added some speculative calls to the Short-Term Portfolio this morning. One trade idea we're already loving, also in our Short-Term Portfolio but nowhere near as speculative, is our SBUX Jan $85 puts that we bought for $6.10 back on October 31st. We have shorted SBUX several times this year, waiting and waiting and waiting for the arbitration decision on the KRFT lawsuit.

Finally, yesterday, the decision came down and it wasn't the $1Bn+ we were expecting – it was $2.7Bn! Incredibly, SBUX is only down to $79 pre-market but $2.7Bn is TWO years worth of income AND the termination of the KRFT distribution deal means less SBUX sales in supermarkets going forward so there will still be time to short these guys this morning if they maintain such an irrational level.

There will be a CC at 9am and perhaps investors think there may be an appeal but no, there will not, this is a done deal that wipes out all of the cash that SBUX has managed to build up in their bank account since the company's founding in 1985. Even Cramer understands this is bad for the company. Will they still pay their $1.04 dividend? That cost them $500M last year so I will guess not. Will they continue to buy back $300M of their own stock each year? Again, no. Will they float a bond or float more shares (dilutive) in order to avoid draining their accounts and forcibly cashing in all of their investments? Yep.

Don't get me wrong, if SBUX crashes, we will be BUYBUYBUYing them, but not for the current p/e of 35 – that's for sure! It's not pretty when companies that are priced to perfection have imperfect results. The market is priced to perfection as well – we'll see how the rest of the week goes for that too!

- Phil

Click here for a free trial to Stock World Weekly.

www.philstockworld.com

Philip R. Davis is a founder of Phil's Stock World (www.philstockworld.com), a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders. Mr. Davis is a serial entrepreneur, having founded software company Accu-Title, a real estate title insurance software solution, and is also the President of the Delphi Consulting Corp., an M&A consulting firm that helps large and small companies obtain funding and close deals. He was also the founder of Accu-Search, a property data corporation that was sold to DataTrace in 2004 and Personality Plus, a precursor to eHarmony.com. Phil was a former editor of a UMass/Amherst humor magazine and it shows in his writing -- which is filled with colorful commentary along with very specific ideas on stock option purchases (Phil rarely holds actual stocks). Visit: Phil's Stock World (www.philstockworld.com)

© 2013 Copyright  PhilStockWorld - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

PhilStockWorld Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules