Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
Virgin Media Fibre Broadband Installation - What to Expect, Quality of Wiring, Service etc. - 21st Jun 21
Feel the Inflationary Heartbeat - 21st Jun 21
The Green Superfuel That Could Disrupt Global Energy Markers - 21st Jun 21
How Binance SCAMs Crypto Traders with UP DOWN Coins, Futures, Options and Leverage - Don't Get Bogdanoffed! - 20th Jun 21
Smart Money Accumulating Physical Silver Ahead Of New Basel III Regulations And Price Explosion To $44 - 20th Jun 21
Rambling Fed Triggers Gold/Silver Correction: Are Investors Being Duped? - 20th Jun 21
Gold: The Fed Wreaked Havoc on the Precious Metals - 20th Jun 21
Investing in the Tulip Crypto Mania 2021 - 19th Jun 21
Here’s Why Historic US Housing Market Boom Can Continue - 19th Jun 21
Cryptos: What the "Bizarre" World of Non-Fungible Tokens May Be Signaling - 19th Jun 21
Hyperinflationary Expectations: Reflections on Cryptocurrency and the Markets - 19th Jun 21
Gold Prices Investors beat Central Banks and Jewelry, as having the most Impact - 18th Jun 21
Has the Dust Settled After Fed Day? Not Just Yet - 18th Jun 21
Gold Asks: Will the Economic Boom Continue? - 18th Jun 21
STABLE COINS PONZI Crypto SCAM WARNING! Iron Titan CRASH to ZERO! Exit USDT While You Can! - 18th Jun 21
FOMC Surprise Takeaways - 18th Jun 21
Youtube Upload Stuck at 0% QUICK FIXES Solutions Tutorial - 18th Jun 21
AI Stock Buying Levels, Ratings, Valuations Video - 18th Jun 21
AI Stock Buying Levels, Ratings, Valuations and Trend Analysis into Market Correction - 17th Jun 21
Stocks, Gold, Silver Markets Inflation Tipping Point - 17th Jun 21
Letting Yourself Relax with Activities That You Might Not Have Considered - 17th Jun 21
RAMPANT MONEY PRINTING INFLATION BIG PICTURE! - 16th Jun 21
The Federal Reserve and Inflation - 16th Jun 21
Inflation Soars 5%! Will Gold Skyrocket? - 16th Jun 21
Stock Market Sentiment Speaks: Inflation Is For Fools - 16th Jun 21
Four News Events That Could Drive Gold Bullion Demand - 16th Jun 21
5 ways that crypto is changing the face of online casinos - 16th Jun 21
Transitory Inflation Debate - 15th Jun 21
USDX: The Cleanest Shirt Among the Dirty Laundry - 15th Jun 21
Inflation and Stock Market SPX Record Highs. PPI, FOMC Meeting in Focus - 15th Jun 21
Stock Market SPX 4310 Right Around the Corner! - 15th Jun 21
AI Stocks Strength vs Weakness - Why Selling Google or Facebook is a Big Mistake! - 14th Jun 21
The Bitcoin Crime Wave Hits - 14th Jun 21
Gold Time for Consolidation and Lower Volatility - 14th Jun 21
More Banks & Investors Are NOT Believing Fed Propaganda - 14th Jun 21
Market Inflation Bets – Squaring or Not - 14th Jun 21
Is Gold Really an Inflation Hedge? - 14th Jun 21
The FED Holds the Market. How Long Will It Last? - 14th Jun 21
Coinbase vs Binance for Bitcoin, Ethereum Crypto Trading & Investing During Bear Market 2021 - 11th Jun 21
Gold Price $4000 – Insurance, A Hedge, An Investment - 11th Jun 21
What Drives Gold Prices? (Don't Say "the Fed!") - 11th Jun 21
Why You Need to Buy and Hold Gold Now - 11th Jun 21
Big Pharma Is Back! Biotech Skyrockets On Biogen’s New Alzheimer Drug Approval - 11th Jun 21
Top 5 AI Tech Stocks Trend Analysis, Buying Levels, Ratings and Valuations - 10th Jun 21
Gold’s Inflation Utility - 10th Jun 21
The Fuel Of The Future That’s 9 Times More Efficient Than Lithium - 10th Jun 21
Challenges facing the law industry in 2021 - 10th Jun 21
SELL USDT Tether Before Ponzi Scheme Implodes Triggering 90% Bitcoin CRASH in Cryptos Lehman Bros - 9th Jun 21
Stock Market Sentiment Speaks: Prepare For Volatility - 9th Jun 21
Gold Mining Stocks: Which Door Will Investors Choose? - 9th Jun 21
Fed ‘Taper’ Talk Is Back: Will a Tantrum Follow? - 9th Jun 21
Scientists Discover New Renewable Fuel 3 Times More Powerful Than Gasoline - 9th Jun 21
How do I Choose an Online Trading Broker? - 9th Jun 21
Fed’s Tools are Broken - 8th Jun 21
Stock Market Approaching an Intermediate peak! - 8th Jun 21
Could This Household Chemical Become The Superfuel Of The Future? - 8th Jun 21
The Return of Inflation. Can Gold Withstand the Dark Side? - 7th Jun 21
Why "Trouble is Brewing" for the U.S. Housing Market - 7th Jun 21
Stock Market Volatility Crash Course (VIX vs VVIX) – Learn How to Profit From Volatility - 7th Jun 21
Computer Vision Is Like Investing in the Internet in the ‘90s - 7th Jun 21
MAPLINS - Sheffield Down Memory Lane, Before the Shop Closed its Doors for the Last Time - 7th Jun 21
Wire Brush vs Block Paving Driveway Weeds - How Much Work, Nest Way to Kill Weeds? - 7th Jun 21
When Markets Get Scared and Reverse - 7th Jun 21
Is A New Superfuel About To Take Over Energy Markets? - 7th Jun 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Coordinated Central Bank Action Traps Stock Market Bears!

Stock-Markets / Stock Markets 2011 Nov 30, 2011 - 08:32 AM GMT

By: PhilStockWorld

Stock-Markets

Best Financial Markets Analysis ArticleThe new Beige Book is here, the new Beige Book is here!  

I’m sorry but I get very excited about this kind of stuff.  I love data, especially the kind of data our policy-makers rely on to make their future decisions.  Although the BBook is a gathering of anecdotal evidence from the Fed’s 12 regions (see map below), the data comes from businessmen that are respected by each Fed Governor so THEY take it seriously and if they take it seriously, you’d better too.  


We’ll have to wait until 2pm for today’s main event but we get early sentiment readings out of New York with the ISM Report and at 9:45 we get the Chicago PMI.  We already got a TERRIBLE number on Mortgage Applications (down 11.7%) but we’ll call that a holiday thing (hopefully) and we’ll see if that’s confirmed or denied in the 10am Pending Home Sales Report.  

We have Challenger Job Cuts and Productivity Numbers and Oil and OH MY GOD – SCREW THAT – MORE FREE MONEY IS HERE!!!  

The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, and the Swiss National Bank are today announcing coordinated actions to enhance their capacity to provide liquidity support to the global financial system. The purpose of these actions is to ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity. 

These Central Banks have agreed to lower the pricing on the existing temporary U.S. dollar liquidity swap arrangements by 50 basis points so that the new rate will be the U.S. dollar overnight index swap (OIS) rate plus 50 basis points. This pricing will be applied to all operations conducted from December 5, 2011. The authorization of these swap arrangements has been extended to February 1, 2013. In addition, the Bank of England, the Bank of Japan, the European Central Bank, and the Swiss National Bank will continue to offer three-month tenders until further notice.

As a contingency measure, these central banks have also agreed to establish temporary bilateral liquidity swap arrangements so that liquidity can be provided in each jurisdiction in any of their currencies should market conditions so warrant. At present, there is no need to offer liquidity in non-domestic currencies other than the U.S. dollar, but the central banks judge it prudent to make the necessary arrangements so that liquidity support operations could be put into place quickly should the need arise. These swap lines are authorized through February 1, 2013. 

Finally we are getting some rational stimulus but why do they have to drop a bombshell ahead of the US open?  This screws most retail investors (not us, we were very bullish – see our White Christmas Portfolio update, for example) who can’t participate in the Futures (we coincidentally went long on the Futures this morning for other reasons) and didn’t have me banging the bullish drum for them last week.

This is the move we expected and now we can sit back and see how much of a boost it gives us.  It’s hard to quantify the effect but what it’s really doing is taking away about 30% of the reasons to be short and that should give us at least a 3% move up today since we’re still 10% off our recent highs (see how logical that is).  Unfortunately, it will pop oil and that was one of our downside hedges.  I still think it’s a good opportunity to press the shorts but we don’t know where it will stop (now $101.10 in futures).  

Those trade ideas from Monday Morning’s post should be skyrocketing today.  As with our virtual White Christmas Portfolio, which is now in overtime and up over 100% – if you did particularly well from my holiday picks, please take a moment to consider sharing your good fortune with those who are having a rough time this Christmas, thanks!

Reach more New Yorkers with a matching gift!

We also left ourselves very bullish in our FAS Money, AA Money and IWM Money trades, which StJeanLuc is tracking and those are going to be FANTASTIC today.  In addition to last week’s many bullish trade ideas, when I called the bottom, we added longs CTL and MT as they seemed oversold and, yesterday afternoon, my trade idea for the WCP was:

FAS weekly $51/52 bull call spread is .60 and makes .40 (66%) if FAS holds $52 (now $52.84) through Friday. If you stop at .30, you can be wrong twice and right once and still break even so let’s do 10 in the WCP and see how it goes.

So that’s a nice 66% gain by Friday to look forward to!  An interviewer asked me recently if options trading is too complicated for the average investor and I said, no, it’s quite the opposite.  As you can see from the above trade, we are able to manage risk and we know exactly what it will take to be successful.  

If you have $100,000 that you can risk and you allocate $6,000 for a trade like this, risking a $3,000 loss – it’s going to make a quick $4,000 in 3 days (assuming we don’t crash back, of course).  That’s 4% in less than a week on the whole portfolio!  Now, what’s more complicated, making one trade like that based on current circumstances and keeping $94,000 safely in cash or having the whole $100,000 at risk on various stocks, hoping to scratch out 10% for the year?  

Options get a bad rap because people use them incorrectly (for leverage instead of risk control), but they allow us to remain mainly in cash but still do very well.  In our virtual White Christmas Portfolio, we started with $15,000 just a month ago, making small trades like this and we’ve more than doubled already.  

As I cautioned Members, luck has a lot to do with it but, as luck would have it, we were 8 for 8 in our picks this past week (until this morning, when our hedges are blown out)!  Again, keep in mind that had France just defaulted on their debt, we’d be 1 for 8 now (oil was our bear bet), which is why limiting risk is the key to this model – having cash on the sidelines lets you take advantage of these opportunities – another reason it’s good to have at least a small speculative account for options.  

Despite going 8 for 8 in my WCP open positions, I was NOT the smartest guy in the room in yesterday’s Member Chat.  That honor goes to JRW, who gave us the following chart at 12:52 which is EXACTLY what is happening this morning – that’s REALLY good!  Overall, we were happy enough with our finish not to get bearish, despite not holding 11,590 on the Dow (11,556 was close) – mainly because there was so much negativity on the day and the Dollar was strong and we were holding up pretty well considering.  At 3:15, my comment to Members was:  

Wow, first El-Erian was the morning guest on CNBC and now Bill Gross is coming on. Do they own that station?

Also, Roubini weighed in so now we’re just waiting for Greenspan and Whitney to complete the Gloom Squad, which usually marks the last, desperate effort for these guys to keep the markets down (and money moving into the bonds they sell).  

Understanding how people are trying to manipulate your investing decisions is something we talked in detail about this month and it’s not just an academic discussion – we apply our skeptical outlook every day to the information that tends to overwhelm the average investor as we sift through a lot of BS before we find a flower!  Congratulations to all the bulls today – it looks like we may get our Santa Clause rally after all!

Speaking of despicable media whore who use their influence to move the sheeple out of the way of their hedge fund buddies, here’s a quote from my freindbuddypal Jim Cramer yesterday at 12:12:  

12:12 PM Jim Cramer warns that Europe’s credit crisis has pushed the global situation to "DEFCON three, two stages away from a financial collapse so huge it’s hard to get your mind around." At the least, it’s time to sell companies that need credit: “Credit is so important that anyone who can’t get it will be overwhelmed… which is why you need to start selling into this rally."

I can’t wait to hear how he spins this into how he made a great call today!  

And here’s how his hedge fund buddies get rich by trading on inside information while he chases the retailers out of their positions to drive down the prices:

In case there wasn’t enough anger already about cozy ties between Wall Street and Washington, new revelations suggest former Treasury Sec. Paulson gave hedge funds an inside scoop about the government’s plans to seize Fannie and Freddie. Interesting that no one attending the meeting seems to remember anything. Mish Shedlock: "Anyone who says they do not remember a meeting like that is a liar

- 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)

© 2011 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.


© 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