Weekend review and Results.

Another positive week, and month.  Signals Tweeted up 13%, almost all ETF's, no crazy penny stocks.  Signal is simply reliable, even in this whipsaw.  Details below.

For the week ahead, my view is and has been we need to get China to News Year vacation before we tip over again.  China has no choice but to devalue, and that drives the dollar, and that causes deflation.  We are far from out of the woods.

For SPY, and am watching a 61.8% retrace at 197 area as resistance.  Also, watching gold and the miners correlate with the dollar as faith in world currencies fade.

Good trading all.

Something Wicked This Way Comes

The Junk Bond Market topped in 2011, Commodities, as well, the Real Estate Market Topped in 2014, the Stock Market topped in 2015, and now we are seeing gold, U.S. bonds, and the dollar starting to positively correlate.

It is time to revisit with Mr. Exeter. He created a risk pyramid, that shows how investors cascade down from high risk to no risk assets as aversion and default gains steam.

In 2008, basically the derivative market imploded, and the Central Banks around the world applied monetary adrenaline to revive the economy, but all it did was add more debt, and soon after we started to see the risk aversion train begin anew, this time in a classic way.

We are now at the bottom tier of the pyramid.  The U.S. stock market is beginning to swing violently between off shore assets seeking yield enter our markets, to folks realizing growth is faltering and deflation is coming from China and falling oil and bailing out.  Until now, these deflationary waves would force down gold, and bid bonds, but not this time.

Gold, U.S. bonds, and U.S. dollars are being bid as they are relatively scarce from a global point of view.  Let me explain.  There is over $9 trillion in debt denominated in dollars, as the dollar rises, these debts become untenable and causes a dollar shortage which then starts a feedback loop as investors scramble for dollars to hedge their dollar credit loans.  The same for U.S. bonds, 20% of the world GDP charges you to accept their bonds, additionally China, another 30% of GDP has a currency collapse on their hand and a opaque economy, so who wants their bonds.  Thus leaving the U.S. bond market as king, with yield, and a rising currency.

The paper gold market has a very large derivative short, and the other side was long the stock market. Well oops, the stock market trade is now being unwound and gold short positions are, as well.  Plus everywhere else in the world is scrambling for gold now that the banking systems are failing to provide yield or safety. Also, the world said uh oh when the Fed raised rates, dooming their economies. Ergo gold starts to rise that week.

When our bond market starts to fail, katy bar the door on the price of gold.  To the moon.  But, I think that is a few years off though.  The stock market will falter first, and that is in process.

You have been warned.  :-)

Market is on its own until March

This is the second time that a retrace has pulled up short of expectations for me, and I consider that bearish.  We may however stay in the 1850-1910 ES range for a bit as there is a new month and Chinese New Year upon us, but I am looking for rallies to short for now.

I closed the XIV trade for a blended average loss and flipped to VXX, sold IWM flat, and XLE for a profit.  I bought BIS, which is doing nicely, and bought some SPY puts at the announcement which are up.

Still holding GLD and USO long.  I was going to short AAPL, but was already making too many trades on FED day.  I will wait for my next sell signal.  Also, if interested, TSLA is a mess, They are going to have to raise cash in a hostile environment.  This is a car company trading like an internet stock.

Finally, it looks like an overnight ramp attempt is failing.  Watching to see if we continue to fall.

Staying the Course

The only trades I made yesterday was to sell AAPL at the open (not interested in earnings trades), and put a buy stop on GLD at 106.24.  That looks likely to hit at the open if the overnight gains hold.

My view is still the same; this retracement higher is not yet finished.  Oil prices will continue to recover some more, and that releases some of this short steam.

I will reevaluate after the reaction to Yellen, but bear in mind we have BOJ afterwards, then month begin, then the Chinese New Year.  Plenty of opportunities for mischief in squeezing shorts.  Then the indexes can come down to meet their components at a 24.5% average decline.

Letting it Play Out

The market pushed down 15% from all time highs and 10% in two weeks, a snapback was due, and we got one.  Now patience comes into play.  As many tried to capture a bottom, many will try to capture the top. That simply gives fuel to the algo traders to squeeze you until big money comes back in to take us back down.

My view is the next two weeks will not be bearish.  The Fed reports this week, and next week is new money week.  I believe a Chinese New Year is in there, as well.

Right now my signals have me short volatility, and long oil, miners, Apple, and the Russell.  All closed trades this year are profitable, and results are easily beating any major index.

As a reminder, you can take a buy or sell signal and trade the ultra or buy puts and call, or credit spreads and alternatives.

Good trading.

Reversal is in Full Swing

I did not post earlier as I would have been redundant.  The move down was so severe and so fast it demanded a retrace, and so we have it.

Make no mistake though this market is in trouble.  The resumption of the selloff is likely between 1880, to 1930 area for ES (futures of the S&P).  We will just need to wait and see now.  It is the bears turn to pick tops, and the algos to screw with them for a few days.

For us, the Signal registered buys on IWM and AAPL yesterday, and those are in addition to XLE, USO, XIV, and GDX long signals.  We closed our GLD long signal with a profit earlier this week.  I am also holding 24, 26, and 27 VXX puts for next Friday.  all but the 24's are profitable for now.

I plan no trades today unless the market tells me to sell something.

Recap and the Week Ahead

Last week was a bit of a mixed bag for me.  Not sure if it is OPEX or bottoming that caused the whip saws, but it sure feels like capitulation to me.

Closed Real Estate, GLD, GDX

and AAPL shorts for profit, and lost on SPY long,  I doubled my XIV long position.  Results below.

We hit the second of my three targets I laid out in December.  We hit the gap fill and bounced, but less than I expected, and then went promptly to the August Lows.  I am expecting a bounce here, and then into the mid 1700 area before the FED March meeting.

I am looking at capitulation in Oil and Natural Gas, and am long XLE and USO.  Have buy signals on GLD and GDX and am long them, as well.

Finally, We have hit my extreme zone on UVXY and am long XIV, and hold VXX puts.

Results, Y-T-D on the signals.

Some charts

We are Scaring the Children

I closed off my AAPL and Real Estate short yesterday (both profitable), and only am long gold, the miners and oil right now. The market is whipping around so much now, that is making a mockery out of swing trading.

I also have some small VXX puts on for next week.  Volatility is pushing pretty high into extremes and the snap backs are equally powerful.  Like adrenaline, the moves are powerful but not normally long lasting.

The thing that has me scared though is if China has lost control and we are seeing a powerful liquidation event.  The created more debt than we did, on a smaller economy, with even more corruption and malinvestment.  They are sucking the life out of the world economy.

These next areas now look likely.

Rally Over

Well that was fast.  Once we broke the higher lows, and with such persistency it was pretty clear that this counter trend is over.  Until further notice I will not trade counter, only with the trend.  My only exception is I will short volatility as it makes sense.

My view is 182 is now back in play, and then 160, and then into the 150 area.  From there we will see.  Gold and the miners will benefit now that traders must unwind their short positions.

Two areas of great interest, and that has yet to fall nearly enough is Real Estate and Biotech.  We will be religious buying these on buy signals.  For individual stocks, we will focus on AAPL and TSLA, using puts.

Right now, my positions are:

Short AAPL, Trade green
Short Real estate with REK, Trade green
Long GLD, Trade flat
Long GDX.  Trade flat
Long oil, Trade red
Long Oil equipment. Trade red

Rally Continues

Just a quick note, as we are still in the midst of a OPEX counter trend rally.

Oil and oil related stocks have bottomed for now, we are long.

Gold and miners are bottoming, we are long.

SPY is now above the hourly 22 and the MA has now turned higher.  This usually signals some follow through.  My target is still 197 area.  We are long.

We are also long Biotech.

Volatility has collapsed.  This apparently was the fuel to drive the market lower.  We are short.

The only short we have on the market is real estate.  It is bucking this trend for now.  We are long REK.

So far, so good.

Oil Reverses, SPY Retraces

Per my view and my signal last week, this retracement should be a surprise to no one.  We have OPEX and traders are way over their skis short.  As they are forced to unwind, it drives everything higher.  If those moving averages turn up, it will bring in trend following momos for a trade.

For oil, man it was simply due.  Enjoy the respite and get ready to short again really soon

Weekend Recap and Look Ahead.

Below are the trades the signal closed this week, and their results.  The color coding represents the direction the signal took.  Long or short.

The future week shows the trades that are active, and the direction the signal took.  If any close this week, you will see the percentage gain or loss.

The stocks listed are what I am now following.  I will add TSLA to this mix soon.

We are extremely oversold, and with OPEX looming, these bearish derivatives need to be disposed of by Friday.  I bet my signal, timing, and my conviction.

It will be an interesting week.

Climate Change

I'll post a weekly recap, and short term traders post tomorrow.  I wanted to however step back show everyone a bigger pictures


As you know I have been bearish for a while now, and want to recap and show you why.

The markets really topped in 2015.  Real estate in the beginning of the year (confirmation pending), and the stock market in early May, and confirmed in early August.

The FANG stocks and Biotech started to break down in the fall, and are on the verge of confirming long term declines.

The media and the TPTB will lie to you as they have a vested interest in the status quo, but make no mistake a nasty bear market is upon us.

Corporate earnings are falling, margins have peaked, interest rates are rising, consumers are tapped out, and our export markets are all already in recession.

We are very lucky in that the major indexes have held up which still give the little guy a chance to profit instead of getting rolled over.  I posted some charts of indexes that are ripe for shorting.

I normally speak to traders, but I will post some long term trades on my service to help everyone else. It is cheap and I WILL save you thousands.  I'll mark those trades as long term.
Post any comments below and will be happy to answer them.  You can sign up on the right.

PS, if you are holding real estate, you'll want to hedge.

Playing the Odds

Yesterday we filled the gap, and the morning ramp triggered a SPY buy signal, and a VXX sell signal.  Therefore I exited all short positions.  Al were profitable.  I then sat back in smug assurance as I watched the gains I made going long evaporate and go negative.

Then China opened and we rocketed up to where I bought everything yesterday.  It is like bull riding.

So where are we?  Seasonality and a pretty oversold market suggests we move higher for the next week, and that is where I will sit for now.  But rest assured this is just a bear rally.

I'll post any interesting set ups in the meantime.

First Target Met

On the 27th, I laid out my scenario where I thought the market was headed.

http://bobsstocksignals.blogspot.com/2015/12/new-year-resolutions.html 

This road-map was months in the making.  The market indexes were being levitated by Central Bank/proxy buying while the interior of the market was falling.  There is a mismatch between the market and junk debt values, and there was a gap to fill.

Chinese selling overwhelmed the buying.

First up was the gap fill, and based on the market weakness it is likely filled this morning.  Now unless we go to full on crash mode, seasonality tells us that the Thursday prior to OPEX is a low for the next 6 trading days.  I will look to exit my short positions today if I sense any recovery.

We were tactically positioned short the market, with options so looking to reap some nice rewards.  We use a double smoothed momentum  (hourly time frame) signal that keeps us mostly on the right side of the trade.  I use options for more leverage, and we are already up hundreds of percent over the last two weeks.

We are still short

IWM
XLE
SPY

and long

VXX

If you are looking for some nice profitable set ups sent automatically to your phone, give us a try.  Only $12.50/month.

Enjoy the bloodbath.

China Syndrome

China is collapsing.  The fact that this somehow will not affect us is ludicrous.  What makes this so scary is that 100 people run China, all corrupt, all seeking their own self interest.  The policy mistakes and distortions already made, and the ones about to be made will turn this into a bloodbath, and for China that will be literally one,

For us, massive deflation is and will be washing ashore.  If you are an investor there is only one place to hide.  That is long bonds.  Everything else is going to be cooked.

For traders, we need to focus on selling rallies.  That means buying VXX when oversold, shorting SPY/IWM, and the FANGSTA (Facebook, Amazon, Netflix, Google, Tesla, Solar City, Apple) stocks when overbought.  Throw in Chipolte, as well.  They lost the young ones.  As my near 15 year old puts it.  I don't eat where there are diseases.  Her, and her friends are done.  They moved on.

Tesla will be especially interesting as they don't have the cash to pump up their shares.

I am also watching REK/SRS for signs of stress in Real Estate, and BIS for Biotech

For today, we are happily Short.  We have been having a very good couple of weeks.  Signals are working.

AAPL
IWM
XLE
SPY

VXX popped overnight so missed the long signal, but will watch for opportunity to enter.

Recap

What a crazy day yesterday.  In a way a lot of fun, but it will make it hard to stay in swing positions if they start to whip it back and forth.  For me, I am taking the signal and playing the trend towards a Thursday low (Thursday before OPEX week, generally is a short term bottom).

The signals and trades are:

AAPL short and a 104 Jan/103 Jan week 2 put spread is on.  Both legs are profitable and the signal is still short

VXX call Spread 19/20.50.  Closing it today.  Profitable.  Signal is now on sell, but will likely flip back long today.

I posted how I legged into both on Twitter, in real time.

SPY Jan 195 put. (placed yesterday) Signal is on a sell.  Trade is underwater, although looking better this morning.

IWM signal is a sell and profitable ($110)

XLE is on a sell, and not profitable ($59.40)

Tuesday into Wednesday usually brings on Gold weakness.  Watching for a play here.

Enjoy the battle.

Save Yourself Some Grief

This graph has started floating around the internet, with some ominous captions of doom, with good reason.  But before I explain why, I'll explain the chart.  For whatever reason, probably to simply confuse the masses, these terms are loaded with jargon.

Simply put, the Federal Reserve allows hundreds of banks and non banks to buy, for cash, highly rated securities, overnight.  The entities that participate in these transactions use this vehicle on the last trading day to "window dress" their portfolio to make it look less risky than it is in reality.  Why they are allowed to perpetrate a fraud on their investors is the subject of another post.  But, you say Bob, they are exchanging cash for Treasuries how is that hiding risk.  Glad you asked.  In comes the third party.

This group will buy, for a fee of course, their assets, overnight, for cash, at face value, in order for them to take said cash and buy Treasuries from the Fed.

The sheer size of this auction suggests that these entities are stuck with illiquid but not yet impaired assets, and are desperate not to alert their investors.  The size of this auction also drove the Fed funds rates far below the Feds new range they achieved when they rose said rates.  This means the Fed underestimates the problem in front of them.

My view is that the bond market is mismatched again in terms of the ability to liquidate their investments against investor demands, and that they also have not repriced the value of these assets. This is a repeat of 2008, and we will see the same stress in the market.

If you are in illiquid assets (assets you can't sell easily in a short period of time) your only hope is to short by hedging against the industry you invested in.  I imagine for most that is spec real estate. Start getting comfortable with SRS, REK, and even volatility.  We are in for a rough ride ahead.

Keeping it Simple

No need to look at a million charts to make a great living trading.  I only keep a dozen on my watch-list, and trade what is moving enough to make my budget.

Right now that is SPY, AAPL, and VXX/XIV.

Last week we took trades in all three of these and were all nice winners, and easily making budget. Going into the new year we are long VXX with calls, and short AAPL with Puts. SPY also looks good short, and will reenter on the next setup.

My thoughts on the rest of my watch-list

Gold and Miners are not moving enough nor trending enough for me to risk capital.  Weather is going to whip energy around and I will stay away, for now.

Now that interest rates are moving higher, I have added SRS and REK to my watch-lists.  I live in CA and many of my friends and clients speculate aggressively in real estate. They are always asking how can they use the stock market to hedge their portfolio.  I am watching these names as proxies.

I am expecting great things from BIS this year as this sector will be under a political microscope.

Enjoy the charts, and if you want the best return on your investment in 2016, sign up and make money.