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.