Wow, what a comeback!
Maybe the 4th time will be a charm as we once again attempt to break that top line on the Russell (along with our other indexes). Of course, if you zoom out to a monthly chart, you'd see that this saw-tooth patten can form what they call an "island top", which is a signal of possible rally exhaustion.
I know we're exhausted with all these ridiculous "rallies" that are spurred by talk of more stimulus whenever we threaten to fail a support line.
After getting burned in 2009, the Fed (and all the Feds) are simply terrified of a sell-off getting out of control and so, they have backed themselves into a corner of having to placate the markets every time they have so much as a sniffle, lest it turn into pneumonia.
As I've noted to our Members, when we have 5 days of selling with 782M shares transacted (SPY) while the S&P loses 5% and then you have 2 days of buying with 269M shares transacted – can you really call that a recovery? More than 3 times more money went out than went in and our original premise was that there was weak support due to low volume in the first place. How would 2 days of low-volume buying have fixed that? If anything, our support is shakier now than when we started.
As I noted to our Members in this morning's Live Chat Room:
This is why I have to keep making bearish calls – there is MASSIVE manipulation going on – you can't trust anything and it's OK if we don't make money on the way up – that we can always recover from – what we really want to avoid is LOSING money in a crash and blowing a fantastic opportunity to bottom fish because we're scrambling to get out of things that we chased because we were too impatient.
Our STP/LTP combination remains around $755,000 as we added $13,000 more TZAs a bit too early yesterday but I sure slept better knowing they are there. Our next step – if the strong bounces hold, is to make a few bullish adjustments to the LTP and then, during earnings, we can go shopping with the $155,000 (25.8%) we made last year.
I know this may seem tedious to some of you who crave constant action but, as I say so often I'm sick of it myself – if you make a steady 20% a year for 20 years, you turn $500,000 into $26,413,766. DO NOT tell me that you do better than that day trading – You don't! Turning $500,000 into $26M in 20 years is a REALISTIC goal using this system and I'm sorry if it's boring, but it works.
It's not like we're not buying, we picked up RIG ($16.27) just yesterday as a Top Trade Alert and we've actually had 20 bullish trade ideas for our Members since Christmas – so plenty of bottom-fishing on the way down but SENSIBLE plays, much if them in the materials sector – which we feel has suffered long enough BUT may suffer a bit more so we're taking small initial entries with the intent of adding more if the selling contines.
8:30 Update: Meanwhile, our Futures are popping off the NFP Report, where we added 252,000 jobs in December AND revised the last two reports up 50,000 jobs giving us 2.9M jobs added for the year (the most since Clinton) and that brings Unemployment down to 5.6%, also the lowest since Clinton was President (but don't worry, the Republican Congress will put a stop to that!).
Though wages did not improve (down 0.2%) there was a very encouraging 48,000 construction jobs added – in December! That's potentially the best news I've seen in years. Also encouraging is the Government adding just 12,000 jobs – when Bush was in office, 40% of the jobs added were Government jobs – and we know how that turned out.
Meanwhile, a 0.2% cut to the wages of 155M working people is, unfortunately, the same as LOSING 310,000 jobs so the NET for the economy is that the bottom 99% have LESS money to spend now than they did last month. I know they never do simple math like this for you in the Corporate Media but here we tell you the truth and knowing the truth is how we make money in the markets.
In our Live Member Chat Room, we set the following short Futures positions on our indexes: Dow (/YM) 17,850, S&P (/ES) 2,060, Nasdaq (/NQ) 4,245 and Russell (/TF) 1,195. We also played oil (/CL) long at $48.50 and Natural Gas (/NG) long at $2.925. Speakinig of Natural Gas, had you followed our FREE play in the morning post yesterday and gone long at $2.825 (3rd time this week we gave you that level), you could have collected $1,500 PER CONTRACT in profits by the end of the day.
Don't worry, you can still participate in some of the upside on TZA, as we were too early with that one and it dropped from $12.50 to $12.23 (2%) on yesterday's action. We still like it long and, as noted above, we took an aggressive $13,000 spread in our Short-Term Portfolio that will pay us up to $30,000 back (130% profit) if the Russell fails to hold onto 1,170. Now THAT is how you hedge!
Remember, I can only tell you what's going to happen and give you trade ideas that will profit from it – the rest is up to you!
Have a great weekend,
– Phil
