What a crazy month!
Here we are back where we finished May, when I wrote on May 31st's "Friday Finale – Final Chance to Go Away in May":
What a great rally it's been.
Thank you all for playing – have a nice Summer, be sure to come back for our Santa Claus Classic run in November…
Big Chart – I don't like that pattern one bit. That's a spitting cobra pattern and usually they strike to the downside (and, before you ask, yes – I made that up). Still, very logical for the M to form down to the 50 dmas – especially as those 50s are right on major lines for the S&P, NYSE and the RUT and we know the Dow is too silly to worry about and the Nas is ruled by 10 stocks and 5 of them are AAPL so they also give funny readings but the 3 that are broad and hard to control are all lining up perfectly for a 2.5% drop.
We fell 2.5%, bounced back and then fell 6.5% over the next month into June 21st when the chart looked like this after the Fed and I said:
The total drop is right about 4% and 4% is the line at which a 5% move should bounce back to (about 1,584 on the S&P from 1,650) and that was right at the low of the day, just before the close. That's what caused us, at 3:05 pm in our Member Chat, to flip long on the Dow, saying:
Now I like the DIA Quarterly $148/150 bull call spread for 0.80, 30 of those in the STP ($2,400) and let's say well risk 50% ($1,200) with the $3,600 upside at 15,000. If the market goes lower, AMZN and NFLX will be very good to us (and maybe TSLA too!).
Those Momo stocks never did stop going higher but the quarterly DIA play made the full 150% on the bounce. In our Member Chat that day, we added the IWM $94.50 calls for $1.15 which closed at $1.50 (up 30%) the same day and we also grabbed the AAPL Aug $415s at $17, which finished on the 19th at $87.33 (up 413%). In our virtual Long-Term Portfolio, we also pressed our bets on TASR, BRK.B, ABX, NLY and MT – all of which recovered very nicely.
You can follow the rest of the antics in our "July Trade Review" with Part 1 picking up right on Monday the 24th and Part 2 running from the 9th to the 26th, where we were still wondering if we were being too bearish as we still expected another sell-off.
I'll do an August Trade Review over the weekend but I think my August 1st title of "Thrill Ride Thursday – 1,700 and Bust?" is a good indication of our sentiment for the month. The key comment came the next day, August 2nd, with the S&P testing 1,710 and my comment in "Friday: Fools Rush In Where Fundamentals Fear to Tread" was:
As I said earlier in May when I called for cash (ahead of the big downturn actually) – I'd rather miss the next 5% leg up and be in cash than stupidly hold stocks at record highs and let those gains wash away.
Keep in mind – I can only tell you what's going to happen and suggest a few trade ideas – that's the limit of my powers...
That's especially true with the Oil Futures lately where, only yesterday, I sent out an alert to our Members and even Tweeted and even reiterated in the morning post that we were shorting Oil Futures (/CL) at $110 and the Dow Futures (/YM) at 14,850. We caught a 100-point drop on the Dow that was good for $500 ($5 per point) per contract but oil was the biggie, paying $10 per penny, per contract for a nice $3,000 per contract gain as it fell to $107 (2 legs).
We're done with the Futures due to the end of month, holiday weekend nonsense but we've still got our USO puts (Oct $39s, now $1.68) in anticipation of a bigger drop as all this nonsense about Syria washes out. I told our Members what nonsense Syria was for oil prices on Tuesday in our Chat Room, when oil shot up to $112 and we caught that short and I reiterated that position in Wednesday's morning post and this morning, finally, Commerbank joins me, calling SocGen's call for $150 oil "Scaremongering".
For one thing, Syria plays no role on the oil market, and for another we are confident that “optimism” amongst speculators on the oil exchanges in New York and London is currently at its highest ever level, judging from their positioning. What is more, this would correspond to the usual historical pattern, according to which tension builds up ahead of conflicts and prices rise sharply. When war actually begins, however, oil prices have tended to collapse. Looking at recent history by way of comparison, the toppling of Gaddafi in September 2011 resulted in Brent prices falling quickly from $115 to $100 per barrel.
So kudos to Commerzbank for standing up to the idiocy – now if only they'd take a look at TSLA!
Have a great weekend,
– Phil
