Here we go again.
This is our 3rd visit this year to 1,880 on the S&P and maybe this time will be different and, if so, we'll simply have to deploy some of our cash on some bullish plays. Materials are still down, gold and silver are still low, Solars fell out of favor, Biotechs had a nice sell-off, China and Russia are low – plenty of things to buy if we're really breaking back up.
In fact, with the Nasdaq below 4,200, down from 4,400, that's 5% off and TQQQ is the ultra-long 3x Nasdaq ETF and it's at $61.45, down from $70 last month and you can buy the April $65/68 bull call spread for just 0.55, selling the $51 puts for 0.45, risking just $10 of cash to make up to $300 per contract if TQQQ recovers in the next 2 weeks. $51 happens to be the 200 dma on TQQQ, so it seems like reasonable support, especially if the Fed keeps pumping in cash at the extreme levels they hit at the end of this quarter (and the last):
We were 3 full weeks into January before the market started collapsing so figure that's the ebb and flow of all this FREE MONEY that's being funnelled through the Banksters to keep up appearances. We have a similar double top patten now and we'll see if this time is different and we break on through to new highs with this extra 25% injection of liquidity to top off the quarter.
Of course, we're not really bullish until we see those highs broken so I'd rather sell an AAPL Jan $400 put for $5.90 ($590) and that's enough to buy 10 of the spreads for $450 and we make $3,000 if all goes well with a $140 credit still in our pockets and our worst-case scenario is owning AAPL for net $401.40 (25% off the current price). That's a fun way to hedge to the upside, which is why we're in no hurry to pull our cash off the sidelines – we have lots of cool ways to make money.
In fact, I reviewed our 5 Member Portfolios in chat yesterday and they are all performing quite well and are full of great Trade Ideas we can begin adding back to our recently cashed out Income Portfolio. As an experiment, we left our Long-Term Portfolio invested during the pullback but cashed in the Income Portfolio to see which one ends up performing better (they follow similar strategies). It also gives our new Members a fresh chance to follow along, though we had hoped for more of a pullback before moving our cash from the sidelines.
That's our Income Portfolio, as you can see, it's mainly cash now but up a solid 7.1% for the year so far and it's meant to be Conservative – so it would have been silly not to take that money and run when we made that much in just the first two months. Now we are watching and waiting and doing a little bargain-hunting, adding the sort of stocks that should be doing well if the indexes aren't lying to us and we really are recovering.
We'll probably add HOV ($4.73) today, as we're always happy to get a cheap entry on that stock. The 2016 $5 puts are $1.35 and we can sell 10 of those for $1,350 and commit to owning HOV at net $3.65 ($3,650), which is 23% off the current price – what's not to love? We'll determine the amount later in our Live Webcast, which will focus on Futures Trading today (1pm, EST).
Otherwise, I'm still very skeptical of a rally that requires $200Bn MORE liquidity than the usual $50Bn they pump into the markets on a regular basis. Obviously the idea is to fool people like us, with cash on the sides, into chasing and essentially replacing the Fed's borrowed $200Bn and the faster we run in, the faster the Fed can pull back out – like they did in January, as the usual beggining of the year fund allocations replaced their $150Bn boost at the time.
The S&P topped out at 1,850 back then and we're still true to our formula that $1Bn per month by the Fed = 1 extra S&P points – that's a formula that's been holding up since 2012! The FBI is finally launching an official investigation into the market manipulation engaged in by High-Speed Traders, maybe they can then investigate the biggest market manipulator of them all – THE FED!
