But I don't know if I can
Open up enough to let you in
Here come those tears
Here come those tears again
Just walk away – JB
As noted by Dave Fry yesterday:
"This is the kind of stuff market bulls put out which is the amnesia drug to help you forget crappy earnings from important companies and buy stocks. So after the post-Fed Meeting decline the short squeeze to keep January positive was launched. At the same time there was a report per Sen. Charles Schumer that Yellen privately told democrats there would no rate increase soon. That launched buy programs."
And, of course, after a BS rise in the markets on Thursday, we are giving up essentially all of those gains in the Futures (8:15) ahead of the Preliminary Q4 GDP Report, which has NO chance of matching the 5% Q3 Report and may even disappoint those looking for 3.2% growth based on the earnings reports we've seen so far.
In short, the Fed is so terrified of failing our weak bounce line on the S&P (now 2,006), that they feel the need to talk up the market every time it's threatened. Rather than take comfort in the fact that "the Fed has our backs" like most traders seem to – we at PSW are wondering what exactly are they trying to protect us from and, more importantly, what happens to us if they are not up to the task?
As Genesis (the group, not the bible) reminds us "It's an illusion, it's a game or a reflection – of someone else's name" and more importantly, they warn us "Baby, there's a hole in there somewhere." We KNOW there's a hole in there somewhere but we also know the Central Banksters are hiding something and, rather than be encouraged by this and going all in on the markets – we are remaining "Cashy and Cautious" for the 2nd quarter in a row.
8:30 Update: I was going to say "Maybe we're wrong" but screw that, we're not. GDP just came out at 2.6%, close to 20% below the expectations of leading economorons, who don't seem to be able to correlate corporate earnings reports with economic output BECAUSE THEIR PROFESSION IS A JOKE AND THEY ARE JUST GUESSING!!!
Of course, as I told our Members this Morning, bad news could be good news as a poor GDP keeps the Fed at the table, which means MORE FREE MONEY in 2015 and yes, I know how ridiculous that logic is but that's no reason not to play the S&P Futures (/ES) long at 2,000 with tight stops below – NOW!!!
If the market is going to do idiotic things, we may as well make money off the idiots, right? In our Live Member Chat Room, we already went long on /NG (Natural Gas) at $2.66 as that took a lovely dip for us yesterday. Our old line was $2.825 so we'll probably take the money and run before then but, as you can see from the storage chart – we're at an average level for this time of year but these prices are way below average. That's not a complicated investing premise, is it?
For those of you who have not attended our Webinars and don't know how to trade the Futures, there are UNG (Nat Gas ETF) option you can play instead. UNG is $13.62 at the moment and you can sell the 2017 $11 puts for $1.40, which puts you in the ETF at net $9.60. That's almost 30% off the current price ($1.75 for Nat Gas). That trade, by itself gives you a great return (100% on cash in 2 years) but we can add the 2016 $12/15 bull call spread at $1.30 and you still have a net 0.10 credit but now a $3.10 upside potential at $15 – up 3,100% on cash!
As you can see from the chart, we are very unusually low at $2.66 yet UNG is at $13.88 so you 0.10 credit is $1.88 in the money on day one of this trade and anything NOT DOWN $1.78 (more than 10%) from here is a winner. Remember – I can only point out when the market is handing out free money and show you how to profit from it – the rest is up to you!
We're watching the same bounce lines we have been for two weeks (see yesterday's post) and if the S&P fails to get over 2,006 (our weak bounce line), we'll flip more bearish very quickly. Russell Futures (/TF) below 1,180 will tell us to cut our /ES longs but it looks like we can go long on oil again at $44.50 (/CL) as the Dollar climbs back to test 95.
It's very scary out there and we are generally short on the market, the longs in the Futures are there to protect our portfolio shorts from market silliness. Long-Term, we're still bullish because, so far, the Central Banksters do have our backs but, short-term – if they don't allow a healthy correction – we may have an unhealthy one down the road!
Have a great weekend,
– Phil
