Slope of Hope Blog Posts
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I am sure it is not unique, but worth sharing nonetheless. My view is the Federal government is desperate to get the stock market back to being the tax revenue engine it was under Bill Clinton.
Incomes are flat, and national income is not going to be growing anytime soon. They have a problem; how do they goose the stock market and yet control inflation in food and energy. Their answer has been suppression.
First is was lowering interest rates, then massive selling of interest rate swaps, then massive selling of volatility futures, and massive selling of alternative investments like gold and silver, and probably energy too.
Well if you looked at my post last week, every target on my charts were hit or exceeded. Wow! What I did not expect was the follow through. I was convinced we'd get some profit taking. My trade signals stocks had another great week, but I was more lightly invested than my signals, so I had an OK week, but quickly added back to my miner positions.
What I am trying to get my arms around is how buying MBS's in a already low interest rate environment is going to add any more juice. I mean people who can refinance probably already have, right?
I had the best week of the year for me, percentage wise, yet left so much on the table running scared. This week will be just as much of a nail biter. Wednesday, the German court rules. At first I thought that this clearly violates their constitution, but recent rulings from our courts, and the total disregard for the rule of law in other matters relating to the bankers, has me thinking all systems go. On Thursday Ben speaks, with the recent run up in the market, should be a sell the news event, but as my trading partner pointed out to me, they may already be doing QE3, and just decided to not tell us.
For me, risk management demands I continue to move up stops and scale down my size, and on Tuesday I will initiate some hedging.
For those who subscribe to me, I am going to add BOIL, which is a leveraged Natural Gas ETF to my focus list. Nat Gas has bottomed, and I want to buy the dips and ride the moves with some leverage.
Below are some charts and my portfolio and performance.
The market rose on Friday, and started when Europe opened and continued until an hour after our market opened. The reason given was the good employment report. That reason is obviously a deception, as we lost hundreds of thousands of jobs. So what could it be?
My contention is the Fed started to add to reserves into the banking system Thursday/Friday (Repos). The last time this happened (Dec 2008) the miners and metals bottomed and then two months later the market rose.
So the market reacted positively to this, gold and miners showed strength, and as these repos continue, you will see a move to hard asset stocks and commodities, a move out of bonds, and then it will pressure non commodity assets as margin pressure will crush earnings. But first we will make new highs in equities.
The Fed has no choice but to add reserves to the system or risk sovereign and banking collapses. Reserves have been falling for a year, and the only reason the market is flat and not down is the volatility crush and short squeezes that forces risk on. Both are done, volatility at lows and short interest down considerably. Jawboning promises of liquidity is done, and we are at peak earnings and margins, so reserve building is the next step. Plus they must give the banks more cash to leverage up to buy gov't debt and to support the market price and their profitability.
I hope everyone is enjoying the weekend. It is beautiful here in SoCal and I will be a beach rat this weekend. Last week my trades worked out just fine with two frustrating stop outs at break even that eventually climbed right back up,and one beautiful day trade before earnings (AMZN, DO, and QCOM respectively). My other trades are still active or were weekly spreads that expired.
Energy has been a beast, and we may get some rest next week ( I wonder what it is sniffing out; war or QE?) The currency metals are simply not wanting to go down anymore, but I am still mostly writing spreads and day trading GLD with weekly calls and puts.
I am also still short FAS and SPY, although I took off half of SPY on Friday's close. FAS broke its bear flag channel, and I am expecting FAS to be in the 60's soon enough. I also am going to short PNRA and CMG on all rips when stochs go OB. Higher energy, higher food, higher taxes, and zero wage growth is a recipe for disaster for these companies. Grocery stores are dying and people need that stuff, wait until these restaurants try to pass these higher costs along. Below is my current active trades, and Y_T_D results, and some charts to enjoy.