Transcript (X) – Updated September 10, 2014

The Mad Hedge Fund Trader
“At Last!’”
With John Thomas
from San Francisco, CA
September 10, 2014
www.madhedgefundtrader.com
Drew the Short Straw
Trade Alert Performance
Still Another New All Time High!
*January Final +3.05%, *July Final +4.18%
*February Final +6.41%, *August MTD 5.86%
*March Final -2.52%
*September +0.60%
*April Final +3.32%
*May Final +4.61%
*June Final +4.24%
2014 YTD +30.11%, versus 3% for the Dow,
an outperformance of 26%
*First 185 weeks of Trading +152.6%!
Portfolio Review- Running Out of Positions!
current capital at risk
Risk On
(TBT) short Treasury bond ETF
10.00%
Risk Off
none
total net position
10.00%
Trailing 12 Month Return +57.6%%
70.0%
60.0%
50.0%
40.0%
Series1
30.0%
20.0%
10.0%
0.0%
9/6/13
10/6/13 11/6/13 12/6/13
1/6/14
2/6/14
3/6/14
4/6/14
5/6/14
6/6/14
7/6/14
8/6/14
9/6/14
44 Months Since Inception-50 BP Short of All Time High
+152.5%, Averaged annualized +39.8%
180.00%
160.00%
140.00%
120.00%
100.00%
80.00%
Series1
60.00%
40.00%
20.00%
8/8/14
6/8/14
4/8/14
2/8/14
12/8/13
10/8/13
8/8/13
6/8/13
4/8/13
2/8/13
12/8/12
10/8/12
8/8/12
6/8/12
4/8/12
2/8/12
12/8/11
10/8/11
8/8/11
6/8/11
4/8/11
2/8/11
12/8/10
0.00%
Strategy Outlook-Risk is Still On
*Global bonds probably peaked last week on ECB move
*Cease fire in Ukraine is risk positive, but is this a bluff so Putin can
turn off Europe’s natural gas this winter?
*Now Alibaba is looming over global capital markets, triggering $20
billion in reallocations
*ECB makes its big move, collapsing Euro and
yen and sending dollar to yearly high
*US dollar stronger than it appears
The Jim Parker View
The Mad Day Trader-On sale for a $1,500 upgrade
Technical Set Up of the week
Buy
*Dollar in any form, yen, Euro
*European bonds
Sell Short –
*Stock Market trying to put in short term
high
*Every oil rally has failed
Avoid –
*Gold, precious metals
The Global Economy-The US is Stronger than it looks
*August nonfarm payroll a disappointment at 142,000, means interest rates lower for
longer, unemployment 6.2% down to 6.1%
*US Q2 GDP growth at 4.2% is hotter than hot, may get revised up more!
*Europe fears of Japan deflationary repeat as August inflation falls to 0.3%, French
GDP market down from 1% to 0.5%
*Japan fears of European deflation, Q2 GDP -7.2% annualized off of tax increase, New
pension head in Japan to shift greater share of $1.3 trillion in assets out of bonds and
into stocks, means more QE sooner
*China August services PMI up from 54.2 to 54.4
*US July Factory Orders rise a record 10.5%
one huge airliner exports
ISM MfG New 7 Year High
Is What the Stock Market is Seeing
Weekly Jobless Claims-The trend is your Friend
+4,000 to 302,000, new 7 year lows!
Bonds-US and Europe Simultaneously Top Out
*Highs for the year were probably put in for for Europe and the US last
week, triggered by ECB QE
*One more rally left to test the theory, put in reverse head and
shoulders on charts
*Fed tapers quantitative easing to zero in next month, but interest
rates rises not until late 2015
*New trade of the year is to
Switch out of bonds
*Huge rally in (JNK) disappears
Ten Year Treasuries (TLT) 2.50%
failure here is key, proves my top for the year call
30 Year Treasury Yield ($TYX)-Yield 3.23%
Inverse Head and Shoulders setting Up?
Junk Bonds (HYG) 5.70% Yield
The New Lead Contract-Wow!
2X Short Treasuries (TBT)
long 10% position-keeping for a quick turnaround
volatility is low
Investment Grade Corporate Bonds (LQD)
3.49% Yield
Emerging Market Debt (ELD) 3.30% Yield
Municipal Bonds (MUB)-2.88% yield,
Mix of AAA, AA, and A rated bonds
MLP’s (LINE) 9.40% Yield-Holding Up Against Falling Oil
Stocks- Best August in 14 Years
*S&P 500 had gone 14 consecutive days without a 0.50% move, longest
boring streak since 1995.
*Reallocation from bonds and stocks into cash us underway, stocks will lead
the rebound
*Will see a sector shift on next 4% correction, out of Apple and technology
and into banks, or out of Apple into other technology
*(SPY) should hit 2,100 by yearend
*Use next volatility visit to $17 as
cue to buy
S&P 500
Dow Average
NASDAQ (QQQ)-Still an Uptrend
Europe Hedged Equity (HEDJ)-Weak Euro Helping Stocks
(VIX)-Back to the Bottom
Russell 2000 (IWM)-Wedge Setting Up?
Technology Sector SPDR (XLK), (ROM)
Watch Out for an Apple Drag!
Industrials Sector SPDR (XLI)
Health Care Sector SPDR (XLV), (RXL)
Financial Select SPDR (XLF)
Apple (AAPL) – We got the Run to New Highs
The iPhone 6 is Here! Buy the rumor, sell the news!
Google (GOOGL)
Stock of the Week-First Solar (FSLR)
China-The Upside breakout is Here!
Japan (DXJ)-Weak on poor GDP figures
Emerging Markets (EEM)
India (EPI) – Still Grinding Up on EEM Strength
Foreign CurrenciesEuro QE is Here at Last!
*Draghi move the big move, with interest rates cuts and QE, more to come,
400-800 billions Euros to start, 5 years behind the US
*Medium term target of $127 hit, next comes $125, $120, and eventually
$1.00
*Scotland votes for independence
51-49, demolishing the pound
*BOJ announces no new monetary
actions, but yen falls anyway
*Dollar hits new high for the year,
sucking in more foreign money into
US financial assets
Euro (FXE)-The Freefall is On
took profits on the 9/$133-$135 put spread
Long Dollar Index (UUP) –
Euro and Yen Collapse Great for Dollar
British Pound (FXB)
Demoed by Scottish Poll showing 51-49 in favor of leaving the UK
Japanese Yen (FXY)-A Breakdown at Last!
Launching off a 25 year base
Short Japanese Yen ETF (YCS)
Australian Dollar (FXA) – Flat lining on Neglect
Chinese Yuan (CYB)Only the Yuan is holding up against Uncle Buck
Emerging Market Currencies (CEW)
Energy-Collapse!
*Collapsing prices are forcing Russia to sell more oil to support weakening
economy, accelerating the downturn
*Saudi Arabia fighting back to preserve market share, boosting production
*Flip from Contango to Backwardation is price supportive
*Kurdish direct sales increasing after winning US court cases
*Libyan exports resume, potentially adding
1.5 million barrels/day to global supply
*Russia funding anti—fracking efforts
in Europe to protect huge market there,
export earnings
*China leases world’s largest tanker to
store 3.2 million barrels long term
Oil- Back to Multi Year$77.50-$112.50 Range
United States Oil Fund (USO)
Natural Gas (UNG)-
Copper-It’s All About the Dollar
Freeport McMoRan (FCX)-
Precious Metals-The Anti Dollar Trade
*Simultaneous acceleration of quantitative easing in both Japan
and Europe is very gold negative, Euro interest rate cut another nail
in the gold coffin
*Physical gold purchases from China and India falling, even though
we are into the Indian wedding season
*Collapsing oil, strong dollar
together dragging down gold
Gold-Yuk!
Barrack Gold (ABX)-
Market Vectors Gold Miners ETF- (GDX)
Silver (SLV)-Show Me the Rally
Silver Miners (SIL)-
Agriculture
* USDA crop progress report is one of the best in history
*Perfect weather continues
*Too many farmers still waiting for a rally to sell into
*Soybean “good/average rating is 64%, now at an amazing 74%, same
for wheat and corn
*Hopes for an early frost?
*Stand aside
(CORN)-New Lows! Blame This on the Dollar Too!
(SOYB)-Free Fall!
DB Commodities Index ETF (DBC)Double Yuk!
Real Estate-An Autumn Revival?
* Mortgage Interest rates at 18 month lows have failed to spur the
market
*End of taper could bring the end of the 30 year fixed rate loan.
*High end house flipping is soaring
*Entry level buyer MIA and may be
gone for a decade
(student loans, bad associations,
other priorities)
May S&P/Case–Shiller Home Price Index
+9.3% down to +8.1% YOY
(ITB)-US Home Construction Dow Sub index
positive data is feeding into stocks
Trade Sheetkeep positions small, better not to trade at all
than pursue marginal trades
*Stocks- buy the dips, but keep size small, with tech leading
*Bonds- sell rallies across all fixed income, the top is in
*Commodities-stand aside
*Currencies- sell every Euro rally forever, and the yen too
*Precious Metals –stand aside, buy the next bottom
*Volatility-stand aside, could be a long summer
*The Ags –buy new lows
*Real estate- stand aside
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www.madhedgefundtrader.com
Next Strategy Webinar
12:00 Wednesday, September 24, 2014, Live from San Francisco, California
Good Luck and Good Trading!