Global Market Comments
November 19, 2018
Fiat Lux
Featured Trade:
(THE MARKET OUTLOOK FOR THE WEEK AHEAD, or MASS EVACUATION)
(SPY), (WMT), (NVDA), (EEM), (FCX), (AMZN), (AAPL), (FCX), (USO), (TLT), (TSLA), (CRM), (SQ)
I will be evacuating the City of San Francisco upon the completion of this newsletter.
The smoke from the wildfires has rendered the air here so thick that it has become unbreathable. It reminds me of the smog in Los Angeles I endured during the 1960s before all the environmental regulation kicked in. All Bay Area schools are now closed and anyone who gets out of town will do so.
There has been a mass evacuation going on of a different sort and that has been investors fleeing the stock market. Twice last week we saw major swoons, one for 900 points and another for 600. Look at your daily bar chart for the year and the bars are tiny until October when they suddenly become huge. It’s really quite impressive.
Concerns for stocks are mounting everywhere. Big chunks of the economy are already in recession, including autos, real estate, semiconductors, agricultural, and banking. The FANGs provided the sole support in the market….until they didn’t. Most are down 30% from their tops, or more.
In fact, the charts show that we may have forged an inverse head and shoulders for the (SPY) last week, presaging greater gains in the weeks ahead.
The timeframe for the post-midterm election yearend rally is getting shorter by the day. What’s the worst case scenario? That we get a sideways range trade instead which, by the way, we are perfectly positioned to capture with our model trading portfolio.
There are a lot of hopes hanging on the November 29 G-20 Summit which could hatch a surprise China trade deal when the leaders of the two great countries meet. Daily leaks are hitting the markets that something might be in the works. In the old days, I used to attend every one of these until they got boring.
You’ll know when a deal is about to get done with China when hardline trade advisor Peter Navarro suddenly and out of the blue gets fired. That would be worth 1,000 Dow points alone.
It was a week when the good were punished and the bad were taken out and shot. Wal-Mart (WMT) saw a 4% hickey after a fabulous earnings report. NVIDIA (NVDA) was drawn and quartered with a 20% plunge after they disappointed only slightly because their crypto mining business fell off, thanks to the Bitcoin crash.
Apple (AAPL) fell $39 from its October highs, on a report that demand for facial recognition chips is fading, evaporating $170 billion in market capitalization. Some technology stocks have fallen so much they already have the next recession baked in the price. That makes them a steal at present levels for long term players.
The US dollar surged to an 18-month high. Look for more gains with interest rates hikes continuing unabated. Avoid emerging markets (EEM) and commodities (FCX) like the plague.
After a two-year search, Amazon (AMZN) picked New York and Virginia for HQ 2 and 3 in a prelude to the breakup of the once trillion-dollar company. The stock held up well in the wake of another administration antitrust attack.
Oil crashed too, hitting a lowly $55 a barrel, on oversupply concerns. What else would you expect with China slowing down, the world’s largest marginal new buyer of Texas tea? Are all these crashes telling us we are already in a recession or is it just the Fed’s shrinkage of the money supply?
The British government seemed on the verge of collapse over a Brexit battle taking the stuffing out of the pound. A new election could be imminent. I never thought Brexit would happen. It would mean Britain committing economic suicide.
US Retails Sales soared in October, up a red hot 0.8% versus 0.5% expected, proving that the main economy remains strong. Don’t tell the stock market or oil which think we are already in recession.
My year-to-date performance rocketed to a new all-time high of +33.71%, and my trailing one-year return stands at 35.89%. November so far stands at +4.08%. And this is against a Dow Average that is up a miniscule 2.41% so far in 2018.
My nine-year return ballooned to 310.18%. The average annualized return stands at 34.46%. 2018 is turning into a perfect trading year for me, as I’m sure it is for you.
I used every stock market meltdown to add aggressively to my December long positions, betting that share prices go up, sideways, or down small by then.
The new names I picked up this week include Amazon (AMZN), Apple (AAPL), Salesforce (CRM), NVIDIA (NVDA), Square (SQ), and a short position in Tesla (TSLA). I also doubled up my short position in the United States US Treasury Bond Fund (TLT).
I caught the absolute bottom after the October meltdown. Will lightning strike twice in the same place? One can only hope. One hedge fund friend said I was up so much this year it would be stupid NOT to bet big now.
The Mad Hedge Technology Letter is really shooting the lights out the month, up 8.63%. It picked up Salesforce (CRM), NVIDIA (NVDA), Square (SQ), and Apple (AAPL) last week, all right at market bottoms.
The coming week will be all about October housing data which everyone is expecting to be weak.
Monday, November 19 at 10:00 EST, the Home Builders Index will be out. Will the rot continue? I’ll be condo shopping in Reno this weekend to see how much of the next recession is already priced in.
On Tuesday, November 20 at 8:30 AM, October Housing Starts and Building Permits are released.
On Wednesday, November 21 at 10:00 AM, October Existing Home Sales are published.
At 10:30 AM, the Energy Information Administration announces oil inventory figures with its Petroleum Status Report.
Thursday, November 22, all market will be closed for Thanksgiving Day.
On Friday, November 23, the stock market will be open only for a half day, closing at 1:00 PM EST. Second string trading will be desultory, and low volume.
The Baker-Hughes Rig Count follows at 1:00 PM.
As for me, I'd be roaming the High Sierras along the Eastern shore of Lake Tahoe looking for a couple of good Christmas trees to chop down. I have two US Forest Service permits in hand at $10 each, so everything will be legit.
Good luck and good trading.
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Global Market Comments
November 16, 2018
Fiat Lux
Featured Trade:
(RISK CONTROL FOR DUMMIES),
(SPY), (AMZN), (TLT), (CRM), (VXX)
Global Market Comments
November 15, 2018
Fiat Lux
Featured Trade:
(ARE YOU IN THE 1%?),
(SNE), (HMC)
(DUMPING THE OLD ASSET ALLOCATION RULES)
Global Market Comments
November 14, 2018
Fiat Lux
Featured Trade:
(DINNER WITH BEN BERNANKE)
(TESTIMONIAL)
Dear John,
You gave me a profit this year well into six digits which has me so addicted to your service that I'm considering taking out life insurance on you from Lloyd's of London.
I admit I get VERY nervous every time you adventure off to climb the Matterhorn or vagabond through the High Sierras within stalking distance of mountain lions or drive that Tesla further than the end of your driveway or travel with the swells on the Orient Express, virtually daring the enemies of capitalism to do something rash.
You must stop all such foolishness so you can maximize the probability of keeping us in Trade Alerts for the longest possible time. Toward that end, we also respectfully request that you watch your consumption of bubbly and cholesterol at all those fancy restaurants you favor, rein in the holiday celebrations over your amazing track record, and be sure to take your meds.
Also, getting to bed early the rest of the year won't hurt, unless of course you're pulling all-nighters with Mad Day Trader’s Bill Davis on the phone as you both nervously watch the overseas markets until the early dawn, followed by a hectic day of domestic trading and writing of Trade Alerts, all of which you should feel free to do as frequently as needed to keep your performance on its current blistering track. (We must, after all, keep our eye on what's most important in life.)
I, like most of your subscribers, am long -- very long -- on the Mad Hedge Fund Trader...and we need you healthy for many years--preferably decades--to come.
Gary
Garden City, NY
Global Market Comments
November 13, 2018
Fiat Lux
SPECIAL VETERANS DAY ISSUE
Featured Trade:
(NO BIWEEKLY STRATEGY WEBINAR FOR WEDNESDAY NOVEMBER 14)
(A TRIBUTE TO A TRUE VETERAN)
I love doing these webinars. They help crystalize my thoughts and narrow my focus on what’s really happening in the markets and why it’s important.
The questions I get through the chat boxes from you are invaluable in providing me market insight, as well as generating ideas on how to improve this service, which is evolving daily.
But my punishing travel schedule sometimes makes it impossible. I simply can’t be in two places at once.
I have a few major hedge funds that pay me $100,000 a year for my views. They’re happy to do this because my Trade Alerts earn them hundreds of millions of dollars.
When they invite me to a party at the presidential suite at the Bellagio Hotel in Las Vegas to preview next year’s financial markets, I say, “Yes Sir!” and jump on the next plane. It seems there aren’t many people who can provide a global view on all asset classes against the backdrop of 50 years of experience in the markets.
These are often an exchange of views, and I will happily pass on to you what I learn in the upcoming newsletters.
The next Biweekly Strategy Webinar will be held on November 28 at 12:00 PM EST. I look forward to talking to you all then.
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Global Market Comments
November 12, 2018
Fiat Lux
Featured Trade:
(THE MARKET OUTLOOK FOR THE WEEK AHEAD, or IT’S FINALLY OVER),
(SPY), (TLT), (AAPL), (ROKU), (USO)
Could it have been the election all along?
Did the massive uncertainty created by the midterm elections hold back investors for all of ten months?
That’s what it looks like now. In a mere three days, shares made back half of what they lost in October, one of the worst trading months in stock market history.
All the market did was trade in a giant range until the day before we trudged out to our local ballot boxes. After that, it was off to the races. Who was the big winner? The people who want to make Donald Trump’s life miserable who now have countless means with which to do so.
Now that the wraps are off, the way is clear for markets to forge on to new all-time highs which they will do by yearend, or early 2019 at the latest.
The Mad Hedge Market Timing Index saw the sharpest rally in 30 years, from 4 to 29 in a week. I told you the market was cheap!
Oil prices (USO) are telling us we are already in recession. Prices are in free fall hitting $60 a barrel, a nine-month low. China certainly is hurting and they are the largest marginal new buyer of Texas tea.
What we are really seeing is a massive unwind of wrong-footed hedge fund oil longs who expected oil prices to soar with the implementation of new sanctions on Iran. They didn’t.
US Exports plunged 26% in September while tariffs paid by US companies soared by an eye-popping 54%. The destruction of American international trade is well underway. When will it end? Who’s benefiting?
Asians are boycotting US Treasury sales and the US needs to sell to staggering $1.3 trillion in new debt in 2019. Keep hammering the (TLT) with those short positions, your new rich uncle trade.
The Producer Price Index Soared in October, up 0.6% versus 0.2% expected. Yikes, and double yikes! Inflation is here. Keep selling short those bonds (TLT)!
Trump threatened anti-trust action against all of big tech. Market yawned, with Amazon down only $50 after an enormous run-up. A 1% market share against falling prices and enormous customer satisfaction never triggered an anti-trust action before. Jeff Bezos is not the robber baron John D. Rockefeller. Could it be political?
The Number of Job Openings exceeded workers by 1 million in August, with 7.01 million openings versus 5.96 million unemployed. It’s the first time since the Dotcom Bubble top. Are we headed for a 3% Headline Unemployment Rate?
The Golden Age of Gridlock began with the Dems taking the House by flipping 40 seats and the Republicans holding the Senate. Now you can turn off your TV and focus on trading for the next two years. Buy stocks on dips, sell bonds on rallies. Oh, and the 2020 presidential election starts tomorrow.
Housing Sentiment hit a one year low, down a humongous five points, the second fastest drop in history. Rising interest rates have driven a stake through the heart of this once rip-roaring market, but it’s no 2008 replay.
November Share Buy Backs are poised to be the largest in history. Of course, you knew this was going to happen a month ago if you read Mad Hedge Fund Trader. Gotta love that tax reform!
My year-to-date performance rocketed to a new all-time high of +32.94%, and my trailing one-year return stands at 35.33%. November so far stands at +3.31%. And this is against a Dow Average that is up a pitiful 4.43% so far in 2018.
My nine-year return ballooned to 309.41%. The average annualized return stands at 34.72%. 2018 is turning into a perfect trading year for me, as I’m sure it is for you.
In the week before the election, I strapped on the most aggressive long portfolio of this year. It worked like a charm. I then went almost entirely in cash before election day, locking a 12% gain for the model trading portfolio.
I lasted in cash on two days. On the first down 300 point Dow day, I started adding positions in the old familiar names, including Apple (AAPL), Roku (ROKU) for the Mad Hedge Technology Letter, and a short in the (TLT). Bonds could really get crushed going into yearend targeting a 3.50% yield.
Q3 earnings have finished with a whimper and the blackout periods for share buybacks are now over. Let the buying begin! Some $200 billion has to hit the market by yearend, mostly in technology stocks.
After all the recent fireworks, this will be a quiet week on the data front. The October CPI will be the big one, out on Wednesday.
Monday, November 12 is Veterans Day. Stock markets are open but bonds are closed.
On Tuesday, November 13 at 6:00 AM EST, the NFIB Small Business Optimism Index is released.
On Wednesday, November 14 at 8:30 EST, we have the all-important Consumer Price Index announced. How hot will it be?
At 10:30 AM the Energy Information Administration announces oil inventory figures with its Petroleum Status Report.
Thursday, November 15 at 8:30, we get Weekly Jobless Claims. At the same time, October Retail Sales are put out.
On Friday, November 16, at 9:15 AM, the October Industrial Production is published.
The Baker-Hughes Rig Count follows at 1:00 PM.
As for me, I am on standby to volunteer as a pilot and serve as spotter for Calfire for the latest Northern California wildfires. I put my name on the waiting list last year, and they only just got around to calling me. There were 2,000 other volunteer pilots on the waiting list ahead of me.
You gotta love America.
Good luck and good trading.
Captain John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
