The Mad Hedge Fund Trader “Special Non Taper Issue ” With John Thomas San Francisco December 18,

Trade Alert Performance Three Year Anniversary! *2013 YTD %, compared to 21% for the Dow, beating it by 38% *December +3.2% *First 158 weeks of Trading % *Versus +29% for the Dow Average A 85% outperformance of the index 77 out of 92 closed trades profitable in % Success Rate in 2013

Portfolio Review- Maxing Out Over the Holidays watch out for over trading and over confidence! Expiration P&L % YTD current capital at risk Risk On (AAPL) 1/$490-$520 call spread10.00% (SFTBY) shares long20.00% (XLF) 1/$19-$21 call spread10.00% (FXY) 1/$101-$98 put spread10.00% (FXY) 1/$100-$97 put spread10.00% (SPY) 1/$173-$176 call spread10.00% (TLT) 1/$106-$109 put spread10.00% Risk Off none total net position80.00%

Performance Year to Date %!!

36 Months Since Inception %, Averaged annualized +38.1%

Strategy Outlook-Buy the Dips *Its off to the races after the Fed meeting *$23 billion Washington budget deal eliminates one overhang for the market *Bull market in risk assets continues well into 2014 *Bonds have topped, entering 20 year slow motion bear market *Free fall in yen continues *Don’t catch the falling knife in gold, the world wants paper assets *Emerging markets will outperform in 2014 off the back of China recovery *Commodities looking very cheap

The Jim Parker View The Mad Day Trader-On sale for a $1,000 upgrade Technical Set Up of the week *Buy buy calls, risk on after announcement keep (TBT) calls *Sell Short (TLT) on a rally sell (FXY) if closes here, could run another 8 handles (GLD) don’t touch (USO) expensive, but not yet

The Global Economy-Ramping Up *Global synchronized recovery still the play for 2014, the US, Europe, China, and Japan all grow together for the first time since 2007 *UK Unemployment falls to 7.4%, 4 ½ year low, but BOE maintains QE and zero rates. A Fed model? *Japan Tankan survey modestly improves, capital spending rising *October Japanese machinery orders -2.1% up to +0.6% *China HSBC PMI 50.8 to 50.5, still over 50 *German November ZEW investor confidence survey 54.6 to 62, a 7 year high

Weekly Jobless Claims +68,000 increase to 316,000!!

November Nonfarm Payroll dead on the 12 month moving average

Bonds-The Zombie Market *Do we get $70 or $80 billion in Fed buying a month for the foreseeable future? Will head off a market crash and interest rate spike. *Sets up a goldilocks scenario for all risk assets *Taper will overhang the market for all of 2014, keeping it stuck in narrow ranges, will unwind in small $10 billion increments *Bonds could take a big hit when “Great Reallocation” hits in January *Most analysts targeting 3.5% yield on ten year Treasury for 2014, up from 2.70%, could spike to 4% *Sell every rally

Ten Year Treasuries (TLT) long the 1/$106-$109 put spread-tried to double but missed

10 Year Treasury Yield ($TNX)

Junk Bonds (HYG)

2X Short Treasuries (TBT) - The next leg up has started

Investment Grade Corporate Bonds (LQD)

Emerging Market Debt (ELD) 4.72% Yield

Municipal Bonds (MUB)-2.92% yield, Mix of AAA, AA, and A rated bonds

MLP’s (LINE) 11.2% Yield

Stocks – Pause in a Bull Market *If Fed doesn’t taper today, then it’s off to the races and new highs, but only incremental ones. *All the volatility for the month will be concentrated in 2 hours after the 2:00 PM EST announcement *By the way, no chance of Fed taper in December, waiting for Yellen *$635 billion in company stock buy backs in 2013, biggest since 2006 *Japan (DXJ) the big performer in 2013, up 39%, breaking out to upside, carries on into 2014

S&P 500 (SPX)- Another sideways consolidation has begun long the 1/$173-$176 call spread, double on a 3 point dip

Dow Average

NASDAQ (QQQ)

(VIX)-Inverted for the first time in years Short term VIX is higher than medium term-Wednesday Fed hedging

Russell 2000 (IWM)

Apple (AAPL)- Takes a Hit on (JBL) downgrade, (CHL) deal still just talk long the 1/$490-$520 call spread

Technology Sector SPDR (XLK), (ROM)

Cyclicals Sector SPDR (XLY), (UCC)

Health Care Sector SPDR (XLV), (RXL)

Financial Select SPDR (XLF) long the 1/$19-$21 call spread

Citigroup

Shanghai-

(DXJ)- Upside breakout on more aggressive monetary easing

Emerging Markets (EEM) Trapped by the commodity complex, and rising rates

Dollar-Yen is the Big Story *Successful breakdown targets ¥125 in the cash, $75 in the (FXY), will be the big foreign currency trade of 2014, again. BOJ says room for more QE *Japanese cash outflow into foreign bonds weakening the yen more, $25 billion in November alone *Aussie hostage to the US bond market, dragged down by weak commodities, and killed ADM’s takeover bid for GrainCorp. *Euro overvalued again at $1.38 *Taper talk will support dollar, then eventually push it up through higher interest rates

Long Dollar Basket (UUP)-Breaking Down

Japanese Yen (FXY) -Major breakdown underway long the 1/$ put spread, long the 1/$ put spread long the the 1/$98-$101 put spread

Short Japanese Yen ETF (YCS) -

Euro (FXE) -

Australian Dollar (FXA) - Talking down the Aussie again

Emerging Market Currencies (CEW)

Energy- Supply Glut *Libyan support shortage elevating prices *Cold weather gives a boost *So does China recovery *A peace deal with Iran on nukes could drop oil prices for another $20, as 3 million barrels a day in new supply hits the market. *International Energy Agency says US to become worlds top oil producer by 2016 *Sell on next $5 rally

Crude-Sell the Rally….Soon

United States Oil Fund (USO)

Natural Gas (UNG)-Cold weather spike

Natural Gas-It’s All About the Thermometer

Copper- the China catalyst, BUT NOW TOP OF ONE YEAR RANGE

Freeport McMoRan (FCX) Losers punished one last time

Precious Metals-The Unloved commodity *Waiting for the next wave of panic selling *JP Morgan physical gold inventories hit new lows *Eric Sprott of the Sprott gold find fired after a 90% draw down in assets *Will the final bottom be $1,200, or $1,000? *Will we see it in 2014? *Don’t try to catch the falling knife

Gold-Breaking to new lows

Barrack Gold (ABX)-

Market Vectors Gold Miners ETF- (GDX)

Silver (SLV)-

Agriculture-No Trade Until 2014 *China has quadrupled buying at the market bottom, to 48 million metric tonnes. Is this the floor? *Hoarding becoming the order of the day. Farmers would rather store crops than sell at low prices. Storage facilities are overflowing *2012’s high prices cured high prices, rushed farmers to over plant *Buy dips next year and pray for a draught

(CORN)-

DB Commodities Index ETF (DBC)-Yikes! The worst performing sector of 2013

Real Estate-Slowing Down *Seasonal slowdown also hurting *Prices still rising, but at slower rate *Big money has been made, expect slow grind up from here

September S&P/Case–Shiller Home Price Index

(ITB)- US Home Construction Dow Sub index Not the Sector to Own in Rising Interest Rates

Trade Sheet-No Change “RISK ON” Good Into 2014 *Stocks- buy the dips, running to a new yearend high *Bonds- sell rallies, trade the 2.50%-3% range *Commodities-start scaling in on dips *Currencies- sell yen on any rallies *Precious Metals –wait for the final flush *Volatility-stand aside, will bounce along bottom *The Ags –stay away until next year, no trade *Real estate- no trade

To buy strategy luncheon tickets Please Go to Next Strategy Webinar 12:00 EST Wednesday, January 8, 2013 Live from San Francisco Good Luck and Good Trading!