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The Mad Hedge Fund Trader “Special Earthshaking Issue’” With John Thomas from San Francisco, CA August 27, 2014 www.madhedgefundtrader.com www.madhedgefundtrader.com
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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% *April Final +3.32% *May Final +4.61% *June Final +4.24% 2014 YTD +29.78%, versus 3% for the Dow, an outperformance of 26% *First 185 weeks of Trading +152%!
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Portfolio Review- Running Out of Positions! Everything worked! (almost) current capital at risk Risk On (TBT) short Treasury bond ETF10.00% Risk Off none total net position10.00%
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Trailing 12 Month Return +60%
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44 Months Since Inception-50 BP Short of All Time High +152%, Averaged annualized +40.5%
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Strategy Outlook- *Collapsing bond interest rates in Europe has become the main global driver of all asset classes *Watch the German 10 year bund, now yielding 0.90%, targeting JGB’s at 0.50% *Nothing else matters, not Ukraine, the Middle East, Libya, or Ebola *”Normalization” is the word of the week in Jackson Hole *Data says major growth improvement still in the cards for H2
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The Jim Parker View The Mad Day Trader-On sale for a $1,500 upgrade Technical Set Up of the week Buy *Grind up continues, (SPY) targeting at least 2,060 *No breaks until after month end Sell Short – *Euro on next short covering rally *Yen 103.30 in cash market Avoid – *Bond market until melt up in Europe finishes
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The Global Economy- US Accelerating, Europe Decelerating *US August Markit PMI up a strong 55.8 to 58.0 *German Q2 GDP drops -0.2%, threatening a recession, hugely negative for the Euro *Fed meeting at Jackson Hole picks “normalization” as the new word du jour, meaning that interest rates will rise some time in the future *China August Markit PMI drops 51.7 to 50.3
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Weekly Jobless Claims- The trend is your Friend -14,000 to 298,000, new 7 year lows!
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Bonds-Stand Aside Until Europe Tops Out *Global bond rally continues, German 10 year bunds hit 0.90% *Fed tapers quantitative easing to zero in October, but interest rates rises not until late 2015 *Driven by geopolitics and a global cash glut *Switch out of bonds into stocks about to become major factor *2.33% was the spike low on the 10 year Treasury, next spike to 2.25% should hold *Huge rally in (JNK) chases the stock market
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Ten Year Treasuries (TLT) 2.37% failure here is key, proves my top for the year call stopped out 8/$117-$120 put spread expired at cost
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The (TLT) Expiration Short Squeeze *Slow Friday *Option expiration day *False rumor of Russian invasion *I covered short 15 minutes before it hit *No one wanted to be short (TLT) over the weekend *Anyone who acted late on the Trade Alert to cover got hurt
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30 Year Treasury Yield ($TYX)-Yield 3.13%
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Junk Bonds (HYG) 5.79% Yield The New Lead Contract-Wow!
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2X Short Treasuries (TBT) long 10% position-keeping for a quick turnaround volatility is low
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Investment Grade Corporate Bonds (LQD) 3.56% Yield
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Emerging Market Debt (ELD) 3.14% Yield
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Municipal Bonds (MUB)-2.92% yield, Mix of AAA, AA, and A rated bonds
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MLP’s (LINE) 9.40% Yield-
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Stocks- Best August in 14 Years *There are still plenty of bears around, so the bull market in stocks is still on track *Reallocation from bonds and stocks into cash us underway, stocks will lead the rebound *Use the next dip to reload on Tech first and foremost, for a yearend rally, *(SPY) could add 10% by yearend from the August low, provided that geopolitics stay on a low boil *$125/share in S&P earnings X 16 earnings multiple = (SPX) 2,000 *Volatility back down on the floor
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The Trend is Your Friend
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Dow Average
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NASDAQ (QQQ)- Still an Uptrend
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Europe Hedged Equity (HEDJ)- Weak Euro Helping Stocks
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(VIX)- Back to the Bottom
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Russell 2000 (IWM)-Recent lag is a concern
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Russell 2000 (IWM)-Channeling Too
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Technology Sector SPDR (XLK), (ROM) As predicted, it’s all about technology!
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Industrials Sector SPDR (XLI)
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Health Care Sector SPDR (XLV), (RXL)
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Financial Select SPDR (XLF) Hit by Strong Bond Market
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Apple (AAPL) – We got the Run to New Highs rebuy on next dip, but watch out for September
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Google (GOOGL)
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China- Positive PMI’s hint at breakout
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Japan (DXJ)- Weak on poor GDP figures
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Emerging Markets (EEM)
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India (EPI) – Still Grinding Up on EEM Strength
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Foreign Currencies- Here Comes Euro QE! *Draghi absolutely has to cut interest rates and expand QE to head off a Russian sanctions induced recession, targeting $127 in the (FXE). *Draghi hints of accelerated quantitative easing at Sept 4 ECB meeting accelerates the Euro downturn. “All available tools comment.” *Ditto for BOJ governor Kuroda and the yen *Ultra low bond interest rates also dragging down the Euro
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Euro (FXE) -The Freefall is On took profits on the 9/$133-$135 put spread 2% drop in (FXE) boosted our 2014 return by 4%
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Long Dollar Index (UUP) – Euro and Yen Collapse Great for Dollar
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British Pound (FXB) Ditto for Sterling
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Japanese Yen (FXY)- A Breakdown at Last!
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Short Japanese Yen ETF (YCS)
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Australian Dollar (FXA) – Flat lining on Neglect
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Chinese Yuan (CYB) - The bull market has resumed
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Emerging Market Currencies (CEW)
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Energy-Collapse! *Technical breakdown of the charts in ominous *Contango weighing heavily on prices *North Sea oil glut crushing Brent prices *Libyan exports resume, potentially adding 1.5 million barrels/day to global supply *Gasoline prices at one year lows *Natural Gas sees 88BcF going into storage, largest weekly injection in history, but prices rally
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Oil- Back to Multi Year$77.50-$112.50 Range
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United States Oil Fund (USO)
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Natural Gas (UNG)-
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Copper-Don’t Chase
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Freeport McMoRan (FCX)-
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Global Copper Miners (COPX)
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Precious Metals-Gone Dead * Gold trying to put in bottom on charts *Simultaneous acceleration of quantitative easing in both Japan and Europe is very gold negative *Seasonally support turning positive as Indian wedding and Chinese New Year approaches *CME margin cut for all metals is price positive *Gold imports by China and India waning in recent months *Will India president Mordi dump gold import tariffs, as promised?
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Gold- Plunging Interest Rates Crushing Prices
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Barrack Gold (ABX)-
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Market Vectors Gold Miners ETF- (GDX)
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Silver (SLV)- Show Me the Rally
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Silver Miners (SIL)-
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Agriculture * Most ag funds are heavily short, while prices are bouncing along a bottom, setting up a coming short squeeze *Canadian wheat crop coming in 25% smaller than last year *Ukraine, Russia, and Poland are producing wheat crops of lesser quality than last year, boosting international prices *Farm incomes to plunge 14% in 2014 *Stand aside
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(CORN)-New Lows!
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(SOYB)-Free Fall!
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DB Commodities Index ETF (DBC)-
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Real Estate-An Autumn Revival? *Dramatic improvement in the data in July. *33% of sales still for cash, which is amazing, given how low interest rates are, reflects institutional participation in market *30 year fixed mortgage hits 4.15%, a new low for the year *July existing home sales up 2.4%, to 5.14 million, a ten month high *July Housing starts up 15.9%, an 8 month high *July new home sales -2.4% (signed contracts) *
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May S&P/Case–Shiller Home Price Index +9.3% down to +8.1% YOY
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(ITB)- US Home Construction Dow Sub index positive data is feeding into stocks
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Trade Sheet- keep 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, end is near *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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Next Strategy Webinar 12:00 Wednesday, September 10, 2014, Live from San Francisco, California Good Luck and Good Trading !
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