Philstockworld July Trade Review – Too Bearish Or Just Right? Part 2

We had a great start to the month (see Part 1) with 42 trade ideas and only 2 that didn't work but, ahead of the review, I doubt we did so well in the last few weeks as the extent of the run-up took us by surprise.  Let's see how the rest of July played out: 

July 8: Monday Morning – Getting Set for Earnings Season

What's happening is the Corporations have gotten ruthlessly efficient at scooping up the profits as they move operations to countries where they can pay the least and pollute the most – shifting those costs to future generations while the American sheeple head off to Wal-Mart and buy items that ultimately cost them more jobs and even more money over the long-haul.

• LTP and STP trades were made but a watch and wait day otherwise.

July 9: Testy Tuesday – NYSE 9,300 or Bust!

The NYSE gives us a clearer picture of the market and we need to take it's lagging performance very seriously but, on the other hand – we cannot ignore the glory that is Russell 1,010 either.  The Russell (see Dave Fry's chart) is another broad index of 2,000 small-cap companies (under $2.6Bn, over $130M) and they add up to just $1.9Tn – much easier to push around!  

But, faked or no, we have to play the cards we're dealt and this is day two of Russell 1,000+ and now we have 3 of our 5 Must Hold lines green on the Big Chart, which means we need to get more bullish.  Both the Dow and the NYSE have a very long way to go to catch up (5%) but, if the rally is real – that shouldn't be a problem for either of them.  

• Nikkei Futures (/NKD) bullish at 14,500, out at 14,600 – up $500 per contract
• Oil Futures (/CL) short at $103.50, out at $103.60 – down $100 per contact
• 4 YUM Oct $75 calls for $2.50 ($1,000), selling 5 Aug $72.50 calls for $2.40 ($1,200) for a net $200 credit, out at $80 - up $280 (140%)
• AAPL 2015 $500 calls at $28, now $40.30 – up 44%

July 10: Whippin' It Wednesday – 3 Trade Ideas that Make 300% if the Market Falls

Nothing based on the technicals and THAT is why we're going to have to get more bullish (even if we have to hold our noses while we buy to fight of the stink of the BS) but, step on in our buying process is taking some downside hedges so – at these "breakout" levels, we like to hedge first and THEN buy the breakout.  

• Oil Futures (/CL) short at $105, $105.50 and $106 – the $106 shorts finally worked so call it even.  
• Nikkei Futures (/NKD) bearish at 14,600, out at 14,400 – up $1,000 per contract
• TZA Oct $28/35 bull call spread at $1.25, selling Oct $23 puts for .95 for net .30, now -0.90 – down 400%
• DXD Aug $33 calls at $1.20, selling $35 calls for .60, selling AA Jan $7 puts for .28 for net .32, now $0 – down 100%
• 15 DXD Aug $33 calls at $1.20, selling 15 $35 calls for .60 (net $900), selling 1 AAPL Jan $350 put for $900 for net $0 overall, now $200 – $235 = -$35.  
• 20 AAPL 2015 $350/500 bull call spreads at $63 ($126,000), selling 20 2015 $375 puts at $42.50 ($85,000) for net $41,000, now $105,900 – up $64,900 (158%)

As I noted in the morning post – we set our bearish hedges so we CAN go long on trade ideas like AAPL.  The hedges are INSURANCE that you WILL LOSE if the market goes up.  Aheady of AAPL earnings, we only THOUGHT it would go higer but, had it gone down, we anticipated a broad market sell-off.  As noted last night by StJ – primarily driven by AAPL, our LTP gained $120,000 in July so, of course we don't mind losing on a few hedges along the way (and, of course, we didn't have to ride the hedges to the bitter end, these are examples of worst case)! 

July 11:  Thursday Frenzy – Bernanke Boosts Markets, Bashes Dollar

And He shall print for ever and ever.  That's right kids, Uncle Ben came to the rescue last night with his most doveish speech of the year(and the competition was fierce!).  We went over the Fed Minutes (well, half of them, they were long!) in yesterday's chat (tweeted here) but all that analysis was thrown out the window when Bernanke said: "Both sides of our mandate are saying we need to be MORE accommodative."

• Nikkei Futures (/NKD) short at 14,600, out at 14,515 - up $425 per contract
• Oil Futures (/CL) short at $107, out at $106  - up $1,000 per contract
• Oil Futures (/CL) short at $106, out at $105.20 - up $800 per contract

July 12:  Federally Funded Friday – Top 1% Get $850Bn While GOP Votes to Starve the Poor 

On the whole, I'm very concerned that the markets are dangerously overbought and, overall, the Global news-flow still SUCKS – so it's hard to get excited about buying long positions at this very toppy-looking market.  As you can see from Dave Fry's McClellan Chart, we're as overbought as we've been since last September, just before the S&P fell from 1,474 back to 1,343 (9%).

• Nikkei Futures (/NKD) short at 14,600, out even.  
• Oil Futures (/CL) short at $106, out at $104.50 - up $1,500 per contract 
• DBA at $24.75, now $24.37 - down 1.5%
• CLF at $17, now $20.58 - up 21%
• ABX at $14.75, now $16.68 - up 13%
• BA Aug $95 puts sold for $3.30, now .10 - up 97%
• TSLA Aug $130 calls sold for $11, buying Jan $130/160 bull call spread for $10 for net $1 credit, now -$2 - down 300%

Of course, trades like the TSLA spread take time to unfold.  TSLA is at $139 this morning and the Aug $130s have a lot of premium at $15 and can be rolled to the Sept $135s at $16 or the $140s at $13 for $2 – taking an individual snapshot of these long-term spreads at any given time is not very meaningful.  

July 15: Monday Market Movement – What Will It Take? 

The point isn't that the news and data suck, it's that the market could care less.  We're 6.5% higher than we were on April 1st and that was 8.5% higher than we were on January 1st so we're well on our way to a 25% gain for the year.  This is what we expected to happen when inflation kicked in and our long-term Income Portfolio is jam packed with bullish plays as we DID expect this kind of rally by next year – we're just surprised it's coming so early – and without any significant correction (Springheel Jack chart)! 

That's led us to be way too bearish in our short-term betting and we'll need to drink the Kool Aid and make ammends.  On April 14th we had great timing with "5 Trade Ideas that can Make 500% in an Up Market" and, in fact, by May 8th, they became "5 Trade Ideas that Made 1,816% in 21 Days"  and, fortunately, we weren't too greedy and took the money and ran into the May top.  You would think all those trades have now gotten away from us but they haven't:

• Oil Futures (/CL) short at $106, out at $105 – up $1,000 per contract
• Silver Futures (/SI) long at $20, out at $20.15 - up $7,500 per contract 
• Gasoline Futures (/RB) short at $3.15, out at $3.10 – up $2,100 per contract
• DBA Jan $23/26 bull call spread at $2, selling 2015 $25 puts for $1.55 for net .45, now .05 – down 88%
• X 2015 $15/22 bull call spread at $3.05, selling $13 puts for $1.95 for net $1.10, now $1.50 – up 36%
• CLF 2015 $13/20 bull call spread at $3, selling $15 puts for $4 for net $1 credit, now $2.50 – up 350%
• ABX 2015 $15/25 bull call spread at $2.15, selling $13 puts for $2.60 for net .45 credit, now $1.40 – up 411%
• 10 DDM Jan $99/107 bull call spreads at $3 ($3,000), selling 1 AAPL 2015 $350 put for $2,965 for net $35, now $1,900 – up 5,328%
• 10 DDM Jan $99/107 bull call spreads at $3 ($3,000), selling 1 ISRG 2015 $350 put for $2,900 for net $100, now $2,200 – up $2,100%

July 16: Turn Down Tuesday – Even Coke is Having Problems!

Rather than shorting KO, we're shorting oil this morning and I sent out a tweet early this morning, identifying a shorting opportuntiy on /CL Oil Futures at $106.45 but we stopped out of those at $106.50 and now we're looking at the $107 line as our next shorting target, waiting for the big drop we are fairly positive is going to come as we head into the NYMEX contract rollover next Monday.

(note – by July 30th, oil had fallen to $103.   At $10 per penny, per contract, that's $4,000 on the Futures.  This opportunity is repeating in the August cycle but beware a spike up first!)  

• Oil Futures short at $106.45, out at $106.50 - down $50 per contract 
• Oil Futures short at $107, out at $105.75 – up $1,250 per contract

IN PROGRESS