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Thursday Thrust – Dollar Sacrificed to Save the Markets (again)

Posted on the 18 June 2015 by Phil's Stock World @philstockworld

Thursday Thrust – Dollar Sacrificed to Save the Markets (again)Dive, dive, dive!  

That's what the Dollar is doing this morning as Yellen once again stepped in to save the markets by saying the high Dollar has been a drag on US Exports, giving the impression the Fed does not want the Dollar so strong – even though the Dollar was already at 95, down 5% from it's April highs, when the S&P was at 2,050.  

Now the Dollar is at 94, which is 6% lower and the S&P has managed to claw back to 2,100, which is 2.4% higher.  When you consider the fact that the S&P 500's value is calculated from a formula that is based in Dollars, we've actually lose 3.6% in real value since the April lows but shhhhhhhhhhhhhhhhh – don't tell that to the bulls!    

Thursday Thrust – Dollar Sacrificed to Save the Markets (again)The good news is that the Gold ETF (GLD) trade idea we had for you, FOR FREE, right in our morning post on June 4th (and you can have them delivered to you pre-market right HERE to make sure you don't miss another one) is right on track with just one day to expiration.  At the time, we said:

Today, for example, there's a nice opportunity to go long on gold at $1,175 (/YG Futures) and that should be good for a $5-10 move up at $32.20 per $1, per contract.  If we're still low at the open, the Gold Trust ETF (GLD) June $112/113 bull call spread at 0.50 will pay back 100% if GLD holds $13.50 into expirations on the 19th.  So, if we want to make $2,500 in two weeks, we add 50 of those contracts for $2,500 to our Short-Term Portfolio (and 10 to our $25,000 Portfolio for $500) and then sit back and watch the fun.

Not only are those 50 contracts going to make the full 100% ($2,500) just two weeks later but the /YG futures just hit our $1,200 goaaaaaaaaaaalllllllllllllll!!! and that's good for a gain of $805 PER CONTRACT!  We also gave away 6 other stock picks in that morning's post, 5 of which are already winners.  GLD was, of course, one of our Top Trade Alerts for June (5 so far) and we have consistently been knocking those out of the park.  

That being said, I have great confidence in yesterday's Top Trade Idea and I'll share it with the cheapskate readers here so they can get an idea of what they are missing by not subscribing to PSW:

Cameco Corp (CCJ) is back in play at $15 and I like the fact that they settled with their union and that Japan is getting around to restarting reactors and that China and India are building new ones like crazy:

Workers at Cameco Fuel Manufacturing Inc. Accept Contract Offer

Asia’s $800 Billion Nuclear Splurge to Unlock Uranium Motherlode

Uranium producer Cameco sees 5 pct rise in 2015 revenue

Thursday Thrust – Dollar Sacrificed to Save the Markets (again)

Using the premise that we wouldn't mind owning 1,000 shares in the LTP for $13,000 (14% off the current price), we can sell 10 2017 $13 puts for $1.80 in the LTP and consider that free money ($1,800) and put it towards the purchase of 20 Jan $13 ($2.70)/16 ($1.15) bull call spreads at $1.55 ($3,100) for a net outlay of $1,300 on $6,000 worth of spreads(at $16).  

SPY  5  MINUTEOur Long-Term Portfolio is still over 85% in cash as we still don't have much faith in the markets holding up, but that doesn't mean there aren't bargains to be had.  In fact, 1/3 of the S&P 500 is trading at 52-week lows with 16 (3.2%) making new lows yesterday alone, despite the Fed boost.  

This morning, however, we're going to look to be leaning more bearish and we'll take the opportunity of this early-morning, weak-dollar pop to buy back the short S&P Ultra-Short (SDS) June $20.50 calls we sold on Tuesday to cover our longer-term SDS bullish (short SPY) hedges.  These BS Dollar rallies are a gift if you know how to play them and we currently (8:30) have the opportunity to short:

  • S&P Futures (/ES) at 2,100
  • Russell Futures (/TF) at 1,270 
  • Oil Futures (/CL) at $60.95
  • Gold Futures (/YG) at $1,205

SPY DAILYWhat we're expecting is for the Dolar to come back (now 93.50!), especially with the CPI Report coming in hot at +0.4%, which puts the Fed back on the table with inflation running hot (also good for our Inflation Fighter plays!).

We're still waiting to clear those strong bounce lines but, given the weak reaction to a 1.5% drop in the Dollar from yesterday (pre-Fed), I don't see it happening and, if Greece gets worse over the weekend or the BOJ or China add more stimulus – there go those currencies and up comes the Dollar to put pressure on the markets (and gold and oil) again.  

Speaking of going short.  Did you know that Direxion has a 2x China Bullish ETF (CHAU)?  We already have a long on the China Ultra-Short (FXP) but we cashed out of FXI shorts for nice gains and now I like CHAU as a new China short, since it's one of those high-fee, high-turnover EFTs that simply chew up their own value over time.  They peaked just under $59 but we can pick up the Nov $65 puts for $19 and sell the Nov $53 puts for $11 for net $8 on the $12 spread that's almost 100% in the money to start.  

Thursday Thrust – Dollar Sacrificed to Save the Markets (again)

The nice thing about owning the $65/53 bear call spread for 155 days (to November expiration) is that we get to sell high-premium short puts along the way.  For example, July $45 puts are $1.75 and are $8.40 out of the money (15%) which means China would have to fall 7.5% in 30 days for those puts to hurt us.  Meanwhile, they pay us back $1.75 on the net $8 we lay out in our first month – that's 22%!  Since we don't NEED to make 22% a month and since we're bearish on China, a partial sale will fit the bill and we'll come up with ratios in our Live Member Chat Room later today. 

Thursday Thrust – Dollar Sacrificed to Save the Markets (again)We get Consumer Comfort, the Philly Fed and Leading Indicators later on today and that's all the US data we'll see this week.  The BOJ has a press conference early tomorrow morning (tomorrow afternoon for them) and next week we'll get Housing Data, Durable Goods and another look at GDP (Weds) but, as you can see from the Economic Surprise Index – the aggregate of data is still very, very bad and that's why we remain "Cashy and Cautious" – no matter how much money the Central Banksters continue to throw at this problem.  

Be careful out there!  

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