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Sep 14
2011
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Thoughts on Europe and New Video ReleasedPosted by: Stan Moore in Stans Blog on Sep 14, 2011 Tagged in: Untagged
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Dear Friends & Fellow Traders,
Every week for the last few months I come to trade thinking that the agreements between France and Germany solved the "crisis" and every week this sovereign-debt crisis just won't go away. Investors fear the end of the European Union.
Barron's says it best this week, "Investors realized last week that a resolution to Europe's financial crisis may be far more important to the future of the U.S. financial markets than just about anything President Obama can say or the Federal Reserve can do.
“A rumor appeared Friday morning that Greece would default on its debt over the Sep 11 weekend sent U.S. and European shares into a tailspin despite the Greek government's strong denial of such talk.
“Contributing to the dour mood was the resignation of Jürgen Stark, Germany's top representative on the European Central Bank's executive board. His departure reinforced the impression that the ECB, like the U.S. Federal Reserve, suffers from internal disagreements about how to help the economy. The discord raises questions about the effectiveness of these institutions and, more immediately, whether Germany will support the funding of future euro-zone bailouts."
It certainly is very profitable to trade every week but it wears on our emotions. We make money trading but our overall portfolio balances decline or go nowhere at best. I'm more tired than ever. I'm glad I'm getting away for a few weeks very soon.
Next I read from Kass there’s more distressing news about investors leaving the markets in near record redemptions. These issues are looming large so take heed.
In the past week Doug Kass has remarked how negative individual investors have become over the last few years. He writes, "In June nearly $21 billion was redeemed from domestic equity funds. Last month, almost $29 billion was redeemed and, in August, it has been estimated that more than $35 billion poured out.
“The $85 billion of outflows from June to August will likely approach the previous three-month record of $88 billion which came out of domestic equity funds between September and November of 2008!
“Thus far in 2011, individual investors have sold about $75 billion of domestic equity funds, only $10 billion less than last year's total outflows.
“Astonishingly, since the beginning of 2007, domestic equity mutual funds have had net outflows of more than $400 billion (in the same period, $835 billion of fixed-income funds have been purchased! (Hat tip Steve).That spread between stock outflows and bond inflows - $1.235 trillion - is unprecedented in the annals of financial history."
Kass continues, "Recent data suggest that hedge funds have also become noticeably bearish. According to ISI's Hedge Fund Survey (released last night), hedge fund net long exposure (falling to 45.7% from 47.0%) is now at the lowest level since summer 2009.
“There are two ways of looking at the hedge fund community's loss of confidence in the equity markets. Either it's bullish that hedge funds are so bearish, or there are some very good reasons why hedge funds (and retail investors) are bearish."
Kass concludes, "While the bearishness on the part of both retail and institutional investors has normally been associated more with market bottoms than market tops (and thus seen as bullish), four critical factors suggest that both investor groups might stay on the sidelines until they are somehow resolved:
Some Thoughts on our Favorite Companies
I recommend we continue to sell puts on the GDXJ on any weakness into the 32-34 level. If you read the linked article I posted in last week’s Stan’s Blog you'll note that we have the biggest buyer (China) of gold on our side looking for gold to go much higher from here.
I love SIGA down under $5 and still can't believe this price. SIGA has a $440 million contract to supply product with a great pipeline of others to come. Yes PIP's suit is a problem but a monetary award with make that go away. I've sent so much out already on CIGX I can't say anymore under $2.50. Own it big.
I’ve been trading and investing now going on 47 years. Early in my career I was a drug analyst. These companies were money machines or as I would say "growth companies". This is to separate them from plain growth stocks. These drug companies grow and prosper with economic growth however, they faultier with a softer GDP. Year in and year out regardless of the economic outlook these companies boomed.
Today, there are very few that come to mind. The premier growth company in the world today by far is AAPL. I would add AMZN and IBM to that list. There are others you get the idea. I have the next big winner in BTX. Years from now, say 3-4 years, BTX will dominate the stem cell area or whatever you want to call it like no other company can. This week’s deal with a major university is just more icing on the cake. BTX products will become the gold standard. Everyone will do business with them. The best part – the company has only 40 million shares outstanding with almost half held by insiders. BTX will be a huge winner in my life time.
Trades of the Week in Review
Again hoping for good news from Europe and combined with China’s slowing growth the market rallied into a high Thursday morning. Gold and bonds are higher and that's not good for stocks. Also Obama was to present his Jobs plan Thursday night. I can't remember the market rallying much into or after one of his addresses. I send an Alert Email to buy the SPY 120 OTM puts under $1.00. I went long under $0.90 and added some more near $0.80. As always we hedge our brains out in the sideways action.
That afternoon, Thursday, the EURO broke support, the 200DMA, near 140 and dropped sharply. The puts hit $1.72. I noted to hold the puts overnight and look to hedge anytime after the speech near the 1167-69 area. The overnight low was 1171. That's close enough for government work.
The next morning, Friday, with the market trading near 1173-4 pre-market I sent an Alert Email to buy the E-minis to hedge if one has not hedged. I noted there was good support near 1163. I send another Alert Email to add a few more hedges near 1163 after the market opened. At that same time I recommended we sell the 120 puts and buy twice as many of the 117 OTM SPY puts. This way we lock-in substantial profits but use some of the remaining profits to continue to push the downside trade for even more substantial gains.
With all the volatility I got a bit crazy about that time the market dropped lower. The Advance/Declines were over 1 to 10, an extreme to say the least. The ES hedges were hurting us but the puts could have been sold between $2.75 and $3.00. I'm assuming most of the 117s could have been purchased like I did near $0.50. I expected the E-minis to rally and they reached 1169.50. At worst we gave back some of our earlier hedged profits but the 3X return on the options greatly increased the overall returns.
Above I mentioned some of the news that happened out of Europe. Obama was a total non-event given what was occurring in Europe. This greatly enhanced the profits on the down side. The brief rally that occurred from the 1160 low to the 1169 gave a few in the Chat Room the ability to buy the 117s even lower. By 11:20 they were trading at only $0.17.
I send a few move Alert Emails after the 117s hit $1.60 to scale-out. By $1.76 we were down to tag ends. My first hedge paid for all my $0.50 puts. Again we tonned money with the hedges as the markets provided plenty of nice up and down moves. If anyone was lucky enough to buy more 117s near $0.17 with the increased size one should be mighty pleased this weekend with almost a 10X return.
The original trade recommendation traded and could have been bought as low as $0.57 shortly after I recommended the 120s. If anyone held onto the 120s these puts did trade over $4.00 but the switch to twice as many 117 puts was a traders dream come true. See attached Friday 30-minute chart, NET Weekly Money Chart 2011-09-09-D.
New NET Trading Video
I created a new trading/training video for last week’s trading, Aug 29 to Sep 2.
Please note that I will be on vacation from 9/19-10/3. The will be no charts, blog posts or alert emails until I return. You can reach me by email. However, there will be a Friday Chat Room both “vacation” Fridays.
I hope we all took time to reflect and pray for our nation and families as we remember 9/11 and those who selflessly gave of themselves to help others in distress. May God always bless America and each of you.
Keep those cards and letters coming I read everyone.
Good trading,
Stan Moore
702.558.1814
Every week for the last few months I come to trade thinking that the agreements between France and Germany solved the "crisis" and every week this sovereign-debt crisis just won't go away. Investors fear the end of the European Union.
Barron's says it best this week, "Investors realized last week that a resolution to Europe's financial crisis may be far more important to the future of the U.S. financial markets than just about anything President Obama can say or the Federal Reserve can do.
“A rumor appeared Friday morning that Greece would default on its debt over the Sep 11 weekend sent U.S. and European shares into a tailspin despite the Greek government's strong denial of such talk.
“Contributing to the dour mood was the resignation of Jürgen Stark, Germany's top representative on the European Central Bank's executive board. His departure reinforced the impression that the ECB, like the U.S. Federal Reserve, suffers from internal disagreements about how to help the economy. The discord raises questions about the effectiveness of these institutions and, more immediately, whether Germany will support the funding of future euro-zone bailouts."
It certainly is very profitable to trade every week but it wears on our emotions. We make money trading but our overall portfolio balances decline or go nowhere at best. I'm more tired than ever. I'm glad I'm getting away for a few weeks very soon.
Next I read from Kass there’s more distressing news about investors leaving the markets in near record redemptions. These issues are looming large so take heed.
In the past week Doug Kass has remarked how negative individual investors have become over the last few years. He writes, "In June nearly $21 billion was redeemed from domestic equity funds. Last month, almost $29 billion was redeemed and, in August, it has been estimated that more than $35 billion poured out.
“The $85 billion of outflows from June to August will likely approach the previous three-month record of $88 billion which came out of domestic equity funds between September and November of 2008!
“Thus far in 2011, individual investors have sold about $75 billion of domestic equity funds, only $10 billion less than last year's total outflows.
“Astonishingly, since the beginning of 2007, domestic equity mutual funds have had net outflows of more than $400 billion (in the same period, $835 billion of fixed-income funds have been purchased! (Hat tip Steve).That spread between stock outflows and bond inflows - $1.235 trillion - is unprecedented in the annals of financial history."
Kass continues, "Recent data suggest that hedge funds have also become noticeably bearish. According to ISI's Hedge Fund Survey (released last night), hedge fund net long exposure (falling to 45.7% from 47.0%) is now at the lowest level since summer 2009.
“There are two ways of looking at the hedge fund community's loss of confidence in the equity markets. Either it's bullish that hedge funds are so bearish, or there are some very good reasons why hedge funds (and retail investors) are bearish."
Kass concludes, "While the bearishness on the part of both retail and institutional investors has normally been associated more with market bottoms than market tops (and thus seen as bullish), four critical factors suggest that both investor groups might stay on the sidelines until they are somehow resolved:
- The market’s continued volatility and instability is scaring investors, who have not yet gotten over the economic/market experience of 2008-09.
- The growing sovereign debt contagion in Europe and the failure of leaders/central bankers to respond intelligently remains a wild card.
- Continuing political partisanship and the failure of our leaders to properly confront our fiscal imbalances and to promote pro-growth policy threatens business and consumer confidence.
- An inability to gauge whether the erosion in the August sentiment measures -- influenced by the chaos in the U.S. stock market and domestic/overseas economic uncertainties -- will translate into weakness in hard domestic economic data."
Some Thoughts on our Favorite Companies
I recommend we continue to sell puts on the GDXJ on any weakness into the 32-34 level. If you read the linked article I posted in last week’s Stan’s Blog you'll note that we have the biggest buyer (China) of gold on our side looking for gold to go much higher from here.
I love SIGA down under $5 and still can't believe this price. SIGA has a $440 million contract to supply product with a great pipeline of others to come. Yes PIP's suit is a problem but a monetary award with make that go away. I've sent so much out already on CIGX I can't say anymore under $2.50. Own it big.
I’ve been trading and investing now going on 47 years. Early in my career I was a drug analyst. These companies were money machines or as I would say "growth companies". This is to separate them from plain growth stocks. These drug companies grow and prosper with economic growth however, they faultier with a softer GDP. Year in and year out regardless of the economic outlook these companies boomed.
Today, there are very few that come to mind. The premier growth company in the world today by far is AAPL. I would add AMZN and IBM to that list. There are others you get the idea. I have the next big winner in BTX. Years from now, say 3-4 years, BTX will dominate the stem cell area or whatever you want to call it like no other company can. This week’s deal with a major university is just more icing on the cake. BTX products will become the gold standard. Everyone will do business with them. The best part – the company has only 40 million shares outstanding with almost half held by insiders. BTX will be a huge winner in my life time.
Trades of the Week in Review
Again hoping for good news from Europe and combined with China’s slowing growth the market rallied into a high Thursday morning. Gold and bonds are higher and that's not good for stocks. Also Obama was to present his Jobs plan Thursday night. I can't remember the market rallying much into or after one of his addresses. I send an Alert Email to buy the SPY 120 OTM puts under $1.00. I went long under $0.90 and added some more near $0.80. As always we hedge our brains out in the sideways action.
That afternoon, Thursday, the EURO broke support, the 200DMA, near 140 and dropped sharply. The puts hit $1.72. I noted to hold the puts overnight and look to hedge anytime after the speech near the 1167-69 area. The overnight low was 1171. That's close enough for government work.
The next morning, Friday, with the market trading near 1173-4 pre-market I sent an Alert Email to buy the E-minis to hedge if one has not hedged. I noted there was good support near 1163. I send another Alert Email to add a few more hedges near 1163 after the market opened. At that same time I recommended we sell the 120 puts and buy twice as many of the 117 OTM SPY puts. This way we lock-in substantial profits but use some of the remaining profits to continue to push the downside trade for even more substantial gains.
With all the volatility I got a bit crazy about that time the market dropped lower. The Advance/Declines were over 1 to 10, an extreme to say the least. The ES hedges were hurting us but the puts could have been sold between $2.75 and $3.00. I'm assuming most of the 117s could have been purchased like I did near $0.50. I expected the E-minis to rally and they reached 1169.50. At worst we gave back some of our earlier hedged profits but the 3X return on the options greatly increased the overall returns.
Above I mentioned some of the news that happened out of Europe. Obama was a total non-event given what was occurring in Europe. This greatly enhanced the profits on the down side. The brief rally that occurred from the 1160 low to the 1169 gave a few in the Chat Room the ability to buy the 117s even lower. By 11:20 they were trading at only $0.17.
I send a few move Alert Emails after the 117s hit $1.60 to scale-out. By $1.76 we were down to tag ends. My first hedge paid for all my $0.50 puts. Again we tonned money with the hedges as the markets provided plenty of nice up and down moves. If anyone was lucky enough to buy more 117s near $0.17 with the increased size one should be mighty pleased this weekend with almost a 10X return.
The original trade recommendation traded and could have been bought as low as $0.57 shortly after I recommended the 120s. If anyone held onto the 120s these puts did trade over $4.00 but the switch to twice as many 117 puts was a traders dream come true. See attached Friday 30-minute chart, NET Weekly Money Chart 2011-09-09-D.
New NET Trading Video
I created a new trading/training video for last week’s trading, Aug 29 to Sep 2.
Please note that I will be on vacation from 9/19-10/3. The will be no charts, blog posts or alert emails until I return. You can reach me by email. However, there will be a Friday Chat Room both “vacation” Fridays.
I hope we all took time to reflect and pray for our nation and families as we remember 9/11 and those who selflessly gave of themselves to help others in distress. May God always bless America and each of you.
Keep those cards and letters coming I read everyone.
Good trading,
Stan Moore
702.558.1814