A Month’s Worth of Winnings – Repeat After Me! (TSLA,FXI,XHB,RSX)

An important thing to remember about stock movements, and one that’s been documented in abundant fashion by market technicians, is the propensity of both individual stocks and indexes to perform a ‘test’ of prior lows after falling.   That is, stocks fall to new lows every day, bounce, and more often than not, reverse course a second time to ‘test’ whether that former low was, indeed, a firm bottom.     Smokin’!   Of course, should the security in question pierce below its former low, it’s likely further declines are in store. Should support hold, however, the stock is almost assuredly headed back toward its last retracement high.   Have a look now at a chart of the S&P 500 for the last six months, and pay particular attention to the far right edge of the chart, where an apparent ‘W’ shaped bottom is being etched out –     This is the test we were talking about.   The index could fall another 30 points, or roughly two percent, and still be on the good side of the test, and it’s our view that that’s precisely what will occur.   The oversold RSI read in late August also supports…

Read More

The World is Falling Apart! (XHB)

Stand aside! Gang way! Look out below! Timberrrrr!   The decibel level toward the end of last week got so shrill that we had to throw on the headphones and cool out to some chug-a-luggin’ Johnny Cash tunes just to get some perspective.   Heaven help us – you’d think the very planet was living out its last days!     But as Johnny says, I keep my eyes wide open all the time…   In fact, while all the major averages and a few headline stocks were putting straws to the gravy, a few select sectors were actually performing well. And not just the usual suspects, like the utilities. This, for illustration sake, is the Dow Jones Utility Average for the last six months, matched against the Industrials (DJIA) for the same period.     The utilities, of course, are the investment refuge of widows and orphans – a good, safe place to park funds and collect income regardless of the market weather. Or, at least, that’s the role they’ve played historically.   But in a world of increasing fanaticism and natural disasters, where power plants and pipelines and refineries have become ‘military’ targets, and explosions and meltdowns kill and maim thousands and pollute…

Read More

A Treasury Bond (TLT) Longshot Trade

We dedicated the better portion of this week’s Wall Street Elite letter to the basics of trend-watching and the best options to play on the long side.  The TLT trade we’ve come up with today precisely fits the mold as we laid it out in yesterday’s article. We concluded in that article that it was superior to select a security that was in the midst of a bull market but was about to undergo an intermediate term retracement. For a number of reasons (that we won’t repeat here), we suggested that the best returns came from buying PUTs on that security, and for those interested we recommend you look here to get all the details. But before we get into the specifics of this TLT research and trade idea, we have two trades to report from last month’s options expiry that somehow got overlooked. Pens at the ready! We’ll start with a trade we opened on the 25th of November in a letter called It’s All up to You – and the Trades You Make. At the time, we bet on a pairing that pitted the SPDR S&P Homebuilders ETF (NYSE:XHB) against the Global X Social Media ETF (NASDAQ:SOCL), buying PUTs on the former…

Read More

Assuaging Your Worries (XHB, GS, HYG)

The greatest risk any investor faces in a bull market is jumping early. We therefore want to dedicate this letter to reassuring you that despite all the noise, the bull is strong. And for those who are, indeed, considering selling – and even more for those who’ve yet to climb aboard, we say – We start this week’s shenanigans with a word on the homebuilders. You’ll remember that last week’s letter was all hot and bothered by the prospect of a homebuilder breakout above an ascending triangle, a technical development that normally brings with it a rush of excited buying. Well, looky here –   This is the SPDR S&P Homebuilder ETF (NYSE:XHB), and as you can see, the breakout (in red) occurred directly after our letter went out. Adding to the strength of the move, we saw the moving averages unfurl completely (in green), a development with profound long term implications for the stock and sector. With daily volumes on the rise and both RSI and MACD showing little sign of reaching ‘overbought’ levels, we believe the cruise is on for the homebuilders, and, moreover, expect the sector to ignite the rest of the domestic economy in the months…

Read More

Greek Crisis Souvlaking Good for Stocks! (XHB)

How good? Everyone’s talking about Greece. What’s going to happen if she exits the Euro? Will Europe let her go? Will the Russians and Chinese step in to save her? Will the next domino to fall be Italy or Spain? Will there be a global financial freeze that follows a Grecian implosion. And so on and so on… And yet the truth lies elsewhere. For behind the headlines, what’s actually unfolding is classic Greek drama – a Euripidean comedy in fact – whose performance so captivates its audience that they fail to recognize the underlying tragedy of the piece. What is Hidden and What is Revealed   American investors should be crying. For the Greek theater has hidden from them what we believe are the most significant financial developments in well over a year – developments that could be making them a lot of money. And they are – 1. The dollar’s continued strength – in large part a function of European, and general global anxiety over the fate of the Euro, 2. The continuing decline in the price of commodities, a result of the dollar’s rapid advancement, 3. And ongoing strength in U.S. equities, which have, for the most…

Read More

It’s All up to You – and the Trades You Make (RSX, XHB, SOCL)

Know it well, friends – no one can do you damage of any size or scope like you can do to yourself. That’s the first and last word on trading and on life. Looking for a reason why you’re broke or sad or lonely or angry or feel cheated or depressed or otherwise negative about something or someone? We say take a look in the mirror. Because 999 times out of a thousand… If not for your failure to act or your failure to refrain from acting, you wouldn’t be in the mess you’re now in. So why not 1000 times out of a 1000?   The reason we qualify the matter is because there is such a thing as evil in this world. And where it strikes, it makes victims of perfectly healthy, happy individuals. And we have to allow that in one case out of 1,000 the victimhood was unearned, uninvited, and indeed struck from out of the blue and was without apparent cause. [We purposefully use the term ‘apparent’ because to do otherwise would open a theological quandary that’s unthinkable. But more on that another time.] Take Responsibility   In the world or investments and trading, where…

Read More

Buy the Chinese Chicken Dealer (YUM, INTC, MSFT, QQQ, XHB, IBB)

We’ve got a great deal to report this week, so buckle up and get ready to roll. We’ll start with a trade that we’re not so pleased with. It was set on June 16th in a letter called Homage to the Aged, a letter that attempted to convince you that the old-line tech stocks were where it’s at, and that concentrating on these issues over the short term would pay off handsomely. And as it turns out, we were right – even though the trade didn’t work out. As fellow Normandy analyst Matt McAbby pointed out last Thursday, it’s the big names that have thrived on the NASDAQ Composite, while the greater number of her components have actually declined. Look here – [care of Bourbon & Bayonets] Whereas companies like Cisco (NASDAQ:CSCO), Intel (NASDAQ:INTC), Microsoft (NASDAQ:MSFT) and Oracle (NASDAQ:ORCL) have all risen nicely from the time of our call, a full 47% of the index’s remaining components didn’t. They’re all at least 20% below their mid-summer highs, as the chart shows, putting them on a level that, per definition, defines them as being in the grip of the bear. But all that notwithstanding, we played a pairs trade on this…

Read More

Trade the Weak Against the Strong (XHB,QQQ)

We’re going to continue today with a theme that we’ve been pressing for some time now, but that still deserves some additional elaboration. Believe it: It’s Different this Time Wall Street is nothing if not skeptical. The best of the street’s traders and analysts are doubters nonpareil. Main Street also has its doubters. And it’s precisely that quality that’s traditionally made for a safer investment approach and higher returns over the long haul.   This Missouri ‘show me’ attitude has saved many a market player a lot of money, because on Wall Street perhaps more than anywhere else, the need to kick the tires and look under the hood – or better yet, to get a forensic specialist to diagnose a potential purchase – is investment wisdom at its best. Yet even then, unforeseen problems can arise. So when we say that we’re dealing today with an unprecedented situation in market history – when we claim that ‘this time it’s different’ and markets will actually grow to the sky – we appreciate that many a seasoned investor will look at us askance, and perhaps not a few will tell us to go jump in the Ganges. And we understand that….

Read More

Powered by WishList Member - Membership Software
GET YOUR FREE SPECIAL REPORT:
"THE SEVEN DEADLY SECRETS OF CHINA"

GET YOUR FREE SPECIAL REPORT:

"THE SEVEN DEADLY SECRETS OF CHINA"

Enter your e-mail address to claim your FREE Special Report “The Seven Deadly Secrets of China”

You have Successfully Subscribed!