Morning Update: December 16, 2013

admin@RandomWalkTrading.com

1–(855)–RWT-0008

Monday December16, 2013

Only 4 weeks until the FIRST Maui ’14 class.

The second one is a week later.

• Yes, there is a huge chapter on the Risk Reversal

• Yes, the secret Combo Spread is in it.

Yes, there is a couple seats left online and 1 or 2 for the live class (contact office for details). 

ONLY NEWS TO WORRY ABOUT THIS WEEK:
Fed Rate Decision on the 18^th at 2:00pm Eastern

(See more about this in “Today” section below)

The Dow closed up 15.93 points in what should have been a stronger day. I suppose I am underestimating the concern people are having over the Fed announcement this week.

The Dow closed at 15,775.36

AAPL was down 6.11 to close at 554.43

The VIX was up 0.22 at 15.76. 

The TLT was up 0.50 to close at 103.21. 

Metals were smashed once again.

GLD = 119.38 up 1.09

SLV = 18.95 up 0.14

TSLA closed a147.65 up 0.18

DDD 80.97 up 0.61 (52 week high = 84.85)
VJET 37.80 up 0.19 (52 week high = 70)

Yesterday

A very quiet gyration around unchanged on the day. The market is staying 250 points away from 16,000, giving it room to fall or run on Wednesday. People are more nervous about this meeting than any since September when the Fed hinted they may start QE then.

 Also, I am going to start reporting the closing numbers for some 3D printing companies. They are a wild ride right now. 

Today

Down Open? There is going to be nervousness as “experts” throughout the next few days impart their own guess work on what the Fed will do. The ONLY problem with these guys is they are usually using too much analysis and data. They do not take the human factor into account, the Christmas season, and the legacy humans want to leave behind?

This is going to be a crazy week no matter what the outcome by Friday. Today we will be down on the open as people run for exits with the hint that a fire may come on Wednesday. This is the last time we will hear from Uncle Ben Bernanke, and Yellen will be the wise old man from now on.

Despite our outrageous QE program the Bank of Japan is stimulating even more than we are. The UK has said that they will keep stimulating until their unemployment gets down to 7% (it is at 7.6% now).

So the question that has the markets spooked even more than a government shutdown is, “Will Bernanke be the Grinch Who Stole Christmas” and start tapering this month?

EGOS

First, put yourself in Bernanke’s shoes. He has a chance of going down in history as a great Fed chairman. Though he fumbled the ball many times the first couple of months of the financial crisis, he has had a tremendous amount of success since then. The Dow is at 16,000, when 5 short years ago it was below 7,000. He knows how fickle the markets can be. Would you want to possibly ruin your legacy as one of the best fed chairmen ever by causing a Christmas Crash?

Expectations

Second – most of the rest of the world is staying their course or continuing to ease. Even though tapering is NOT tightening, it would send a message to the rest of the world that it is time to accept the current levels of (non) prosperity as the norm.

Third – despite unemployment being at 7% (if you are gullible enough to believe that to be a real number), it is not exactly a robust economy. Unemployment is lower only because people are taking part-time jobs instead of full time. This is not growth. Corporate earnings are good, but not because of growth but because of cutting employees, cutting expenses, replacing work force with part time people, etc.

Fourth – 60% of the real market “gurus” and the bond market are predicting tapering will not start until Feb or March of 2014. Despite concerns that it will start early, Bernanke knows what a shock tapering will be if done when the rest of the world is not expecting it. The new Fed chairman will likely open her first talks with hints of tapering before actually doing it. Why needlessly disrupt the stock market?

Fifth – If the Fed does taper, it will NOT go nuts. It may pull back from $85 billion to $75 billion a month. It will then pepper their statements with comments about going to $85 or $100 billion if needed. This would prevent a free fall.

So in short, the lower we go going into Wednesday the longer in delta in shorter in premium I want to get.

GOLD

What is really interesting is the level of short interest in Gold and Silver. I noticed this weekend that the short interest in gold is the 4^th highest short interest after some stocks that are likely to go bankrupt. What does that mean? It indicates that with good economic news and no inflation people are expecting not only QE to taper but the amount of demand for gold to fall dramatically. Typically that is a sign that one little sign of inflation or a weakening economy and the metals will run up VERY fast.

The people short metals will be stepping over each other to cover their shorts. This also would make sense since I have not heard one single person in the last 3 weeks in the media be bullish on the metals. Everyone is expecting gold to go to 1,100 or 1,000. In other words, NO ONE is bullish on gold. Yet if it can not sell off anytime soon, the next move higher could be dramatic.

PLEA

Please tell someone you know that they do not have to be a victim in the government created stock market bubble. I don’t care where they learn to hedge from. Send them somewhere else if you like. Buy them our BASICS book for Christmas. Buy them someone else book But help a friend out. 

The Verdict is In!

Last week’s POT session we voted on a couple of items.

Mini-Class on Legging Free Synthetics and Butterflies.

In a previous class I illustrated how to leg into synthetic calls and puts for free the last day or two of an expiration cycle. We talked about it in POT and you wanted to see it again. Since this can only be done during trading hours I said “In lieu of POT on a Wednesday night, how about we have it on a Thursday and Friday where I can demonstrate things real time?”

People overwhelmingly loved the idea, so we put it to a vote for this expiry or Feb. We can NOT do it in January as I will be inundated concentrating on doing the best Maui class ever. So we put it to a vote.

The results were for February, but not by a large amount, as people are too geared towards the Fed announcement this week’ some needed time to change their work schedule around, etc. So the class will be Feb 20 and 21 at 12:00pm – 1:30pm each day. 

Item Two

We also voted on the class schedule for the next four weeks. This will be posted tomorrow.

Contract the office at 1- 855 – RWT – 0008 for more details.

Attorney Stuff

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