It took the Biden Administration less than 4 months to push the Economy against the Wall. STAGFLATION?

Stagflation is a stagnant economy and inflating prices. Are we there yet?

Not quiet yet since the economy still seems to move forward but things might change on Friday. But we have Inflation big time on the rise! 4.2% in April

When you ask the FEDs about Inflation they say there is none! It is temporary. Alright. What are the facts saying?

When we bought fence board on the weekend we noticed the price went up 50%! Grocery prices went up too. Gasoline is up in the US by about 20% or locally more. In Alberta 20%. Demand is low since you cant go anywhere and the summer season is not here yet. Airplanes are grounded too. Do we have shortages? The demand is lower and we should have lower gasoline prices for that reason but we don't. Even though two refineries in Edmonton are offline due to maintenance.

And Canada's economy is usually following the US. Now we have two Clowns at the helm. One in the US and one in Eastern Canada.

It is clear that with printing Billions of Dollars inflation is rising. USD becomes cheaper and hence imported commodities more expensive. And fueling this trend is a falling DIXY. The US Dollar Index usually has a 14 day up or down kind of scheme going. But 6 weeks down trend is worrisome. 

If the Index falls below 0.85 it might open the floodgates.

Here are two important graphs. Below you see different Asset Classes behaving in different inflationary environment. These data are the asset performances since 1973. So the data are the facts here no matter what our politicians trying to sell you and they selling you snake oil. Watch specifically Commodity Gains in RED and Stock / Treasury Gains in BLACK and BLUE.

Commodities outperform Stocks. TIPS are Barclays U.S. Treasury Inflation Protected Securities (TIPS), which are manipulated by the Government. They just had to be in this graph. We focus on Commodities, Treasury Bonds and Stocks. We can take these indices as a indicator for Inflation and Interest rates hikes. We can also predict the assets that will gain and those that will lose in an inflationary environment. And IMO Interest hikes will come even though they are denying it. This also will slow down the economy.

Here are the Year To Date, YTD weekly performance charts. And we can see that commodity prices are rapidly outperforming the S&P500/ Stock Market. You could take the DIA or any other Stock Market index and you would get the same picture. The S&P 500 is just the biggest Market in the US and world wide.

We clearly have inflation going! While the Stock Market made 10% since January Commodities made 19%. Treasuries under 1%. There you have it. Inflation is here. 

Buy Corn, Granola Oil and Copper. :) 

Inflation Canada

And for the Pinoy community, we can also learn that Canada has a bigger inflation rate than the Philippines, LOL

Inflation USA

On Thursday we will also have our Preliminary GDP output. Then also new Jobless Claims will come out. The markets might move big up or down!!! A weaker job number will fuel inflation and stagnation fears.

Friday then is PMI and Inflation Day and we will see what the economy is up to. It's a leading indicator of economic health - businesses react quickly to market conditions, and their purchasing managers hold perhaps the most current and relevant insight into the company's view of the economy;

The confidence of Americans in the U.S. economy slipped in May for the first time in six months as they grew more worried about a rising cost of living and future job prospects. 

And if the next Unemployment Claims on Thursday will be weak we might end up in Stagnation. The Stock Market might turn Bearish. 

Also Inflation Core Data will be released. Without Food and Energy, though

Consumer Confidence Index. Financial confidence for consumers is a leading indicator of consumer spending, which accounts for a majority of overall economic activity. Are the Stimulus checks drying out or are we printing more Monopoly Money?

Source:

https://www.forexfactory.com

All over all the volume on the markets are 35-50% of the usual average for the most indexes today, which will result in higher stock prices for the rest of the week. The majority waits for Thursday and Friday.

Here you have it. Thank you for all those who supported Biden and the Squad. They are doing a fantastic job!! 

I am still short and neutral across the board.

Chip Scam: China's 15 Billion USD Chip Project Goes Bankrupt | HSMC | Hu...

I didnt know that you can fool the communists that much. Or maybe they are involved since they have 100% control over everything.

But one thing is sure, the Communists cannot develop anything on their own. They steal technology and copycat it 

We went for a small ride today. Is the time coming for the BEARS?

We closed one position on a Short Call Spread for the Diamonds, DIA.. The rest I left on since I think there is more to come. Economic News Entertainment Shows are starting to talk about inflation. Yes, Gold Prices are rising since a while and so did the Bond market.

Copper is falling since a few days. Copper is a leading indicator for construction and engineering. With Lumber prices sky rocketing housing starts will delay and drives prices and inflation up. 17,000 Gas stations on the East Coast are out of Gas and gas prices rising too. 

Canadas inflation rate is not too far behind and has risen to 3.4% in April from 2.2% in March.

Read the article here.

https://ca.investing.com/news/stock-market-news/canadas-inflation-spikes-to-34-what-should-investors-do-2444692

The next chart shows you the ratio between Puts and Calls. A number on 1 would indicate that there are as many contracts in Calls as there are in Puts indicating a flat market Sentiment.

The linear Trendline in red indicates a growing negative sentiment in the market. As of today there are 1.70 times more Puts traded than Calls!! People are hedging or betting on a correction IMO, But who am I to know for sure.

Here is the Chart from yesterday when I was saying the market might drop and so it did today

The Qs fell below the Line in the Sand in blue. We will see tomorrow what gonna happen. I expect a bounce off the Resistance Level in blue. It might stay below the Line in the Sand.

The VIX opened sharply higher and the market went into a sell off in the first part and was cooling down to the end. I bought back my winning Diamond position, DIA, and kept the rest alive. VIX went up to 26 in the beginning. We need more! 

Inflation is Rising and so the open job positions and with all the free money people dont want to return to work. Lumber prices are sky rocketing and squeezing the construction industry. And the gasoline shortage continues. 17,000 gas station out of gas, WOW!! 

Institutional traders might take profits and see what the 12 month Bull market has delivered. Iran and China are challenging Biden and initiating a war in the Middle east. Biden told Netanyahu that Israel should not defend itself. WEAK! 

Time for the BEARS?

Are we going for a ride tomorrow?

The markets made a little nick  to the downside after we had dojis yesterday. The volatility increased today in the second half of trading. The market did not make a dramatic move. I am hoping for the VIX to increase, made a nice Bullish candle today, and turns the markets down. People are now talking about inflation. But there are also voices that the inflation is only temporary, we all know it is not, and it will disappear within the next weeks until the next CPI report comes out. The more stronger factor IMO is the reopening of the US economy and the hiring that goes with it. People will have more money in their pockets and hence will spend more. Retail spending will increase and we will see if supply can keep up. If not it will put more pressure on inflation. Will the FEDs increase interest rates? When? We dont know. But cyclical  (tech stocks) will lose value and money will look for safer havens: Defensive stocks and banks. Defensive stocks like food producers and staples. And also Gold after Bitcoin cannot keep its promise.

If TESLA will lose value the ARK will sink since Tesla is heavily weighted in the ETF.

The Market Heat Map

The VIX ticked up Volatility today

And the Qs might decide tomorrow where to go

We have a few indicators that the ETF might drop. Slopes and Resistance Levels. It dropped a little today but not enough by far.

Households including most U.S. children to get monthly free paychecks

Here is what Socialism looks like. Under the pretext of helping people the FEDs start printing money and give it away for free. 

I also want to have my free money and then I could stop working. Why should anyone work when we just can print money?

Those people will get up to $3,000 per child, or $3,600 for each child under the age of 6, in 2021, subject to income restrictions. The benefit will reach 39 million households, many automatically and by direct deposit every month, starting on July 15.

Their virtue signaling is: Help the poor, lift children out of poverty.

YEAH! Someone has to pay for it. Either they take it from the national Credit Card like Trudeau is doing it, Lets pay for it later, In 5-10 years when the debt ratio reaches critical levels and they have to increase taxes to pay for the spending binge.

Or....

The additional money supply will fuel inflation. The Greenback will lose value and ALL things will become more expensive. Consumer goods and basic material which already is in short supply.

We will keep an eye on next months inflation /CPI numbers.

https://www.reuters.com/world/us/households-including-most-us-children-get-monthly-stimulus-payment-2021-05-17/

With stocks trading sideways and showing DOJIs there is uncertainty in the market. The crunch in the housing supply chain is delaying housing starts and driving prices up. Inflation hit 4.2% in April after 2.6% in March. Too high. With higher minimum wages and free money to stay home labor shortage will continue. Having labor shortage on one side and higher unemployment numbers on the other side shows the dilemma the Biden Administration is in. Both phenomena should not appear at the same time but here they are. It is an artificial crisis fueled by incompetence or leftwing ideology, OR..... BOTH.

We will read the FMOC Meeting minutes and press releases. And the the market might move one way or the other. If they mention Inflation concerns and hint for Interest rate increase the S&P will tank. Gold and Silver yields will increase. At least I hope so. Thats what I see, but who am I?

The Spyders a copy basket of the S&P 500 the biggest market in the world.

ZOOMING IN

CE 25. A Cleaner Future with Acceleware ft. Mike Touringy and Jim Boucher

Interview about the new technology and how indigenous people, the Saa Dene, form a partnership with Acceleware. A little too much green on my side but I go where to make money. 

The Progress of the New Administration in Graphs

When we take a look at the manufacturing and service sectors and their over all performance it doesnt look too good for the Reds on the stock market. I know that the PMI, GDP and the CSI, Index of Consumer Sentiment of the University of Michigan, are all looking good!! There should not be a big downturn, 

BUT.....

Inflation hits at 4.6% and we get the tax hikes and we have weakening employment numbers. Printing money fuels inflation. And so does giving out free money. The Killing of the Keystone XL Pipeline and other "evil" projects is not good for the economy. 

More regulations. Here is your red "Green New Deal" It is here already. They all drag on the US economy now. And then there are the attacks on the US.

The Market needs a correction

Do your own research.

Today:

Today is VIX Spike Day

Is this the SELL OFF we all are waiting for? The big market correction? VIX hit new high and trying to catch up with the March spike. The VIX is the Volatility Index for Options but reflexes the markets. When it goes up traders are selling. 

The Beijing Biden Administration is now printing money like crazy. Paying you more to stay at home then filling the job openings. This heats inflation we all were waiting for.
The annual inflation rate in the US soared to

4.2% in April of 2021

from 2.6% in March and well above market forecasts of 3.6%. It is the highest reading since September of 2008.
With the killing of the XL Pipeline and new regulations the gasoline shortage in the US is intensifying while the Administration vows not to intervene on a Hacker attack on US interests. WOW!

This will help the the Green Gang Bangers and Reds but not the poor. They will pay more. And they will pay more taxes too, to pay governments credit cards. You voted for it and you get it!

https://tradingeconomics.com/united-states/inflation-cpi

For Canada

https://tradingeconomics.com/canada/forecast

And we saw for a second day in a row that the SPYder tanked and so all other indexes! Inflation Fear hits the markets. I secured my position in ARKQ and I hope it will hold. I closed some other positions for a loss and hedged the rest. We are good now. We will see.

With the 1,000 rockets fired onto Israel, sponsored by Iran /Russia /China and the UN and the Hacker attack on US infrastructure the Biden administration is challenged and tested. WHO will they support? What will be their response. Weak Biden and Commie Harris dont work for America.

Week ahead May 10

Last week was a great play. The S&P500 at its SPYDER barely moved for 3 weeks. What a great opportunity for Iron Condors. We reaped in on the option decay.

Before that Friday we had little hickups but hey we made it.

We closed a Spyder position since it hit 30%. This trade was 2 weeks in the oven and cooking well. We always take it out when the heat goes to 30%

SPY 04 Jun 2021 445.00C/465.00C/390.00P/370.00P Iron condor

And we opened another one with the Qs
QQQ 18 Jun 2021 365.00C/375.00C/310.00P/300.00P Iron condor

On Friday the market rallied a little and this was good enough for us to close two more positions!!!
QQQ 04 Jun 2021 365.00C/385.00C/315.00P/295.00P Iron condor

IWM 18 Jun 2021 245.00C/255.00C/200.00P/190.00P Iron condor

The IWM was only on since three days and grew rapidly. We had a $13.00 P/L per day per contract. Usually these numbers are about $5.00 - $8.00!

Three positions matured during this week. This was phenomenal! Let us see the coming week. It is almost Monday.

The ARK of Cathie Woods

The ARK Innovation exchange-traded fund (ARKK) dropped for a seventh straight day Wednesday in its longest slide in nearly two and a half years. After surging roughly 150% in 2020 thanks to a string of prescient bets on Tesla Inc. and stay-at-home tech darlings, the negative stats are starting to add up.

ARKK, which edged lower in early trading on Thursday, is down more than 10% for the year and investors are piling into protection against more losses. Put volume hit 190,000 Tuesday, the most in six weeks and the fourth-most on record. The latest data show outflows for a sixth consecutive day, the longest streak since the fund launched in 2014.

Read the full article here.

https://finance.yahoo.com/news/cathie-wood-ark-battered-selloff-203932002.html

The Market conditions.

After being long on ARKQ stocks, a cousin of ARKK, and the looming correction in the ever bullish market I bought a PUT to protect the down side of the stock. Yes, I also sometimes buy insurance. The price is 6.5% of the LONG Position. That means that the cost of the put will be absorbed if the Stock regains the old value plus a little bit more. It is down by 5% now. But if the stock further drops as indicated in the article the PUT will absorb all the losses and generate a profit. So either way there will be a win in THIS position as long as the MARKET MOVES, up or down.

The Married PUT

TSM, Taiwan Semiconductor Manufacturing

Are you still remembering the TSM 16 July 140 CALL? We bought it on February 22.

TSM was on the dive for a month after we bought it and then it rebounded for two weeks and then it sloped down again and has been stagnating since. This is the biggest Semiconductor Company in the World and has an excellent record and earnings beyond expectations. Well, new machinery for more chips requires big capital, which will be taken off the shareholders earnings. But it is a good investment nevertheless. TSM is solidly funded! This stock also tanks at great earnings! Great record though.

The stock lost 20% on value and our CALL position 94%.

The first image we took on FEB 22. The same three candles we see marked in the second image. The assumption that the stock will increase in value in the next two months turned out not to happen. Instead of going up by $30 from $131 we are down at $117! That is quite a difference.

We already discussed that the entry was wrong before. Now how can we fix a 94% loss on this position? I am not too concerned about the numbers anymore since the loss is already incorporated by 80%. The actual loss for booking is minimal. 

But still, the question is interesting for future rescue operations. This is true for a good company only. GM was one and that stock came back and made us a profit even though we also did a wrong entry. 

Shall we?

We dived for one month straight and recovered partially for 2 weeks and then TSM fell asleep.

The main question is, is this the end of TSM and its business? Will they simply go away? Can they keep their investor base happy? I think TSM is here to stay. It is one of the Blue chip companies of the chip making business. TSM provides all chips for Apple!

Our position still has 72 days to go and I will buy time. 72 days are 2 1/2 months. Could TSM climb $25 in 2 months? YES! Is it likely? Probably not for what I have seen in the past two months. What if we added another month to the expiration and tell the REFEREE just to let us play a little longer? How much that gonna cost us? Not that much. 5% of the original costs. If we wait with buying time and lets assume the stock is up but not as much as wished and then we decide to buy calls in an uptrend -- they will be much more expensive!

The 20 AUG 140 CALL would expire in 108 days!. Within 3.5 months I think TSM could actually do it.  And this Call is super cheap!! Later we can ask for another extension. 

This Call will be positive.

We could convert it into a calendar spread to lower the costs of the extension, getting premium paid but this would expose us to a collateral capital of almost the same amount as the original capital! So I prefer just an extension in the game for a small amount. 

Excel Charts based on YAHOO data sets. Closing prices weekly! The Long Call blue line indicates the Strike Price for our call.

Projected growth per week if the stocks moves only upwards. 

Our target is beyond the 5th Deviation. Pretty far out. Like beyond Mars or so. Will take a while!

These numbers are weekly numbers. TSM will not hit 5th Deviation within one week. ZERO chance. But a 5$ climb within one week lies within the 1st Deviation and has a probability of 39%. 

Statistics tell us a 40% uptrend and a 33% downtrend within 1st deviation limits. Since we have 15 weeks to go I expect 6.6 Weeks to be down and 8.2 weeks to be up. The Mean of 5 years of data suggests that TSM will be up by only 10$ after 14 weeks!! Much below our needs. So lets see if we do $125 or $145 in August.

We have 15 weeks to go!

Markets down today. Eco-Comical Entertainment on TV.

I personally dont know what the markets will do and business news are another sort of entertainment. There is very little valid information in all what is said by paid "Economic Experts" or "Degree Holders". If you listen to them carefully and over time you will have noticed that they contradict themselves all the time. Also, they try to sell you random events as a coherent line of causalities. Their opinion is paid as entertainment.

Now when they say the markets are up amid great Earning data it is a wrong causality. Why? It is true that great earnings were pronounced end of April, AAPL, TSM and others but those stocks were down even though they had great earning reports. The market was up all over all but not with some great stocks I am watching. 

Then now we had earnings and they were great, too, and beyond expectations and the market took a dive! So what is it now? It is just noise in the background. People getting paid for entertaining the crowed and keep you spending.

The market is unpredictable. Thats why I do not predict market directions for the most part but I can tell you where the market "probably" will not be within a certain amount of time. I sell option spread trades.

Today the market dipped. Well, I am not so concerned about the dipping but the rate of it. I had two positions in the "Be Alerted Zone". Yes they were loosing money. But since we have our mechanics in place we will handle it if we have to.

We can see the red candle of the QQQ. What does it mean to my Iron Condors?

The SHORT PUTS closer to the money gaining value at a bigger rate than the LONG PUTS further OTM. My PUT Wing becomes more expensive and I will have to pay more for the short put to close the trade.

At the same time the SHORT CALL is losing faster on value than the PUTs are gaining and the LONG CALL further OTM even faster. This creates a negative balance in the position if I had to buy it back before expiration. If it doesnt hit the Strike before Expiration the position will simply disappear and I keep the Credit. If it threatens to hit the Strikes we have our mechanics in place. 

At the end of the day it calmed down again and we will see another day. The pictured RED CANDLE retreated half way and QQQ fell by 6 Dollars net. If this goes on for another 3 days I have to react. Until then probably not.

How to escape the realm of Gambling and enter the realm of trading. 6 Months Performance Review

After changing some tactics and adjusting trade executions in January and February we are improving. The big one for this month will be reducing FEES, putting up more than 20 trades and diversifying them over the weeks, in time!
With diversifying in a timely manner we will not have the same Strikes and we will have Profit rolling in week over week. Thats the profit conveyor. 
In general I have one trade per day. There are 20 trading days in a month. More trades = more turn over.

Targets

• Target for May is 25 trades, Long term target is 4 trades per day but not now. 
• With our benchmarks we are in the zone.
• Reward Ratio of  more than $2.00
• Trade Limit of more than 20%
• Winners to Losers better than 60%
• Account long term performance at 7% per months, this month to improve to 3.5%. A 7% a month is a 100% Gain a year.
  

Performance

1. All over all I am pretty satisfied with the results and the development. I feel more confident now and know exactly what to do if the trade turns against you. And I did it many times now.
   
   A gain of 2.8% a months still results in a 43% Gain annualized. We have 71% winners and making a profit of $2.29 per Dollar we lose. Our allowed trade size is 59% but it is capped at 15% in our mechanics.
   That is an awesome result!!!
   
   
   
   
   
2. Last month we came out of the hole. We made more money with many more losing trades. Another thing to consider. If you calculate your Kelly Criterion you exactly know where you have to improve and where you are actually good at.
   
   The winners were below the 60% mark and the Trade size at 4.5%. But still we were making $1.45 for every Dollar down. And we were up more than in April. Still a great performance.
   
   
   
   
   
3. February was still a learning curve since I still were taking the course for a Hedge Fund Manager. But things were most definitively improving since. Keep track of your numbers and trades and you can see and evaluate your performance. If you dont do statistics and have a proper documentation, like Hedge Fund Managers do, you are a gambler in my opinion. You are not the bank in the casino but you are pretty good on the slot machines! You will lose it all, guaranteed. 
   
   February was tough for many people I heard since the market looked like turning down but then flattened out. How can you make money in flat markets? We do.
   
   The Winners were great at 60% and so the trade size at 17%, could have been better. Benchmark is 20%. But we lost money, about 6 cents on a Dollar invested. Hence the account was down by 0.7%. But January was the worst.
   
   
   
   
   
   
4. In January I started the course and had to force myself to get away from gambling. Picking trades without knowledge but out of feeling. Based on lagging lines on the charts and irrelevant studies like RSI of MACD. Look for movement and jump in because many traders are doing the same. Those Indicators for the most part are useless. For certain they are useless in picking your assets! They do not provide you with the metrics you need to have in place to make consistently money.
   
   January was the most frustrating month so far. I was still confused with gambling and had to leave the itching behind. We lost 58 cents on the Dollar and the account was losing 7.3%. Even though we had more winners than losers. So Kelly cut down the trade size limit to -49%. Well these are alarm sirens going off everywhere. All systems RED!!
   
   
   
   
5. December was still gambling month and we made great profits. We brought the account up by 35% and we did so in the months before! Great times but gambling! Winners great and we made great profit, $2.15 on a Dollar. Trade Size was over 20% as well.
   
   But this luck will run out, I guarantee you. Have done it, seen it and been there. It is painful. Very painful! 
   
   
   

So thats it. We are improving and we will see what May will bring. We have our parameters and the metrics all lined up and we will operate according to our mechanics. There is no emotion involved. If your emotions going up reduce your trading size. That simple. I trade at 15 - 20%.