Four for Five on Short Calls

On March 23, I said the following:

NEW YORK (TheStreet) — Japan’s stock market may be about to put in a long-term top and there are two ETFs you can short to take advantage…

In order to take advantage of a turn south, there are two main options in terms of ETFs one can short, either directly or through options. The first is the iShares MSCI Japan ETF(EWJ) , which has greatly underperformed the Nikkei by 17% over the last year. This could mean it will also lose value faster than the Nikkei itself if and when the BOJ announces a less accommodative monetary policy. The second is the WisdomTree Japan Hedged Equity ETF(DXJ) , which has the added benefit of underperforming when the Yen rises relative to the dollar.

If the BOJ confirms no more QE, which it has already hinted at, then the Yen is likely to rise relative to the dollar, pushing DXJ down even faster than EWJ, which is not hedged against the Yen.

I went short DXJ when the Nikkei was at 19,750. The top was at 20,952. I was 6% off. DXJ was at $56, and covered at $46. It really tanked today because the Yen skyrocketed, and the DXJ holds short positions in the Yen, which brought it down even further.

On June 1, I said the following:

But, as Austrian Business Cycle Theory suggests, there need not be any actual shrinking in the money supply to bring on the bust after the boom. All that needs to happen is that the rate of increase slows. And if the policy of the People’s Bank of China is indeed to maintain the status quo in the money supply, then we may have seen our top in the Chinese stock market, and its corresponding ETF, the iShares FTSE/Xinhua China 25 Index (FXI), just from last month.

I went short FXI at $48, and covered at $39. It’s now at $34.

The Greek shorts I already wrote about.

On August 13, I wrote the following:

If the S&P (NYSEARCA:SPY) breaks through the 2040 support zone, tested twice since February, then a serious crash is both possible from both a fundamental and technical perspective. The S&P has not gone anywhere since February, and has not stagnated for so long since the 2009 bear market bottom.

Personally, I am going long the VIX here out to November. The closest ETF is the VIX Midterm Futures (NYSEARCA:VIXM), though rollover of contracts and decay makes holding the VIX options directly more attractive for less capital.

And covered this morning.

The only short that has not worked out yet is Italy. I shorted EWI earlier this year, and my position expires in September. EWI has to go to 12 for it to work, and it may not make it. Three weeks to go. We’ll see if I go 5 for 5.

And yes, I’m still waiting for gold to rise. Luckily, there’s no time limit on that one.

 

 

The Most Volatile Day in Stock Market History

What the hell was that?!

The Dow traded in a range of 7% today, in one single day. That’s wider than its trading range since December, nine whole months.

The Nasdaq was even worse, with a range of 9%. That has never, ever happened before.

The volatility was so extreme that the VIX couldn’t even open for the first 30 minutes of the day because the value of the options it’s based on couldn’t even be calculated. As soon as trading opened I covered my calls, but I was freaking out a bit at the open because it was literally frozen.

My broker’s servers crashed twice this morning while I was trying to cover it. But eventually I did. Everyone it seems was losing their minds.

Further, the Yen was trading like a penny stock against the Dollar today, up 2.65% in one day.

The S&P moved up 2.5% in the space of 12 minutes, and then rocketed back down at the close to below 1900.

Unbelievable. I wonder what happens tomorrow.

Four Blood Moons Calling? Greek Elections again, S&P Minicrash, Gold bear over?

Well, if the whole blood moons thing is correct, which I still doubt but it is possible, then the picture has to start deteriorating fast. Like now, within the next two months. According to Blood Moon Theory or whatever you want to call it, we have until Hoshanah Rabba 5776 for the world to change somehow.

Today, the S&P broke medium term support at 2040, gold is up again, miners up 20% since bottoming late July, China crashing again, VIX up 25% in one day. I’m long gold and miners (obviously), no longer short China anymore, but long the VIX expiring in November since covering the China short.

Let’s clarify this “China devaluing” mumbo jumbo for a second. China has a “peg” to the dollar. That means the PBOC doesn’t allow the Renminbi, or Yuan or whatever they call it, to trade below a certain exchange rate with the dollar. They control it by buying or selling dollars whenever it gets too close. China is not “devaluing” its currency so much as simply letting it trade below a previous peg without the PBOC selling dollars to strengthen it to within an arbitrary peg. Why are they doing this? They think they need to in order to “stimulate exports” which is a bunch of crap, like saying you need to take hit of your crackpipe to think clearly. Yeah, maybe for 3 seconds, but then you go nuts.

Now Vietnam and Kasakhstan and a whole bunch of other countries few people care about economically are doing the same thing. The peg is manipulation. Releasing that peg is allowing the free market to trade the currency.

I’m in the US now, and this is the first time in years I’ve even put on main stream financial media around market close today just to see what they say. The bullshit is so thick you can’t cut it with a chainsaw. Nobody has any clue what they’re talking about, and they all say that in different words.

Greek elections are happening again. My hope is Yanis Varoufakis will get off his butt and run for Prime Minister in a new party. He’d win hands down, I think, and send the banksters to hell. He’s the only one that would do it. September 20th apparently is the date.

Gold is on its way up past $1,150 after bottoming (hopefully) at $1,072. If this is the bottom, it’s been a long time coming.

When the S&P broke support since February when it steamrolled through 2040, it was in the last 15 minutes of trading today. If stocks don’t bounce back sharply tomorrow morning early, then the next support levels are at 1972. If that gets broken, 1820 is next. Tomorrow is a very important day for stocks. If they don’t bounce early, they probably won’t bounce.

Let’s see what happens.