RF's Financial News

Sunday, May 17, 2015

This Week in Barrons - 5-17-2015

This Week in Barrons – 5-17-2015:

Thoughts:

Dear Ms. Yellen:

Should I invest in the Chines Yuan right now? After all, the Chinese have pegged their currency to the U.S. dollar since 1994, and have never wanted their currency to soar above the dollar in any meaningful way – because it would obviously hurt their exports. However, that could change when the Chinese Yuan is admitted to the International Monetary Fund’s (IMF’s) SDR in October. I’m guessing that the IMF has arranged a deal where China has been told to maintain some exchange rate control over the Yuan, so that it doesn't fly to insane heights while umpteen trillion U.S. dollars are dumped on to the market. But it could. And it is often these ‘out of the blue’ elements that cause large financial market dislocations.

Say for example, on October 20^th a headline hits the wires that the IMF has accepted the Chinese Yuan into its SDR basket. I would expect the U.S. dollar to gradually start fading in value while the Chinese Yuan begins to rise. Now that’s not rocket science, and would tell me to invest in the Yuan right now – yes? But is there a better potential investment in gold and/or silver? After all, gold has been artificially held down in order for China to amass enough of it until such a time that its currency would be included in the IMF’s global SDR (Special Drawing Rights) basket. I could make the case for the ‘price caps’ being removed as soon as the SDR announcement would be made. And along those same lines, I would expect gold and silver to rise (along with the Yuan) over the next 6 to 12 months following the announcement.

But, silver has been capped in the same way as gold, so, which one makes the better investment? I think there are a few considerations:

- First, the rise in the Yuan will be gradual so as to prevent currency disruptions.

- Secondly, there is a general allure of gold. Yes it is not money and pays no dividend, but it is used at the very upper echelons to judge the wealth of nations.

- Finally, gold is used to store wealth – not create it. Gold tries to help you keep what you've made and fight off inflation. Now (however) there is a chance of actually making some money on the metals again when the controls are lifted and before they ‘go to sleep’ again for a long time.

Which to invest in is a good question, and often based upon expectations. Currency fluctuations are normally capped at approximately 15% per year. I (however) think that gold will move from its current price of $1,220 per ounce to about $2,600 dollars an ounce over the next 3 years. I also believe that silver will move from around $18 an ounce to $70 per ounce in the not too distant future. Gold moving from $1,220 to $2,600 is a 110% gain. Silver moving from $18 to $70 is a 288% gain. So in percentage terms, Silver is the better investment – if these numbers hold true.

But let’s do the math using their most recent highs rather than some arbitrary number. In 2011 gold hit $1,900/ounce and silver hit $49/ounce. One gold coin going from $1,200 to $1,900 nets you $800 dollars. $1200 buys you 67 silver coins at $18 per ounce, and if these 67 coins went from $18 to $49 apiece – it would net you $2,077. Therefore, silver wins again.

The reason that I think silver can indeed pull off multiple price increases is simply because all those that cannot afford gold, tend to run to silver when gold is going higher. This increased demand causes an excess of 100% gains, and even 250% price increases if history is our guide. Bottom line, I like both silver and gold, and will invest in both physical metals over the next several months.

The Market:

Break out the trumpets, the kazoos, and the flags – as this week the S&P index made another all-time high. It doesn’t matter that:

- Our first quarter GDP was negative,

- The official retail sales report was the worst since 2009,

- The WSJ said: “We just saw the worst set of economic reports since the great recession",

- Last quarter a record number of Americans renounced their citizenship, and

- Consumer confidence fell in May by the largest margin in two years, dropping from 95.9 to 88.5 – far below even the lowest estimates by 68 economists. The reasons cited were the stalling American economy and rising fuel costs.

After all, our Central Bankers are evil, but not stupid. They created a debt based system funded by ever-rising asset prices. These same Central Bankers are forced to make prices rise even further in the face of a terrible economy. We know that the Fed is chomping at the bit to raise interest rates, but the Fed doesn’t meet again until June 16 to 17. This leaves the markets (and the Central Banks) over a month to be left to their own devices.

Of course I question the authenticity of the breakout:

- The XLF (the financial ETF) was actually down on Friday,

- The IWM (the ‘small cap’ ETF) is still below its 50-day moving average,

- On a break out to new highs you want increased volume, and we didn’t get it,

- The DOW transports are well below their 50-day moving average, and

- The semiconductor index hasn’t even regained its April highs – let alone all-time highs.

All of the indicators for market participation are fairly weak, but the breakout has held for now. However, if the market participation does not broaden out, this rally won’t last for more than a few days. I tend to think that the Central Bankers will throw the kitchen sink at holding up this market rally. If the market stays at these levels, some people would sell their bonds, rush back into stocks, and we could see a quick rush higher in equities. But I think that this ‘rush’ would burn out quickly, and we would roll over into a long correction.

I think the ‘big picture point’ is this – if this breakout holds and we do see the market run higher, I do not think that it has long legs. In other words, this rally has limited upside potential. Frankly, I'd be surprised to see us gain more than another 300 points on the DOW, and maybe another 45 points on the S&P – before we exhaust ourselves and see a hefty pull back.

For years this market has pushed higher in the face of every ill you could conceive: a war in the Ukraine, Isis running amok, horrid economic reports, and terrible employment participation numbers. Just last month over $70B was pulled out of U.S. equity funds. If the market starts to advance again, a lot of that $70B could flow right back into our equity markets. Would it not be just like ‘Mr. Market’ to suck J.Q. Public in, giving the illusion that this market is destined for much higher prices, and then yank the rug out from under him? It certainly would, and that's what I think will happen.

While it's not written in stone, and yes this breakout could fail from here – if market participation increases then I think it's the beginning of the end. But as long as they keep the S&P over 2117, we should see them pull the financials, small caps, and semiconductors in with them and give us one more shot higher. If (however) we experience two closes below the 2117 level on the S&P, then I don’t think that the Central Bankers can regain their footing, and we will correct fairly rapidly.

TIPS:

Upon request – many of you have asked me to specifically detail the DUST versus NUGT trade. NUGT – is a ‘triple leveraged’ gold mining ETF that moves up and down with the mining EFT’s – GDX and GDXJ. DUST is basically the exact inverse of NUGT – and moves (almost tick by tick) in the exact opposite direction as NUGT. The trade I’m proposing is a one-day trade (every Friday) – involving DUST, NUGT and weekly options that expire that same day. The trade will net you between 1 and 2% every Friday – with virtually no risk.

- On Thursday – between the hours of 3:30 / 4:00 pm – you purchase equal $ amounts of DUST & NUGT. The goal here is to have the underlying assets offset themselves, and you simply collect the ‘covered call’ premium.

- On Friday between the hours of 9:30 / 10:00 am – you sell ‘covered calls’ on both of your DUST & NUGT positions. The strike prices of the covered calls are the closest, higher prices to their respective assets.

- For example: if DUST were selling for $13.24 – your strike price for the covered call would be $13.50.

- If NUGT were selling for $12.05 – you may (either) want to see if NUGT would fall below $12 – before selling at a $12 strike price, or see if NUGT rises closer to $12.50 to sell the $12.50 strike premium.

- Now, as long as DUST and NUGT remain below their strike prices you do nothing – and the covered call premium will remain in your account.

- If (however) one of the assets (NUGT) goes above their covered call strike price – you simply need to immediately purchase (again) as much of that same asset (NUGT) as you did previously – in order to offset the continued downward movement in the opposite asset (DUST).

- In this case the covered call on DUST would remain in your account – and you would make the covered call minus any small assignment fee on the part of NUGT.

- Depending upon the covered call strike prices – this should net you between 1 and 2% every Friday.

- You then sell the assets (first thing) on Monday morning – and ‘rinse-n-repeat’ on Thursday / Friday.

I’m currently looking at:

- UPS over 101.70, ACM over 34.10, and RTN over 108.00.

- ADBE (Adobe) is testing resistance @ $80,

- THC (Tennet Healthcare) looking for a Put Credit Spread,

- GPRO (GoPro) and NKE (Nike) looking at a Put Credit Spread, and

- Kansas City Southern came out with a horrible update, yanking their guidance for the year. But of course they announced the mandatory stock buy back to try and keep their share price up despite lousy fundamentals.

I’m currently holding:

- KR (Kroger) – SOLD a June 67.5 / 70 Put Credit Spread,

- AAPL (Apple) – SOLD a June 110 / 115 to 135 / 140 Iron Condor,

- WYNN – SOLD a June 95 / 100 to 125 / 129 Iron Condor,

- CSX – BOUGHT a Calendar – May / Aug @ $38,

- NUGT – BOUGHT shares and weekly covered calls,

- DUST – BOUGHT shares and weekly covered calls

- ORCL – BOUGHT June $45 Calls

- RUT – BOUGHT June Butterfly @ 1190 / 1260 / 1320, and

- SPX – SOLD – Iron Condor – June @ 1970 / 1975 to 2175 / 2180,

o SOLD – Iron Condor – June4 @ 1945 / 1950 to 2185 / 2190,

o SOLD – Iron Condor – July1 @ 1890 / 1900 to 2195 / 2205,

o SOLD – Iron Condor – July2 @ 1905 / 1910 to 2180 / 2185,

o SOLD – Iron Condor – July2 @ 2005 / 2010 to 2180 / 2185,

o SOLD – Iron Condor – July @ 1900 / 1910 to 2200 / 2210,

o SOLD – Iron Condor – July4 @ 1860 / 1870 to 2235 / 2245,

o SOLD – Iron Condor – July5 @1870 / 1880 to 2230 / 2240,

o SOLD – Iron Condor – Aug @ 1840 / 1850 to 2250 / 2260.

To follow me on Twitter.com and on StockTwits.com to get my daily thoughts and trades – my handle is: taylorpamm.

Please be safe out there!

Disclaimer:

Expressed thoughts proffered within the BARRONS REPORT, a Private and free weekly economic newsletter, are those of noted entrepreneur, professor and author, R.F. Culbertson, contributing sources and those he interviews. You can learn more and get your free subscription by visiting: <http://rfcfinancialnews.blogspot.com> .

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If you'd like to view RF's actual stock trades - and see more of his thoughts - please feel free to sign up as a Twitter follower - "taylorpamm" is the handle.

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Creativity = http://vimeo.com/user8991651/review/105373017/0d0c374c28

Investing = http://vimeo.com/user8991651/review/105373016/a5e84dd610

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Views expressed are provided for information purposes only and should not be construed in any way as an offer, an endorsement, or inducement to invest and is not in any way a testimony of, or associated with Mr. Culbertson's other firms or associations. Mr. Culbertson and related parties are not registered and licensed brokers. This message may contain information that is confidential or privileged and is intended only for the individual or entity named above and does not constitute an offer for or advice about any alternative investment product. Such advice can only be made when accompanied by a prospectus or similar offering document. Past performance is not indicative of future performance. Please make sure to review important disclosures at the end of each article.

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PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS AS WELL AS THE OPPORTUNITY FOR GAIN WHEN INVESTING IN MANAGED FUNDS. WHEN CONSIDERING ALTERNATIVE INVESTMENTS (INCLUDING HEDGE FUNDS) AN INVESTOR SHOULD CONSIDER VARIOUS RISKS INCLUDING THE FACT THAT SOME PRODUCTS AND OTHER SPECULATIVE INVESTMENT PRACTICES MAY INCREASE RISK OF INVESTMENT LOSS; MAY NOT BE SUBJECT TO THE SAME REGULATORY REQUIREMENTS AS MUTUAL FUNDS, OFTEN CHARGE HIGH FEES, AND IN MANY CASES THE UNDERLYING INVESTMENTS ARE NOT TRANSPARENT AND ARE KNOWN ONLY TO THE INVESTMENT MANAGER.

Alternative investment performance can be volatile. An investor could lose all or a substantial amount of his or her investment. Often, alternative investment fund and account managers have total trading authority over their funds or accounts; the use of a single advisor applying generally similar trading programs could mean lack of diversification and, consequently, higher risk. There is often no secondary market for an investor's interest in alternative investments, and none is expected to develop.

All material presented herein is believed to be reliable but we cannot attest to its accuracy. Opinions expressed in these reports may change without prior notice. Culbertson and/or the staff may or may not have investments in any funds cited above.

Remember the Blog: <http://rfcfinancialnews.blogspot.com/>
Until next week – be safe.

R.F. Culbertson

<mailto:rfc@culbertsons.com>

<http://rfcfinancialnews.blogspot.com>

Sunday, May 10, 2015

This Week in Barrons - 5-10-215

This Week in Barrons – 5-10-2015:

Thoughts:Dear Ms. Yellen:Happy Mother’s Day. But didn’t your mother ever tell you: “If you don’t have something nice to say about something, don’t say anything at all?” Well, it seems that when you were questioned about the U.S. economy last week you said: “Equity market valuations are quite high, and there are potential dangers there. The stock market is too high. And when we raise interest rates, we’re going to raise them a lot.” Don’t you think that those were rather ‘mean’ words to say – about an economy to which you are the appointed ‘mother’ – 4 days before Mother’s Day?

One of the problems you’re facing is the changing corporate allegiance from serving their customers to pushing their stock price higher. A perfect example is the announcement on Friday by Dow Chemical. They announced 1,750 job cuts, while simultaneously announcing that they are boosting their share buy back to $10B. That’s it in a nutshell. Currently the most important thing to companies is NOT expansion, taking care of their employees or their customers, but rather an ever-increasing stock price.

I also tend to think of you as a boxer in a heavyweight-boxing match. It’s you and the Fed against that new, ‘up-and-comer’ – the Chinese economy. You must realize that for all intents and purposes, you and the Fed have driven the U.S. economy into the black hole of debt, blown up our banking system and have single-handedly diverted all of today’s global monetary energy toward Asia. I don’t expect you and the Fed to do down without a fight, and in fact – as soon as the Chinese currency is included into the SDR program in October – I truly expect disruptions. Do I expect the dollar to fall? Yes. Do I expect the Yuan to rise? Yes. But beyond that, we still have the situation where the U.S. is mired in debt, and our debt is not payable by any realistic means.

As if to add insult to injury, the Chinese have been accumulating gold ferociously over the past five years. They will not allow an ounce to leave the country. With the Chinese Yuan being included into the SDR basket in October, I think that many of the price controls on gold will be lifted. I do not believe that it just starts soaring higher, but I do believe that more commercial banks and speculators will begin to start trying to take it higher. China may even WANT the price of gold to go higher. And if gold moves higher in October, then silver should move along with it. It won’t happen instantly – there will be a lag – but at that point there is no reason to keep them constrained.

Happy Mother’s Day Ms. Yellen. Potentially a revenue stream for you and the Fed could be to sell tickets to watch your boxing match. It should be at least as exciting as the Mayweather – Pacquiao match.

The Market:On Friday, the Jobs Report came in on the heels of:
- Receiving the worst wholesale sales data since 2008,- Learning that a record 93M Americans are no longer in the work force,- Hearing the CEO of US Steel say that the American steel industry is so badly hurt it may need tariffs on Chinese steel in order to SURVIVE,- Having the Challenger lay-off report soar to 61,500 in April – up over 53% year over year,- Watching mortgage applications fall 4.6%,- Seeing our nation's trade deficit increase 43% to $51.5 billion in March suggesting that U.S. 1^st Quarter GDP will be revised downward from an already meager 0.2% gain,- Watching April’s monthly inflows to international ETFs of $25B surpass March’s five-year high of $22B, and- Seeing investors pull a net $16B from U.S. equity ETFs in April.

The details of the Payroll’s report that we received on Friday show that payrolls increased by 223k in the month of April. This was slightly more than estimates of 218k, with March payrolls being revised downward by 41k – from 126k to 85k. The birth/death model accounted for 213k of these jobs – so only 10k ‘real jobs’ were created last month. And (to top that off), the household survey data suggested that part-time jobs made up the over-whelming majority of all jobs created. I consider this a Goldilocks report because it wasn’t too good that the Fed would hike rates, and wasn’t too bad that the economy could be faltering.

But then why did the markets have such a large rally on Friday? It’s because ‘the street’ knows that this is a ‘bogus’ report. It’s horrid that the March employment numbers were revised downward from 126K to just 85K. But worse is that the ‘birth/death’ model (an admittedly fictitious government number) eliminated 95% of all of the reported job gains. So virtually all of the jobs gains for April were ‘made up’, and March was darn near negative. ‘The Street’ figured that these numbers put the Fed on hold for rate hikes – at least in the short term. And therefore, Friday’s close had the S&P at 2116 – just one point shy of the all-time closing highs. Now the question becomes: Do we break free and set out on a new leg higher, or is this a ‘top’ that will hold firm again – just like it has since March 2nd?

It’s my view that the Fed has perverted the entire financial structure in order to keep this ponzi scheme alive. That is to say they have allowed a debt based money system to give the illusion of prosperity. If the Fed tried to reverse course and return to ‘normalcy’, it would make them appear impotent and incompetent. They simply will not take that path, and days like Friday show me that the Fed can do incredible things. The DOW gained 267 points like it was nothing. Where did all of the money come from for such a push higher? Money flows show me that I came from foreign Central banks. In fact the Swiss National Bank recently stated that they own $34B worth of U.S. stocks, and that they are not alone.

So the Fed wants this market higher, and they can employ foreign banks as a method of getting it there. With that in mind, I think we punch through the 2117 level and set off another run higher, but I think it will be an exhaustion run for the roses. Remember the market's number one job is to ‘take’ as much money from as many people as possible. For two months the market has been trading sideways, and most mutual funds and ETFs have experienced drawdowns. Figures show that almost $70B has fled U.S. equities and moved into bonds and money markets. It would be just like ‘Mr. Market’ to run higher – drawing all of that money back into stocks, and then have a downward correction.

I'm leaning toward the idea that we break out to new highs, and move higher as everyone tries to get back in. But, in a relatively short period of time, we mark a significant top and finally enter a prolonged correction. However, all of that is just conjecture until we put in a few good solid closes above the S&P 2117 level.

TIPS:

I’m currently looking at:
-       KR (Kroger) – a June 65 / 67.5 Put Credit Spread,-       AAPL (Apple) – a June 110 / 115 to 135 / 140 Iron Condor,-       WYNN – a June 95 / 100 to 125 / 129 Iron Condor,-       FEYE (FireEye) over 42.55, and JPM (JP Morgan) over 65.50,-       DD over 75.10, IBM over 173.40, and TJX over 67.70When I consider buying a specific commodity, I often drift toward the following companies first:
-       Copper = FCX,-       Gold = ABX,-       Oil = PDCE,-       Industrial Metals = TCK,-       Oil Exploration = CLR,-       Oil Equipment = NOV,-       Chemicals = WLK,-       Steel/Iron = VALE, and-       Machinery =JOYI’m currently holding:
-       CRM (Salesforce) – SOLD - Iron Condor – May @ 67.5 / 70 to 77.5 / 80, and SOLD a – 71 / +68.5 Put Credit Spread,-       CSX – BOUGHT - Calendar – May / Aug @ $38,-       GLD – BOUGHT MAY Call Debit Spread @ +112 / -120,-       HERO – BOUGHT more Stock @ < $1,-       NUGT – BOUGHT shares and weekly covered calls,-       DUST – BOUGHT shares and weekly covered calls,-       ORCL – BOUGHT MAY / JUNE $45 Call Calendar, and BOUGHT more June $45 Calls,-       RUT – BOUGHT June Butterfly @ 1190 / 1260 / 1320,-       SPX – SOLD – Iron Condor – June @ 1970 / 1975 to 2175 / 2180, o   SOLD – Iron Condor – July @ 1900 / 1910 to 2200 / 2210,
o   SOLD – Iron Condor – July2 @ 1905 / 1910 to 2180 / 2185,
o   SOLD – Iron Condor – July2 @ 2005 / 2010 to 2180 / 2185, and
- UNH – BOUGHT – Calendar – May/June @ $115

To follow me on Twitter.com and on StockTwits.com to get my daily thoughts and trades – my handle is: taylorpamm.

Please be safe out there!

Disclaimer:

If you'd like to view RF's actual stock trades - and see more of his thoughts - please feel free to sign up as a Twitter follower - "taylorpamm" is the handle.

If you'd like to see RF in action - teaching people about investing - please feel free to view the TED talk that he gave on Fearless Investing: http://www.youtube.com/watch?v=K2Z9I_6ciH0

Creativity = http://vimeo.com/user8991651/review/105373017/0d0c374c28

Investing = http://vimeo.com/user8991651/review/105373016/a5e84dd610

Marketing = http://vimeo.com/user8991651/review/105373015/d7237d026d

Sales = http://vimeo.com/user8991651/review/105373014/0e44b43962

To unsubscribe please refer to the bottom of the email.

Note: Joining BARRONS REPORT is not an offering for any investment. It represents only the opinions of RF Culbertson and Associates.

Remember the Blog: <http://rfcfinancialnews.blogspot.com/>
Until next week – be safe.

R.F. Culbertson

<mailto:rfc@culbertsons.com>

<http://rfcfinancialnews.blogspot.com>

Sunday, May 3, 2015

This Week in Barrons - 5-3-2015

This Week in Barrons – 5-3-2015:

Thoughts:

Dear Ms. Yellen:

This week we learned that our economy grew (via the first quarter Gross Domestic Product (GDP)) at a whopping +0.2%. So, after trillions of dollars in QE and constant market manipulations, the economy missed going negative by two tenths of one percent. And without the large inventory buildup addition to GDP, our first quarter growth would have been negative -2.4%. Obviously, if this market goes to new highs, it won't be on the back of a growing economy.

Ms. Yellen, with a shrinking economy as a backdrop, I couldn’t (for the longest time) figure out why you would ever raise interest rates? And then it came to me; the ‘black swan’ event that you fear is the inclusion of the Chinese Yuan into the Special Drawing Rights (SDR) calculation. Allow me to explain my thinking. SDRs are an alternative reserve currency that can be used to backstop reserves and even pay back obligations to the International Monetary Fund (IMF) and member nations. SDRs can't be used to buy or sell products – just currency. Soon, they will be changing.

Currently only 4 currencies make up the SDR: the Japanese Yen, the European Euro, the British Pound Sterling, and the U.S. Dollar. Conspicuous by its absence is the Chinese Yuan, and all signs point to China being included in the SDR in October. That will not only increase China's voice in the IMF, but it will allow their currency to be freely traded across the globe.

Countries wishing to diversity their currency reserves have only the 4 choices listed above with the U.S. dollar being the best looking horse in the glue factory. In other words, the minute the Chinese are accepted into the SDR basket, it paves the way for all nations to diversify some holdings away from Yen, Dollar, Euro and Pound and into the Yuan. That means that U.S. Dollars would be sold in order that nations could buy Yuans – i.e. the demand for the U.S. dollar will fall. And that Ms. Yellen, is the ‘black swan’ event that I think you’re worried about. You know that when the Chinese Yuan is added to the SDR, they are going to become a reserve currency, and some amount of dollars will be sold to accumulate them. The demand for U.S. dollars is one of the main reasons that we have been allowed to live far above our actual economic situation, and removal of that demand will manifest itself in many ways starting with inflation.

When China is admitted to the SDR, then the dollar will fall (maybe a lot). If demand for U.S. dollars falls, our Treasury will need to fund their notes by either: increasing taxes (2016 is an election year), printing more money (we just ended QE), or increasing interest rates.

Ms. Yellen, that is why, (despite lousy economic news, horrible economic reports and truly ugly data) you’re blaming the weather and the fall in oil prices for our declining economy – is it not? That also explains why you keep doctoring up the economic reports, and why you tapered the QE program. You are desperate to raise rates to offset what you see coming with a declining dollar. You also know that the Chinese admittance will cause large dollar dislocations, and that could set the price of gold free.

What I’m struggling with is that during my lifetime, I will have witnessed our politicians and our Fed take the single best economy on earth and completely transform it into the #1 indebted nation on earth in just a few decades. No one could possibly make that many consecutive mistakes. This had to be done on purpose. I’m struggling with that purpose.

The Market:

The market continues to move sideways with ‘dips’ getting bought and ‘rips’ getting sold. This market is going to resolve itself at some point. A couple closes over 2117 on the S&P and we’ll move higher, where a couple closes under the 50-day moving average at 2090 and we will be heading lower. In between those two, we have a crapshoot.

Factually:

- According to Goldman, corporate stock buy-back orders are up 23% year over year, and last year was an all-time record year,

- Construction spending hit a two year low, and

- Shortly, corporate stock buy-backs will come to the market’s rescue (as they have had to wait until after earnings).

I’m only looking for a market correction if:

- The Dollar (DXY) continues to weaken, and breaks below 95,

- The 10-year note continues to march higher above 2.2%,

- Oil continues its march higher, and exceeds $60 a barrel,

- More cities (like Chicago) show financial distress, and get their debt downgraded, and

- The Volatility Index (VIX) gets below 12 – showing complacency. As a general rule, I like to see the VIX around 16. The VIX below 14 shows an unconcerned market, and is where I often begin to buy hedges / insurance. The VIX below 12 shows a market ‘ignoring all risk’, and is where I begin to over-insure. The VIX in single digits signifies that a big move is coming – either up or down.

Currently, we are watching a tug-of-war being waged between the fundamentals and manipulation. The fundamentals tell us that ‘this market must submit and fall’ while the manipulators say ‘this market must continue higher, or all hell will break loose’. In the long run, the fundamentals will win out, but the ‘long run’ can be a lot longer than you'd think. We are currently 6 years into a bogus recovery, and no one expected it to last this long.

Thus far, the March 2 and April 24 highs have been a concrete wall that the market can't break through. But each time the market nears or violates its 50-day moving average to the downside, it gets a jolt of joy juice and up we soar again. It’s been 2 months of this sideways chop for a market that is destined to either breakdown or breakout.

I continue to watch the levels. Until we get over 2117 on the S&P or until we lose 2040 on the S&P, we are still in the channel and bouncing up and down like a yoyo. If we were to put in 3 market closes over 2117, I'd feel confident we've got at least one last hurrah run in us before the wheels fall off. If (however) we put in 3 or more closes under the 50-day at 2090, I'd be watchful for a quick fall to the lower boundaries at 2040, and if we lost that – the party's over.

So until we get a breakout, or a breakdown, my game plan is the same. I snag a few long side trades on the upswing, and take profits quickly. Then I sidestep the drops as best I can, and wait to re-enter. If we break through the highs and hold, I'll load up in anticipation of the one last push for glory. If we lose the 2040 level, I’ll begin to take on long-term short positions.

TIPS:

Currently looking at:

- WYNN – bad earnings – looks to be overdone – selling Put Credit Spread,

- KSU (Kansas City Southern) – to the upside – selling a Put Credit Spread,

- RH (Restoration Hardware) – to the upside,

- AAPL (Apple) – to the upside,

- SPX – Iron Condor – July 10^th expiration, and

- Calls on INTC > 33.20, MS > 37.70, AA > 14.20, DANG > 9.70, SCI > 28.40, USO > 20.60, FNV > 53.50 and PAAS > 10.

I’m currently holding:

- CRM (Salesforce) – SOLD - Iron Condor – May @ 67.5 / 70 to 77.5 / 80,

- CSX – BOUGHT - Calendar – May / Aug @ $38,

- DIS (Disney) – BOUGHT - May Calls @ $111,

- GLD – BOUGHT MAY Call Debit Spread @ +112 / -120,

- NKE (Nike) – BOUGHT - May Calls @ 98.50,

- NUGT – BOUGHT shares and weekly covered calls,

- DUST – BOUGHT shares and weekly covered calls,

- ORCL – BOUGHT MAY / JUNE Call Calendar @ $45,

- RUT – BOUGHT June Butterfly @ 1190 / 1260 / 1320,

- SPX – SOLD – Iron Condor – June @ 1970 / 1975 to 2175 / 2180, and

- UNH – BOUGHT – Calendar – May/June @ $115

To follow me on Twitter.com and on StockTwits.com to get my daily thoughts and trades – my handle is: taylorpamm.

Please be safe out there!

Disclaimer:

If you'd like to view RF's actual stock trades - and see more of his thoughts - please feel free to sign up as a Twitter follower - "taylorpamm" is the handle.

If you'd like to see RF in action - teaching people about investing - please feel free to view the TED talk that he gave on Fearless Investing: http://www.youtube.com/watch?v=K2Z9I_6ciH0

Creativity = http://vimeo.com/user8991651/review/105373017/0d0c374c28

Investing = http://vimeo.com/user8991651/review/105373016/a5e84dd610

Marketing = http://vimeo.com/user8991651/review/105373015/d7237d026d

Sales = http://vimeo.com/user8991651/review/105373014/0e44b43962

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Note: Joining BARRONS REPORT is not an offering for any investment. It represents only the opinions of RF Culbertson and Associates.