ELI WALLACH HAS GONE

If immediately you don’t recognise his name just take a look at this picture here. You get it now, right?

He was one of the greatest 'character actors' ever in America. In one report Clint Eastwood said, "working with Eli Wallach has been one of the great pleasures of my life."

He acted in the following remarkable and legendary roles:

• Calvera in The Magificent Seven (1960)
• Tuco in The Good, the Bad and the Ugly (1966)
• Don Altobello Godfather Part III (1990)
• Julie Steinhard Wall Street: Money Never Sleeps (2010)

The veteran stage and screen actor died last Tuesday, he was 99. He appeared in more than four dozen films over the past five decades and received an honorary Academy Award of Oscar in 2010 for lifetime achievement. He had a sense of humor about his carrier and he titled his 2005 memoir “The Good, the Bad, and Me: In My Anecdotage.”

Why am I blogging today about him? First, because he used to be one of the best actor ever secondly, he had some connection with the market, namely in his final film role, Wallach had a key part in Oliver Stone’s “Wall Street: Money Never Sleeps” (2010) movie. In that movie Wallach is a wise old banker who predicts a financial apocalypse. There was a great performance from 95 year-old Eli Wallach as Jules Steinhardt, a veteran money man who goes back to the original Wall Street crash.

We can learn from his professional approach. He had the following famous quotes about his attitude. His commitment to the acting is a great pattern for us either how being better trader:

• “I've learned that life is very tricky business: Each person needs to find what they want to do in life and not be dissuaded when people question them.”
• “Well, I go to the theater today, and its curtain - there is no curtain in this play; the lights go down and go up - and we start. And I live this character for two hours. There are only two of us in the play. And It's a complete experience.”
• “Everyone thinks acting is easy. It's far from easy, but it's the most gratifying thing I do.”

The BFM Assets Team.

DOES THE VIX INDEX FORECAST ANYTHING?

The Marketwatch yesterday posted an article with this title “The father of the VIX.” I guess that is a good opportunity to talk a little bit more about the VIX fear gauge index.

The VIX is a mathematical equation derived from S&P500 options and traded on CBOE and a ticker for the Chicago Board Options Exchange Market Volatility Index. Mostly referred to as a fear index and represents the market's expectation of stock market volatility over the next 30 day. The idea of the VIX was first described by Menachem Brenner and Dan Galai in 1986. And, seven years later in 1993 the “the father of the VIX” Robert E. Whaley, a professor at Vanderbilt University developed the VIX for the Chicago Board Options Exchange (CBOE).

The VIX is generally called as an inverse indicator and the Trader’s Bible says the markets crash when the VIX is low. But, and here comes the big but. I have so many concerns about this preconception. As always on the market something works for a while after doesn’t work that is the same with the VIX too. If that would be true this year the market needed to go down because of the low VIX levels, but all US indices are at their historical highs. Just using your logic in this concept the markets should have been crashing every week for past couple years.

And here come the problems. Everyone and their grandmother know about the VIX now and watching it like a hawk. Secondly, if it would be so simple forecasting the crash everyone could make money. In my view the low level of VIX only show people are comfortable that nothing serious will happen in the next one month. That’s it nothing more, so it is more a sentiment indicator. And as we know the mass could be at most cases wrong. So, I have a bad news for VIX believers the VIX is not an indicator of anything having to do with forecast crashes.

Recently the VIX at historical law and many investors are worried about that VIX hitting multi-year lows. Should we be concerned? I don’t think so. As Robert E. Whaley said “I wouldn’t be worried about it.” The VIX could be lower than 10 or 11 in the market everything possible.

DO YOU WANT TO EARN OVER 30% PER YEAR?

Invest into our fully regulated Swiss Managed Account Fund: http://www.bfmassets.com/managed-accounts

The BFM Assets Team.

BUY THE ASX200

Yes, the Australian index, recently there is a great bargain opportunity, just tonight the ASX 200 rose by 1.2%, climbing from a one-week low. Sydney index’s pivotal stock groups are the banks and miners are both jumped higher.

It was a good morning for us because we hold some significantly huge positions from level of 5,400 and gained from level up to 5,460. We have covered some of our positions this morning and reopened and kept some others because we are still very bullish on ASX200. Why?

We have technical and sentiment reasons. In terms of technical issues we see a good arbitrage deal on ASX200 the reason is that the Australian benchmark index couldn’t gain much in the last couple of weeks while US indices are gained to new records. It seems lazy the ASX200 index and lagging far behind the American benchmark indices.

All in all to own ASX200 is a good bargain because it is cheap and quite far from the previous tops 5,500 (April 2014). Therefore we are expecting more gains on the long side and we are so optimistic about that the index needs to hit its previous high at 5,565. That is only question of time. It seems the futures will close tonight above the resistance level of 5,440 so this breakout opens the way up to that area.

The BFM Assets Team.

MARKET GOES UP LIKE AN ESCALATOR AND GOES DOWN LIKE AN ELEVATOR

Yesterday was a great example of that old rule. Right after the opening the SP500 briefly touched an intraday record at 1,966 then escalated the sell-off in the late session and was falling further the indices most points in more than a month. The Dow suffered a triple-digit decline. The correction started at Italy vs. Uruguay match, so the traders were more interested to sell than watch the game.

Is it only a profit taking at the end of the quarter? Nobody knows. But for sure, yesterday was there was a severe correction. But on the other hand that might bring a great opportunity for a bargain hunting in July.

• Dow -0.70% 
• Nasdaq - 0.43% 
• S&P 500 - 0.64% 

And at the same time the VIX gained with double digit as we anticipated couple of days ago here at this blog.

• VIX 12.13, +1.15, +10.47%

Is this correction a drama? No, this is part of this business and I heard that the sun will still come up tomorrow again. The resistance on DJIA is still at 16,945, until that level don’t do anything just wait and watch like a great elk hunter.

The BFM Assets Team.

THE FLAT MONDAY

It was totally flat and boring yesterday all US indices. Stocks were flat like a pancake. The Dow Jones index snapped its six-session winning streaks. U.S. big cap stocks fell and SP 500 dropped for the first time in seven sessions. After a great last week when SP500 index rose 1.4 percent, the most in two months, closing at an all-time high. The DJIA also ended the last week at a record level.

More detailed:

• S&P 500 -0.01% 
• Dow -0.06% 
• Nasdaq +0.01% 
• Russell 2000 -0.3%

After the record levels reaching last week, the market took a breath and consolidated slightly. This Monday was a perfect pattern of no volatility at all. The SP500 has not had any daily move of more than 1% since beginning of April. Since that time the SP500 gained 8.1%.

Narrow trading ranges mean also low volatility, which is good on one side because most people couldn’t burn their money. But on the other hand it means the rapid movements need to come shortly, the eruptive period is getting closer and closer. The low trading ranges are mostly followed by bull rally.

In technical perspective the DJIA is in a range now and could come more consolidations. The key resistance level needs to be taken 16,940 being more bullish again.

The BFM Assets Team.

PRAYING AND HOPING IN THE TRADING

DOW 17,000!!! Exactly not yet, misses 10 points, the new record is 16,990. This morning the DJIA futures got really close to 17,000, only 10 points missed.

There are two interpretation of this level. Some say it is too high and overbought and some say it is not high, there is still more place to gain. I am supporting the second option. Until we don’t see any fact which proves the bulls are dead and the bullish trend is not violated we are only on the long side.

Just a short story about the clashes of two cultures:

I have a good friend who told me around 10-14 days ago he shorted SP500 and DJIA because it was overbought, so needs to come some corrections. I argued with him and I said honestly I doubt that and last Friday I had a discussion with him again and he still expected the correction and holding his short positions. I don’t know how much money he had lost, but my concern is that he is stuck to his idea against all the facts.

I do really hope hope by this morning he revises his view and close all the shorts and not hoping anymore in a miracle. He has been merely waiting for some kinds of magic. But, praying and hoping works in the churches not in the markets. I remember well when I was rookie I prayed and asked God thousands of time, please help me turning out with profit on that certain position. I did this quite regularly, each week maybe each day because I was sitting quite often in a loosening position and I was desperate and I had anger about the market.

Since I accepted the rule of the market - that means it is always moving in trend and don’t argue with that momentum, just follow that. Don’t try to sail against the major trend. Don’t be on both sides of the market because there is only one winning side of the market, the Jedi-side, the side of the direction a trend.

If you understand that, you are going to be much better trader and your life as a trader will be more easy and pleasure. Don’t try to catch both sides, because the market in a bullish trend could be far more irrational than you and I can be solvent.

The BFM Assets Team.

BULLS MAKE MONEY ON OIL

WTI Crude Oil is steadily over 100$ and stays there since beginning of May. We started to buy at 92$ in January and closed our potions on the way up to 107$. This is the highest price since July 2013. Thursday continued the gains and headed for a second weekly gain.

The oil has a Ph.D. in International Realtionship & Politics, always reacts so sensitively on geopolitical turbulances like it was in March the Russian invasion in Krim Peninsula and in June, the Iraq military clashes.

Yesterday Nymex oil futures settled higher again and extending gains in the late trading session after President Barack Obama said the U.S. would send military advisers to Iraq, but that forces would not return to combat. The oil loves the military activity close to the oil fields, mostly in Middle East and Nigeria.

All in all I doubt that this great bullish rally from 92$ within couple of month is only because the geopolitical fears. I guess the world economy is doing better which creates bigger energy demand and with the supply concern that is a good combination to the bullish momentum. Our target was stated in May was 110$ we are so close that level and we still keep our bet. 

Technically just last week broke out from the flag pattern the WTI Oil.

DO YOU WANT TO EARN OVER 30% PER YEAR?

Invest into our fully regulated Swiss Managed Account Fund: http://www.bfmassets.com/managed-accounts

The BFM Assets Team.