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John Gilluly

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  • Time For A 'Texas Hedge'? [View article]
    This is probably the most dangerous risk/reward trade I can imagine at this point of uncertainty in the October sell-off. The market is panicking and becoming irrational in the selling. Not sure if probabilities still apply here, that is, if the sell off continues. Another 2% down move on the SPX would move the SVXY down by 7 pts, and conceivably, the UVXY short trade down by 7 Pts (minimum). On a 1,000 shares of each that's a $14,000 loss on approximately $100,000 investment, in a SINGLE DAY.

    You get the picture. If we go down to -15% on the SPX (not unreasonable, considering the history of corrections and how over-extended the market is now) a person could lose half their capital with this trade, in a WEEK. So this could be a Texas-size bust as well as a Texas-size hedge. Definitely not appropriate for S/A readers who are not high-risk traders. It's little like watching a cannon ball leave a cannon in slow motion.

    I own the facsimile of SVXY (XIV, a cheaper cousin), and it fluctuated from 29.50 (AH on Tuesday) to 24.50 in a single 4 hour span on Wednesday today, back up to 28.38 at the close, and in AH went down to 25.75. That's a 16% move down, and then a 16% move up, and then a 8% down, in a single 24 hour span. The wildness is so extreme, it reminds me of the mad-hatter. I hope that outlier range of 52 on the BTF for SVXY holds up, and doesn't break.

    This sell-off reminds me of 2010 and 2011, although I don't see anything quite extreme in our present economy as those times in the past now: doesn't make sense actually, cheap interest rates and cheap gas is good for a consumer economy. It's like a double tax cut. Plus the USA is ADDING 200k jobs a month (more consumers). How does that add up to -10% on the SPX and panic selling?
    Oct 16, 2014. 12:10 AM | 2 Likes Like |Link to Comment
  • Is October's Storm Nearly Over? [View article]
    Dr. Contango,

    Nice comments. Regarding #1, her cousins might have no memory, but chart readers can see what's happened at previous inflection points. #2. That is just a superb image with a deep truth to it. Investors (long-termers) are naturally bullish (You put your little seed $ in the ground and watch it grow), and the only time that natural bent is disturbed is when they are kicked in the chops. Volatility is the aberration; not the peace and quiet.
    Oct 14, 2014. 05:08 PM | Likes Like |Link to Comment
  • Future Price Range Forecasts Of Leveraged Long ETFs Signal Broad Market Moves [View article]
    If you liked SVXY at $70 with a possible 19% upside (-1.9% downside), then I am assuming that today's (Monday, October 13th) after-hours print of $54.88 (a -23% draw down in 3 days), would seem positively mouth-watering, yes?

    In any case I bought it, and ERX too. And plan to add more if it goes lower; or I may short UVXY (small), seeing as how it's up 50% since Friday morning (2 days ago).

    I am assuming SVXY is as green as green can be on your scatter chart to the right. The last time I remember an ETF being skewed that far into the green to right was LBJ in March, 2014, at $15. It eventually doubled.

    Thank you for all you do Peter. Your S/A ranking is richly deserved.
    Oct 13, 2014. 09:52 PM | Likes Like |Link to Comment
  • Is October's Storm Nearly Over? [View article]
    Hi Dave,
    The curious thing about QE is that whenever it's removed the economy cools a little, interest rates go down, and the inflation that's supposed to appear "just around the corner" never materializes.

    You're right about 2011, one hopes that does not happen again.

    From my observation, the attribute of QE is that its inflationary for asset prices as long as it lasts, but the market has collapsed twice when it was removed. I think the Fed is going to be uber-careful this time around so that the summers of 2010 and 2011 do not three-peat in the present. I am assuming we will have close to 0% interest rates for the remainder of the decade. This entire bull market was built on QE. Just surviving QE-less would be a big step forward for the market.
    Oct 12, 2014. 08:35 PM | 2 Likes Like |Link to Comment
  • Natural Gas Prices: After Steep Decline, Where Do We Go From Here? [View article]

    Any idea what caused the dramatic drop today in UNG, BOIL, UGAZ on MULTIPLES of average daily volume? Looked like panic-selling. Selling started right from the opening bell and went down the whole day.

    Jitters ahead of tomorrow morning's release, or was that inventory release "pre-released" today?

    From the chart, it looks like the spot price for Natgas could fall into the $3.50 range, even as low as the $2s
    Aug 13, 2014. 04:51 PM | Likes Like |Link to Comment
  • Cynk Technology: A Win-Win (Or Lose Less) Solution For Both Longs & Shorts [View article]
    Reminds me of the second coming of Plug Power. Same kind of story: almost nothing there fundamentally (okay, PLUG's got 2 cents a share in book value, but no more). The four letters - CYNK - provided an instant online casino game for day-traders. The "company" was immaterial ($0.00).
    Jul 14, 2014. 03:31 AM | 2 Likes Like |Link to Comment
  • Calm Before The Storm [View article]
    It's been that way thus far (the sorry part). On the other hand, the put/call ratio of the last 5 weeks has been nothing short of spectacular. Maybe spectacular could become...well...ordinary? I counted only 17 times in the last 10 years in which the put/call ratio was today's 0.43 or lower. That ratio comes out to 17/2510, or an average of 1/147.

    Probability-wise, not a high-odds proposition of continuing.

    Jun 5, 2014. 04:17 PM | Likes Like |Link to Comment
  • Calm Before The Storm [View article]
    Completed full short-position this morning at $80.20. SVXY is now parabolic on the two month chart. The ETF is at (or above) the extreme upper end of its 3 year channel. Waiting for a crack in the surge.
    Jun 5, 2014. 01:07 PM | Likes Like |Link to Comment
  • Counting Russian Cards [View article]
    The article speaks for itself on the buy side. If RUSL returns to its normalized levels, it should rise to the mid $20s. Emerging Markets in general are receiving a bid now after a very long downturn. The Ukrainian conflict has kept the Russian stock market down near its lows. Three other Direxion EM sovereign funds - Brazil, Latin America, and India - have doubled since their March lows. All would have been excellent trades.
    Jun 5, 2014. 01:03 PM | Likes Like |Link to Comment
  • Market Rally Saturation Nearing; Warning By Leveraged Long ETFs [View article]
    Morphic - Your comment is instructive in that it is usually useless for an author to try to explain himself outside of the formal structure of an article. If the article itself is not understandable to a reader, then nothing else will likely improve on that; especially in light of the dismissive attitude you seem to have about what he has said.

    As one who ascribes to Peter's views and has used them successfully ($), they are extremely "freeing" and profitable when compared to the previous market maxims I once held dear.
    Jun 2, 2014. 01:31 AM | 2 Likes Like |Link to Comment
  • Calm Before The Storm [View article]
    Yes convoluted, that's it exactly. It took me a long time to unlearn the traditional gab-fest (re: "long-term investing") which is primarily storytelling combined with gambling. Call it entertainment for pundits (even little ones).

    You will notice that the most-listened-to pundits are also the best and most-convincing storytellers. As a matter of fact, cons are quite believable in general. The believability factor is important if you are a con. One could even make a living at it. There are no non-believable confidence men.


    In our world, TIME is the elephant in the room. He who can successfully go into hand-to-hand combat with Time and perform amiably shall claim the day.

    Like your Anaconda in the grass analogy, we wait for the surprise wanderer (in this instance: volatility) to amble-by our neck of the woods.
    May 30, 2014. 12:11 PM | 3 Likes Like |Link to Comment
  • Calm Before The Storm [View article]
    I generally try to follow the thinking on this page: (link:
    May 30, 2014. 03:04 AM | Likes Like |Link to Comment
  • Market Rally Saturation Nearing; Warning By Leveraged Long ETFs [View article]
    They are not inclined to "buy the dips" at this point in time, and think the risk/reward for the market - and most of its sectors- are not good on the long side. Hence the scatter graph with most everybody up at the top, not down below. The yellow bars with a dot on the UDOW means the MMs think it is overbought.
    May 30, 2014. 02:54 AM | 2 Likes Like |Link to Comment
  • Market Rally Saturation Nearing; Warning By Leveraged Long ETFs [View article]
    Peter, thank you so much for this. I noticed an opportunity vis a vis the VIX last week. Just a hunch; but I took it. I have been short the SVXY and increasing my position in tiny increments as it continues to rise to the top of its channel near $80.

    See my recent article on SA, "Calm Before the Storm" (Link:
    I also responded to some posters' comments there. Opinion?

    I am a little puzzled by the RI for VIX when compared to the RI for SVXY on blockdesk. MMs have been positioning themselves for a rise in volatility on the VIX for 3 months (which hasn't come "yet"), but with the SVXY, expectations always remain dead center. The RI changes up or down on a daily basis with the price. What's with that? Is the VIX telling the real story and the SVXY the cover story? This "No surprises allowed" way of approaching the SVXY leads me to believe they are very concerned about the VIX's affect on prices, watch it closely, and always want to be dead center on the SVXY.


    BTW..the RUSL, URTY, and TNA trades turned out very well.
    May 30, 2014. 02:30 AM | Likes Like |Link to Comment
  • Calm Before The Storm [View article]
    Sandwah - isn't that the point? In terms of investment returns, TIME CARRIES ALL THE MUSCLE. Compressing the greatest amount of result into the shortest amount of time. Only volatility affords those kinds of opportunities.

    Buying the VIX at a multi-year low in volatility - amidst 10 volatility events in 18 months - seems like a high-probability trade to me; especially because the SVXY does not appear to deteriorate with the passage of time.

    I'm not sure how I could compare it. Maybe a lion on the Serengetti waiting by a water hole for the Wildebeests to return? They have been there before. They will come again. No one's around. Why not stake out a position?

    Or maybe a fisherman down by the lake. The fish aren't biting today, but they've bit here before, and the trout in this lake are huge, so when you score a trout, it's possible you could get a big one. So the fisherman waits with his pole and lure and bides his time.

    I know that if I short 1K of SVXY near $80 and cover a few weeks later at $60-$65, those profits will indeed show up in my brokerage account. They are not statistical phantoms. And if I am wrong here (I don't think I am); I'll simply get out and move on. I'm completely detached about this.
    May 30, 2014. 01:59 AM | 7 Likes Like |Link to Comment