The Mad Hedge Fund Trader“Special Non Taper Issue ”

With John ThomasSan Francisco

December 18, 2013www.madhedgefundtrader.com

Trade Alert PerformanceThree Year Anniversary!

*2013 YTD +59.25%, compared to 21%for the Dow, beating it by 38%

*December +3.2%

*First 158 weeks of Trading +114.3%

*Versus +29% for the Dow AverageA 85% outperformance of the index77 out of 92 closed trades profitable in 2013

84% Success Rate in 2013

Portfolio Review-Maxing Out Over the Holidayswatch out for over trading and over confidence!

Expiration P&L+67.24% YTD

current capital at risk

Risk On

(AAPL) 1/$490-$520 call spread 10.00%(SFTBY) shares long 20.00%(XLF) 1/$19-$21 call spread 10.00%(FXY) 1/$101-$98 put spread 10.00%(FXY) 1/$100-$97 put spread 10.00%(SPY) 1/$173-$176 call spread 10.00%(TLT) 1/$106-$109 put spread 10.00%

Risk Off

none

total net position 80.00%

Performance Year to Date +59.25%!!

36 Months Since Inception+114.3%, Averaged annualized +38.1%

Strategy Outlook-Buy the Dips*Its off to the races after the Fed meeting

*$23 billion Washington budget deal eliminates one overhang for the market

*Bull market in risk assets continues well into 2014

*Bonds have topped, entering 20 year slow motionbear market

*Free fall in yen continues

*Don’t catch the falling knife in gold,the world wants paper assets

*Emerging markets will outperform in 2014 off the back of China recovery

*Commodities looking very cheap

The Jim Parker ViewThe Mad Day Trader-On sale for a $1,000 upgrade

Technical Set Up of the week

*Buy

buy calls, risk on after announcementkeep (TBT) calls

*Sell Short

(TLT) on a rallysell (FXY) if closes here, could run another 8 handles(GLD) don’t touch(USO) expensive, but not yet

The Global Economy-Ramping Up

*Global synchronized recovery still the play for 2014, the US, Europe, China, and Japan all grow together for the first time since 2007

*UK Unemployment falls to 7.4%, 4 ½ year low, but BOE maintains QE and zero rates. A Fed model?

*Japan Tankan survey modestly improves,capital spending rising

*October Japanese machinery orders -2.1% up to +0.6%

*China HSBC PMI 50.8 to 50.5, still over 50

*German November ZEW investor confidence survey 54.6 to 62, a 7 year high

Weekly Jobless Claims+68,000 increase to 316,000!!

November Nonfarm Payrolldead on the 12 month moving average

Bonds-The Zombie Market

*Do we get $70 or $80 billion in Fed buying a month for the foreseeable future? Will head off a market crash and interest rate spike.

*Sets up a goldilocks scenario for all risk assets

*Taper will overhang the market for all of 2014, keeping it stuck in narrow ranges, will unwind in small $10 billion increments

*Bonds could take a big hit when “Great Reallocation” hits in January

*Most analysts targeting 3.5% yield on ten year Treasury for 2014, up from 2.70%,could spike to 4%

*Sell every rally

Ten Year Treasuries (TLT) long the 1/$106-$109 put spread-tried to double but missed

10 Year Treasury Yield ($TNX)

Junk Bonds (HYG)

2X Short Treasuries (TBT)-The next leg up has started

Investment Grade Corporate Bonds (LQD)

Emerging Market Debt (ELD) 4.72% Yield

Municipal Bonds (MUB)-2.92% yield,Mix of AAA, AA, and A rated bonds

MLP’s (LINE) 11.2% Yield

Stocks – Pause in a Bull Market

*If Fed doesn’t taper today, then it’s off to the races and new highs, but only incremental ones.

*All the volatility for the month will be concentrated in 2 hours after the 2:00 PM EST announcement

*By the way, no chance of Fed taper in December, waiting for Yellen

*$635 billion in company stock buy backs in 2013, biggest since 2006

*Japan (DXJ) the big performer in 2013, up 39%, breaking out to upside, carries on into 2014

S&P 500 (SPX)-Another sideways consolidation has begunlong the 1/$173-$176 call spread, double on a 3 point dip

Dow Average

NASDAQ (QQQ)

(VIX)-Inverted for the first time in yearsShort term VIX is higher than medium term-Wednesday Fed

hedging

Russell 2000 (IWM)

Apple (AAPL)-Takes a Hit on (JBL) downgrade, (CHL) deal still just talk long the 1/$490-$520 call spread

Technology Sector SPDR (XLK), (ROM)

Cyclicals Sector SPDR (XLY), (UCC)

Health Care Sector SPDR (XLV), (RXL)

Financial Select SPDR (XLF)long the 1/$19-$21 call spread

Citigroup

Shanghai-

(DXJ)-Upside breakout on more aggressive monetary easing

Emerging Markets (EEM)Trapped by the commodity complex, and rising rates

Dollar-Yen is the Big Story*Successful breakdown targets ¥125 in the cash, $75 in the (FXY), will be the big foreign currency trade of 2014, again. BOJ says room for more QE

*Japanese cash outflow into foreign bonds weakening the yen more, $25 billion in November alone

*Aussie hostage to the US bond market, dragged down by weak commodities, and killed ADM’s takeover bid for GrainCorp.

*Euro overvalued again at $1.38

*Taper talk will support dollar,then eventually push it upthrough higher interest rates

Long Dollar Basket (UUP)-Breaking Down

Japanese Yen (FXY)-Major breakdown underwaylong the 1/$98-101 put spread, long the 1/$97-100 put spread

long the the 1/$98-$101 put spread

Short Japanese Yen ETF (YCS)-

Euro (FXE)-

Australian Dollar (FXA)-Talking down the Aussie again

Emerging Market Currencies (CEW)

Energy-Supply Glut*Libyan support shortage elevating prices

*Cold weather gives a boost

*So does China recovery

*A peace deal with Iran on nukes could drop oil prices for another $20, as 3 million barrels a day in new supply hits the market.

*International Energy Agency says US to become worlds top oil producer by 2016

*Sell on next $5 rally

Crude-Sell the Rally….Soon

United States Oil Fund (USO)

Natural Gas (UNG)-Cold weather spike

Natural Gas-It’s All About the Thermometer

Copper-the China catalyst,BUT NOW TOP OF ONE YEAR RANGE

Freeport McMoRan (FCX)-2013 Losers punished one last time

Precious Metals-The Unloved commodity

*Waiting for the next wave of panic selling

*JP Morgan physical gold inventories hit new lows

*Eric Sprott of the Sprott gold find fired after a 90% draw down in assets

*Will the final bottom be $1,200, or $1,000?

*Will we see it in 2014?

*Don’t try to catch the falling knife

Gold-Breaking to new lows

Barrack Gold (ABX)-

Market Vectors Gold Miners ETF- (GDX)

Silver (SLV)-

Agriculture-No Trade Until 2014

*China has quadrupled buying at the market bottom, to 48 million metric tonnes. Is this the floor?

*Hoarding becoming the order of the day. Farmers would rather store crops than sell at low prices. Storage facilities are overflowing

*2012’s high prices cured high prices, rushed farmers to over plant

*Buy dips next year and pray for a draught

(CORN)-

DB Commodities Index ETF (DBC)-Yikes!The worst performing sector of 2013

Real Estate-Slowing Down

*Seasonal slowdown also hurting

*Prices still rising, but at slower rate

*Big money has been made,expect slow grind up from here

September S&P/Case–Shiller Home Price Index

(ITB)-US Home Construction Dow Sub indexNot the Sector to Own in Rising Interest Rates

Trade Sheet-No Change“RISK ON” Good Into 2014

*Stocks- buy the dips, running to a new yearend high*Bonds- sell rallies, trade the 2.50%-3% range*Commodities-start scaling in on dips*Currencies- sell yen on any rallies*Precious Metals –wait for the final flush *Volatility-stand aside, will bounce along bottom*The Ags –stay away until next year, no trade*Real estate- no trade

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Next Strategy Webinar 12:00 EST Wednesday, January 8, 2013

Live from San Francisco

Good Luck and Good Trading!