The Mad Hedge Fund Trader“Smelling the Roses ”

With John ThomasSan Francisco

January 8, 2014www.madhedgefundtrader.com

Trade Alert Performance2013 Final

*2013 Final +67.45%, compared to 26%for the Dow, beating it by 41.45%

*December Final +11.41%*January MTD +3.00%

*First 160 weeks of Trading +125.50%

*Versus +47% for the Dow AverageA 78% outperformance of the index75 out of 90 closed trades profitable in 2013

83% Success Rate in 2013

Portfolio Review-Running Into Expirationwatch out for over trading and over confidence!

Expiration P&L+8.51% YTD

Risk On

(AAPL) 1/$490-$520 call spread 10.00%(SFTBY) shares long 20.00%(XLF) 1/$19-$21 call spread 10.00%(XLE) 1/$83-$86 call spread 10.00%(GILD) 1/$67.50-$70 call spread 10.00%(FXY) 1/$98-$95 put spread 10.00%(SPY) 1/$173-$176 call spread 10.00%(TLT) 1/$104-$107 put spread 10.00%(XLK) 1/$33-$35 call spread 10.00%

Risk Off

none

total net position 100.00%

2013 Final Performance +67.25%!!

37 Months Since Inception+125.5%, Averaged annualized +40.7%

Strategy Outlook-Buy the Dips, Risk On Lives*Bull market in risk assets continues well into 2014, but are now vastly over extended, take short term profits

*Run entire trading book into January 17 expiration, then reassess

*Bonds attempting to break down to knew lows, highs in yields

*Yen oversold, needs to consolidate a big move down

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

*Emerging markets still unloved, but may bottom soon, will be a rotation play

*Commodities looking very cheap, must do well this year

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

The Quarterly calls are out

Technical Set Up of the week

*Buy

buy (GOOG), Priceline (PCLM),and momentum names on dip (AAPL) moving stop down to $518

*Sell Short

(TLT) sell again on rally after Friday(FXY) $94.50

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

*This US could hit 3%-4%, far above consensus expectations

*China still stagnating, how much of the 7.5% is real?

*Biggest growth surprise could be in Europe, from 0% to 2%

*Chinese December services PMI falls from 52.5 to 50.9, 2 ½ year low, sets off Asian growth scare

Weekly Jobless Claims-2,000 drop to 339,000

December Nonfarm Payrollout Friday, expected in line

Bonds-Another Poor Year Ahead

*Bear Market continues

*Most analysts targeting 3.5% yield on ten year Treasury for 2014, up from 2.95%, could spike to 4%

*The “1%” will support this market, slow the descent

*No Fed move on interest rates for a year

*Another taper will come in the firsthalf, but is already priced in

*Sell every rally

Ten Year Treasuries (TLT) long the 1/$104-$107 Don’t chase from here,

don’t sell into a pit

10 Year Treasury Yield ($TNX)-Yield 2.98%

Junk Bonds (HYG) 6.17% Yield

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

Investment Grade Corporate Bonds (LQD)3.84% Yield

Emerging Market Debt (ELD) 4.18% Yield

Municipal Bonds (MUB)-2.93% yield,Mix of AAA, AA, and A rated bonds

MLP’s (LINE) 10.2% Yield

Stocks – Beating the Tax Man

*Tax selling has been the big factor so far this year by shareholder looking to defer taxes due until April, 2015

*Biggest falls have been by market leaders, like (XLE) and (AAPL)

*Is a temporary move, bull market resumeswhen year end effects end

*Traditional New Year rally was pulledforward by December hyper bullishness

*Money moving from crap to quality

S&P 500 (SPX)-Begging for a Correctionlong the 1/$173-$176 call spread, run into expiration

S&P 500 (SPX)-The One Year View

Dow Average-Down on the Year

NASDAQ (QQQ)

(VIX)-

Russell 2000 (IWM)

Apple (AAPL)-Takes a Hit on tax selling after 48% gain in 6 monthslong the 1/$490-$520 call spread

Technology Sector SPDR (XLK), (ROM)long the 1/$33-$35 call spread

Cyclicals Sector SPDR (XLY), (UCC)

Industrials Sector SPDR (XLI)

Health Care Sector SPDR (XLV), (RXL)

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

Financial Select SPDR (XLE)long the 1/$83-$86 call spread

Softbank (SFTBY) – losing momentum

Gilead Sciences (GILD)long 1/$67.50-$70 call spread

Shanghai-

(DXJ)-Upside breakout on more aggressive monetary easing,assets up from $300 million to $12 billion in 14 months

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

*But needs to consolidate first

*Ausie Central Bank Governor still talking it down.

*Euro overvalued again at $1.38

*Buy the Yuan (CYB) for a long term play

Long Dollar Basket (UUP)-Ready for Takeoff?

Japanese Yen (FXY)-Consolidation of Major breakdown Next

long the 1/$95-$98 put spread

Short Japanese Yen ETF (YCS)-

Euro (FXE)-

Australian Dollar (FXA)-Talking down the Aussie again

Emerging Market Currencies (CEW)

Crude-In balance, no trade

*Harsh east coast winter is supporting oil and natural gas

*So is a global economic recovery

*Prospect of Libya returning to the export market caused recent dip

*Geneva Iran negations overhanging the market, but is a multi year affair

*Ever present new supplies ofnatural gas

United States Oil Fund (USO)

Natural Gas (UNG)-Cold weather spike

Copper-Dragged up by Improving Global Recovery

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

Precious Metals-In the Trash

*Hedge fund redemptions crushed gold right into year end

*Physical buyers still there

*Emerging market central banks buying every dip

*Don’t catch a falling knife

Gold-(GLD) Breaking to new lows

Barrack Gold (ABX)-

Market Vectors Gold Miners ETF- (GDX)

Silver (SLV)-

Agriculture-No Trade Until 2014

*Distress selling by farmers to meet cash flow setting new lows

*They had been withholding supplies until now awaiting better prices

*Big buys from Egypt and China helping to put in bottom

*So is the extreme cold in theMidwest

(CORN)-

DB Commodities Index ETF (DBC)-buying for a later play

Real Estate-Slowing Down

*November construction spending rose 1% to $934 billion, a four year high

*Rising rates could trigger an initial stampede to buy homes

*Homebuilders prefer profitability overmarket share, creating shortgages

*Nothing to do here

September S&P/Case–Shiller Home Price Index

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

(DHI) DR Horton

Trade Sheet-No Change“RISK ON” Good Through Q1 2014

*Stocks- buy the dips, but cut back size, running to a new highs*Bonds- sell rallies, trade the 2.80%-3.5% range*Commodities-start scaling in on dips*Currencies- sell yen on any rallies, buy (CYB)*Precious Metals –wait for the final flush *Volatility-stand aside, will bounce along bottom*The Ags –stay away, no trade*Real estate- no trade

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Good Luck and Good Trading!