The Mad Hedge Fund Trader “Trading the Crash”

1. With John Thomasfrom San Francisco, August 26, 2015www.madhedgefundtrader.com The Mad Hedge Fund Trader“Trading the Crash”

2. *January +0.53% Final *July +6.42%*February +7.73% Final *August +1.27% MTD*March +3.00%Final*April +6.62%Final*May +5.15% Final*June +3.68% Final*2015 Year to Date +34.40%compared to -8.8% for the Dow Average*Trailing 1 year return +40.1%, +187.21% since inception *Average annualized return of 40.1% Trade Alert PerformanceNew All Time High!

3. Portfolio ReviewRun a small book in crash conditionsa very wide short strangle Expiration P&L 36.40%

4. Paid Subscriber Trailing 12 Month Audited Return +35.55%Ouch! Snake Bit by the Crash

5. 57 Months Since InceptionDaily Audited Performance Averaged annualized return +39.35%

6. Lennar Homes (LEN) $53.45Home Depot (HD) $116.16Walt Disney (DIS) $98.84General Motors (GM) $29.60Tesla (TSLA) $230.77Apple (AAPL) $105.76Solar City (SCTY) $40.99Gilead Sciences (GILD) $105.33Wisdom Tree Japan Hedged Equity (DXJ) $52.01Wisdom Tree Europe Hedged Equity (HEDJ) $56.95 10 Stocks to Buy at the Bottom

7. *Shrink trading book to a single position so it’s easier to watch*Shrink your size so its small enough for you to sleep at night…. Even during a crash*Watch the (VIX) as a leading indicator*Don’t be afraid to trade, now is when risk is the lowest, don’t give up and go into hiding*Expect breakdowns everywhere, trading platforms, PC’s, and the Internet to slow down*When you buy single names, focus on quality,it is a rare chance to buy the best at a discount*Don’t even think about calling your broker,you’re on your own*Maintain discipline, let the other people panic*Now is when you define yourself as a trader,anyone can trade a bull market How to Trade A Crash

8. *China crash brings an American one, but there were no confirming moves in other asset classes, Beijing cuts interest rates by ¼%, but doesn’t help*The bottom may be in, but expect a retest*Oil hits the $30 handle, we may see the $20 handle before it is over*Bond market gets a flight to safety bid,which vaporizes quickly*Profit taking on King dollar returns*Economy is too strong for crash to continue,therefore, you buy stocks*Gold finally gets a “flight to safety” bid Strategy Outlook-

9. The Bill Davis View Picks of the Week Buys: QIHOO 360 Techology (QIHU)  $53.13  Target to $62.50 SolarCity Corp (SCTY) $43.75 Target to $50 Facebook (FB) $78.13 Target to $90 Keurig Green Mountain (GMCR) $50 Target to $75 Alexion Pharmaceuticals (ALXN) $156 Target to $181 Sells: 3M Co (MMM) $155 Target to $131 Wynn Resorts (WYNN) $87 Target to $81 Federal Express (FDX) $165 Target to $148 L-3 Communications (LLL) $114 Target to $106 Deckers Outdoor (DECK) $70 Target to $64

10. *July retail sales up a hot +0.6%, July industrial production up a dynamic +0.6%, auto production up a stunning 10.6%, housing is on fire, July durable goods up a hot 0.2%*US job creation is growing at twice the rate as the workforce, taking employment to all time highs and unemployment to decade lows*First read on Q2 GDP is a sub par 2.3%, but Q1 revised up by 0.6%, so we really got 3% in pieces, Europe still a weak 0.3%, green shoots barely there*Japan Q2 GDP drops 1.6%*Is China downshifting from 7% to 5% growth?August PMI drop from 47.8 to 47.1 causes a panic*European green shoots need fertilizer with0.3% Q2 growth The Global Economy-Hot US, Cold Cruel World

11. Weekly Jobless Claims – Another Run at the Lows4,000 to 277,000, NEW 42 YEAR LOW!headed for Full Unemployment at 5%-Global Recovery a Driver

12. *China crash spills into the the US Treasury bond market, bringing price spike and flushing me out of my short*Crash eliminates any chance of a Fed rate rise in September, even though the economic data say otherwise*215,000 nonfarm payroll and 5.3% unemployment rate puts a cap on any bond price rises, floor under yields*The China crash has slowed things down, with IMF and World begging for a rate hike delay, is basis for the recent 11 point rally*Junk bonds get slaughtered, touchingOctober, 2014 low*Good time to reach for yield in energy MLP’s with oil bottom in, check out (LINE) Bonds-Flight to Safety

13. Ten Year Treasuries (TLT) 2.08%The down trend is in place! Sell Rallies!

14. Ten Year Treasury Yield ($TNX) 2.15%Testing the 1.95% Support

15. Junk Bonds (HYG) 6.44% YieldBig Hedge Funds lining up to short-Classic head and shoulders top

16. 2X Short Treasuries (TBT)-Second Half Big Trade?Buy at the Dip, $41 will hold

17. Investment Grade Corporate Bonds (LQD)4.27% Yield

18. Emerging Market Debt (ELD) 5.50% Yield-Big hedge funds lining up to sell-Identical chart to junk bonds

19. Municipal Bonds (MUB)-1.74% yield Mix of AAA, AA, and A rated bonds-another Puerto Rico Crisis looming

20. *Monday morning opening flash crash may be the 2015 low, 18 months of stock appreciation given up in 5 minutes, retests to come, worst August since 1998 LTCM(Liar’s Poker)*Watch the stocks that bounced back the fastest, they will lead in next rally, (HD), (DIS), (AAPL), (GE), (SCTY), (NFLX)*Crash was exaggerated by Friday option expiration and low August liquidity*Stocks have gone from fairly valued to cheap in a week, multiple falls from 17.5 to 15, bringing in buyers in droves*Upside breakout happens when we start discounting 2016 earnings to be up 11%*China is a train wreck, increasingly volatility globally Stocks-Flash Crash Again

21. Shanghai ($SSEC)-The Bad Boy

22. S&P 500-200 Day MA in Play at $203.50Took Profits on 8/$214-$217 and 8/$211-$215 vertical bear put spreadslong the 9/$204-$208 vertical bear put spreadlong the 9/$171-$176 vertical bull call spread

23. (SPX) 20 Year

24. Dow Average-Boring!, Down -8% on the year!200-day MA break! Down on the Year!

25. NASDAQ (QQQ)-The new leadership

26. NASDAQ (QQQ)-20 Year

27. Solar City (SCTY)-Elon Musk engineers another short squeeze,Buys $50 million of stock

28. Europe Hedged Equity (HEDJ)-Greek bounce

29. (VIX)-Four Year High!

30. (XIV)-Velocity Shares Daily Inverse VIX Short Term ETNbuy on next market selloff and VIX spike

31. Russell 2000 (IWM)-The Weak Linkmost affected by rising rates-Great leading indicator

32. Palo Alto Networks (PANW)-Taking Profits Where There Are Profits

33. Regional Bank Basket (KBE)-Who Killed the Rate Rise?(MTG), (RDN), (SIVB), (CFG), (CFR), (BXS)

34. Technology Sector SPDR (XLK), (ROM)(AAPL), (MSFT), (VZ), (T), (FB), (IBM)

35. Industrials Sector SPDR (XLI)-Dow Mainstay(GE), (MMM), (UNP), (UTX), (BA), (HON)

36. Transports Sector SPDR (XTN)-Another Dow Mainstay(ALGT), (ALK), (JBLU), (LUV), (CHRW), (DAL),

37. Health Care Sector SPDR (XLV), (RXL)(JNJ), (PFE), (MRK), (GILD), (ACT), (AMGN)

38. Financial Select SPDR (XLF)-Party Postponed(BLK/B), (WFC), (JPM), (BAC), (C), (GS)

39. Consumer Discretionary SPDR (XLY)(DIS), (AMZN), (HD), (CMCSA), (MCD), (SBUX)

40. Apple (AAPL) –$92?!Tim Cook Says Business is Great in China on Monday Openingwaiting for the next catalyst-the iPhone 7

41. Biotech iShares (IBB)-The Generals Get Shot

42. China (FXI)-The party is over

43. Japan (DXJ)-Hedged Japan Equitytook profits on 20% weighting-Global contagion kicks in

44. Sony (SNE)-Buy Territory

45. Emerging Markets (EFA)-another big short sellers target

46. India (EPI)-Buy it Here

47. *Global panic brings dollar profit taking as traders dump all interest rate rise plays, no chance of September Fed rate rise, if they do rise, it will bring another crash, is all bad for the dollar*Will create another great long dollar entry point*Commodity currencies (FXC) and (FXA) get demolished*China devaluation reaches nearly 5% to boost economy and exports, slaughtering (CYB)*Panic brings Euro spike*Yen spike too, flushing me out of shorts Foreign Currencies-Farewell to Janet

48. Euro ($XEU), (FXE), (EUO)-Playing Both AsidesPost Greece Hangover

49. Long Dollar Index (UUP)-Kiss this Baby Goodbye for Now

50. Canadian Dollar (FXC)-Commodity Collapse