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TGIF – Just Stop the Madness Already!

California lost more than Michael Jackson yesterday.

They also lost their credit rating as Fitch dropped them to A-minus and even that rating was immediately placed on negative credit watch.  California faces a $24 billion-plus budget deficit for the fiscal year that begins Wednesday, rapidly declining sales tax revenues and an impotent legislature that can’t agree on solutions.  Faced with the prospect of running out of cash, State Controller John Chiang said Wednesday the state will begin to issue IOUs for all general fund payments other than those categories protected by the state constitution, federal law and court decisions.

California has always been a trend-setting state and we have to wonder how far behind them the rest of the country is.  According the the Congressional Budget Office, the US's projected debt is now growing so quickly that is will exceed the size of the economy in 2023, that is 7 years earlier than the projections of the last report just 18 months ago.  The culprit is not the huge sum of stimulus spending that President Obama and Congress have injected into the economy this year, the budget office said. Instead, rising health care costs and an aging population together continue to push government spending upward at an unsustainable pace, only faster than the budget office last estimated. 

US DebtDebt soars because of unrelenting growth in federal spending on health care programs and a rise in Social Security spending” as a share of the economy, the report said. Up to 90 percent of the increase is due to Medicare and Medicaid spending rather than Social Security, it added.  Senator Kent Conrad, a Democrat from North Dakota who is chairman of the Senate Budget Committee, released a statement saying that the budget office report “reinforces the importance of not only paying for health reform, but ensuring that it significantly bends the cost curve on health care beyond the next ten years. We simply must get these health costs under control.” 

Gee, we can't afford health care, we can't afford rising energy costs but people are buying stocks as if both industries have nowhere to go but up, despite lower demand and rising unemployment.  I guess we can keep borrowing and borrowing and borrowing and borrowing to pay the ever-increasing prices projected by commodity futures and biotech multiples but one would think there's a theoretical limit…

There's a major disconnect going on between the markets and reality – perhaps it is end of quarter window dressing by financials and funds so desperate for a good quarter they will do anything to maintain the market for another 7 days .  Just this morning the Nikkei was up 84 points despite the Dollar falling back below 96 Yen.   That wasn't even the bad news for Japan though:  Inside the country, consumer prices fell at a record pace in May adding to the risk that deflation will become entrenched and hamper a rebound from the nation’s worst postwar recession.  Prices excluding fresh food slid 1.1 percent from a year earlier after dropping 0.1 percent in the preceding two months, the statistics bureau said today in Tokyo. It was the sharpest decrease since comparable figures were first compiled in 1971.

Defaltionary Spiral Profits fall, then wages come down, then consumers stop shopping,” said Junko Nishioka, chief Japan economist at RBS Securities Japan Ltd. in Tokyo. “And because people aren’t shopping, companies lower prices. That’s the process that we’re starting to see. It isn’t easy to break out of.”  Some 47 percent of 775 Japanese retailers surveyed by the Nikkei newspaper plan to lower prices in the year ending March 2010 to spur sales, up from 9 percent a year earlier.  “With demand deteriorating, companies are finding it more difficult to sell goods and services and are turning to discounting,” said Azusa Kato, an economist at BNP Paribas in Tokyo.  

I hope I didn't give you the impression that THAT was Japan's biggest problem though.  Oh no, they've got much bigger fish to fry (or eat raw, as the case may be).  While their CPI does the moon-walk, the London Times points out this morning:

Anaemic exports, a struggling domestic economy and a dramatic plunge in summer bonuses could cause Japan’s version of the sub-prime mortgage crisis to explode, a leading think-tank has warned.  A housing loan default problem is looming and likely to begin in the next few weeks. It amounts to the detonation of a ten-year time bomb that, researchers at the Tokyo Foundation say, started ticking around 1999 in the immediate aftermath of the Asian financial meltdown. This is the result of flawed government policy, whereby the state housing loan agency offered mortgages to families that they knew were unable to pay.

The impending meltdown, which the Tokyo Foundation believes could affect some hundreds of thousands of households, will be focused initially on the country’s industrial heartlands, where corporate bankruptcy rates are rising. The residential zones around Toyota’s home territory of Nagoya could become ghost towns, Kazuo Ishikawa, the think-tank’s senior research fellow, said.

The alarming prediction comes amid clear signs of upheaval in the micro economies of Japanese households. With Toyota, Panasonic and other groups expected to finish the current financial year in the red, the system of company bonuses has been shaken. The Japan Business Federation calculates that June bonuses will suffer an almost 20 per cent cut across the board, and a dip from which there appears little immediate prospect of recovery. Because those twice-yearly bonuses amount, on average, to about a quarter of the annual salary package of mortgage-payers, the effect is likely to be severe.  Mr Ishikawa said: “The next six months are going to see a sharp increase in housing refugees. People are first going to try to defer payments, but then they will default and be forced to abandon their homes and head somewhere cheaper.”

I keep telling people but the market does not listen to me:  Commodity hyperinflation is causing DEFLATION in the price of everything else, especially when neccessities like fuel are allowed to run out of control.  This is sucking money out of the rest of the economy and causes a deflationary cycle that ends up snapping back and bursting the commodity bubble anyway.  IT JUST HAPPENED LAST YEAR – WHY DOES NO ONE THINK IT WILL HAPPEN AGAIN?

There, I feel better now…  This is really serious stuff though and it's why I called a top for Members at 8,450 in yesterday's live chat session.  This is really just getting silly and we take our profits and run at this point, especially with the holiday weekend looming shortly where it all may hit the fan very hard.   That is the World's second largest economy and China's second biggest customer and the World's favorite low-interest lender (0.1%) sitting on what may be an economic implosion and WHERE IS THE FEAR?   The VIX fell to 26.36 yesterday, back to pre Lehman levels as if nothing can possibly go wrong with the global economy.  Well it's a great time to by VIX leaps, that's for sure! 

Look, I do not like being negative.  You do not like to hear negative things – this is human nature, we like to be happy.  But this is seriously dangerous stuff people!  If nothing happens then fine but please do not get all bullish as if nothing will.  A major bank or a medium-sized country could default tomorrow and who knows who they owe money to who would also default and so on and so on.  Very sadly, we're going to have to do a weekend post on catastrophe protection because the VIX isn't the only thing back to pre-Lehman levels.  So is the level of economic idiocy….

Personal income was out today and "economists" (the ones we trust to tell us how the economy is doing) were off by 600% in their estimates.  Personal income was up 1.4% due to massive inflows of stimulus but what's disturbing here is how wildly far off the "experts" can be.  This is their job, they are supposed to have a clue!  While boosing incomes for a month by 1.4% may sound great, what we really have is an indication that you can't stimulate a dead cat as Personal Spending was up just 0.3% and the PCE came in at our own deflationary 0.1%.  US consumers look pretty much like the cow in the above cartoon and if they stop giving milk, the whole World economy begins to starve. 

The media can do their sunshine and lollipops dance all day long and I guess that's one of the reasons I start turning negative – just trying to balance out the nonsense.  I am optimistic that, long-term, we can work our way out of this crisis but we need to do it through hard work, not make-believe games that everything got magically better with no pain at all and, until the market begins to embrace that reality, I will continue to watch the sky for signs of cracks, just in case….

Be careful out there and have a good weekend,

- Phil

 


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  1. Good Morning Everyone. Some quotes from KBH :-
     
    "Its premature to declare that housing has reached the end of the correction" – i.e we’re still ********
     
    "SIGNS some of the NEGATIVE housing trends MAYBE moderating". :- i,e things could be getting worse more slowly. Thats a green shoot dont ya know ?


  2.  HTE (Harvest Energy Trust)
    Buy 100 HTE @ $5.50
    Sell $7.50 Call Feb 10 – $0.50
    Sell $5.00 Put Feb 10 – $1.00

    Cost basis $4
    - min gain = $1 or 20%
    - max gain = $3.50 or 80%

    Not bad for Six Months!  PLUS DIVIDENDS !!
     
     
    PHIL,  What your thought with this style play or with one of the other OIL SANDS… PWE, PGH


  3. Looks like a busy pre-market.


  4. Rick Santelli mentioning Taibi’s article in Rolling Stone, but not making mention of the firm that shall not be named.


  5. XLF, I don’t know anything about HTE, but be careful with your assumptions.   Those are the ask prices of the options, you can only be sure of a trade if you sell the on bid.  You might be able to get the midpoint between B&A, but given that it is a thinly traded option that is unlikely.  If you sell on the bid, you’d get $1.10.  Also, Feb options expire in 8 months.  Also, be careful using the phrase "min gain".   Mr. Market never gives you a guaranteed win.   When you count commissions, HTE  below $4 means you lose money and the stock was at $3 in Mar.
    It might still be a good trade, but I just wanted to point out don’t get too rosy with your projections. 


  6. Folks, I’ve got to appologize for any confusion I might have caused.  I say ‘might’ because it could be that no reads or pays attention to me in which case No harm No foul!  But this week I’ve been operating under the assumption that today was the last trading day of the month.  I don’t know how I got this into my head.  Add to that Monday, the 29th is my birthday and I REALLY don’t know what I’ve been smoking!
     
    Anyway, I was thinking today was the last day of the month and would be huge.  Well, I’d like to change that call to Tuesday the 30th!  I think today we will retrace some to quite a bit of yesterday’s madness.  It should be very volatile though.  I’m thinking a red candle for the day with long tails on each end.  Good luck!  I know I could sure use it.


  7. Phil: Did you make the VIX call earlier and I missed it, or is this new?


  8. Taking a small stake in QID.. now


  9. XLF’f – PGH is in the 100K portfolio FWIW.
    Matt – UR right, no one reads the pink box (LOL)!  Actually, you are always a joy to read (where’s RMM??) ; o and I take your rants/points quite seriously.


  10. BIDU is coming into some light resistance back at 300. I’m entering short, but only with a diagonal.


  11. My thinking is we’ve just painted the wick of the candle for the day.  Hopefully!  The Naz just eclipsed the high not only yesterday but on last Friday.  A bullish indicator.  But I’m thinking that’s it on the upside for the day.  If not now.  Then definately within the next 30 mins.  Then again, with madness like yesterday.  Maybe they are out to break not just most but now ALL of the rules.


  12. Being in the Pharma business here in SO. CA…..I was thinking of starting a salvia divinorum side company.  If you have not heard of it…..google salvia divinorum.  A Mexican man sold a few hundred pounds a few years ago.  Last year he sold a few TONS. 
    http://en.wikipedia.org/wiki/Salvia_divinorum


  13. KBH/DB – Not good.  LEN wasn’t good either.

    HTE/XLF – I like it by why not sell the $5s for $1.20, which lowers your basis to $3.20 with a 56% profit if called away (plus dividends) and you can buy 20% more that way for the same price.

    VIX/Mllange – It’s a new idea based on the ridiculous drop in the VIX yesterday.  Oct $15s are $15.85 and you can buy the Oct $30 puts as well for $3.75 to lock in $15 back on the investment and, if the VIX goes back up in a crisis, you could have a nice double on the call side and if it goes down, you gain almost penny for penny on the put side.

    Same lines as yesterday for breakouts.

    • Dow opened the week around 8,450 so that line matters and 8,520 was last week’s close so not getting that back is still very lame.
    • S&P opened at 908 and 920 is their line in the sand.
    • Nas 1,810 and 1,827
    • NYSE 5,800 was down from 5,930 on Friday
    • RUT 510 was down from just 512 and we have the rebalancing today so who knows? 

    Today could go anywhere but let’s not forget what a huge gap down Monday was so we’re saying with cash but keeping our puts and maybe even speculating short over the weekend for some fun bets.


  14. VZ ex-div is 7/8, pays on 8/4 (6% yield).  Buy here @ 31, sell 31 Aug C and 30 Aug P for $1 each. 


  15. WhEEeeeeee!  Down she goes.
     
    Thanks Pharm!  Are you saying that stuff would grow in your area?  Are you thinking about an importing?  Grows in a cloudy mountainous area of Mexico..   shoot, we’ve got clouds and mountains here, too!


  16. Pharmboy – interesting idea, is it legal in CA?


  17. Heck, pots practically legal in CA.  Can’t imagine that stuff isn’t.


  18. Based on the Weak bounce that BA had yesterday, after falling so much so fast, A few ticks back,I sold some July ATM calls to cover my Jan calls.


  19. local gov’ts have declared illegal in some states.  not sure here, but Palomar Mountain in SD county is notorious for POT.


  20. Want to correct something.. when I said the Naz had taken out last Friday’s high I was looking at QLD when I said it.  QLD has taken out last Friday’s high.  But the Naz index has not.  Close but not there yet.  I thought QLD was pretty much the same as the index only more exagerated?  Guess not.


  21. QID/Matt – Good call, nice weekend hold too as we can always roll ‘em.  QID $34 calls now $1.05.

    Salvia/Pharm – I think every plant from that part of Mexico gives you hallucinations! 

    Oil back to $69.50 from $71 at Asia’s close.  As I said yesterday, we seem to be able to sucker Asia with our head fakes but Europe isn’t buying it. 

    VZ/Pharm – Nice play!


  22. Perhaps I missed it.  What exactly is the VIX play?


  23. GLUU – interesting little company and has popped up on several screens.  Opt (or someone here) I think noted them a while back.  The company makes games for mobile phones.  @ 1.19, might be worth a roll of the dice.  SeekingAlpha has several articles on them as well…..


  24. I’m playing with the devil today.  Yesterday I talked about getting into FSLR.  Got an entry close to 158,  over 161 now.  Could still get 5 more out of it before it turns.


  25. Pharm,
    If this is a pure 10 day dividend play, can u explain for me why you’re doing buy/write instead of just a covered call with ITM calls?


  26. The horsemen are all hanging tough. Interesting to see if they can hold out and turn the market.
     
    How many times is ToS going to tell us the FOREX trading is broken?


  27. Phil:
    The other day I mentioned double diagonals on INTC, based on the premise there’s nothing on the horizon to make it go dramatically higher or lower. Here’s what I come up with: I choose deep ITM put/call Jan 2011 LEAPs which are the lowest/highest strikes respectively that I can’t roll up/down for at most $.65 per $1 position. That gives me $20 puts and $12.50 calls (underlying currently about $16.30). That costs me $10.34 for a $7.50 spread ($2.84 in premium) to work off over 19 months, which is $.15 per month.
    July $16 puts/calls have about $.80 of premium with three weeks until expiration. So figure you have about $1.05 a month in premium to sell in the front month.


  28. maxt – I am looking a more medium to LT, as VZ is the best in class, esp. for those of us that like things that are less volitile (relatively speaking).  Also, if they run (the charts look as though they could, the option could get called from you b’f ex-div.  Lastly, VZ has been trading in a channel (mostly) over the past few mo, so I am trying to maximize the play.


  29. Pharm,
    Thanks, I get your thinking now.


  30. Phil – on QID, why buy the $34 (OTM) calls?  Why not ITM contracts?


  31. Phil
    What are your thoughts on CY?   Is it too high now after a 6 month run up or is there more room to run on the fundies and solar wave.


  32. XLF’d – Last year I did a similar ‘can’t lose’ buy-write on AAV around 5 and watched it go to 2, so these oil trusts can be more volatile than you think if oil crashes hard. FYI.


  33. Go ITMN go….


  34. Out of OREX….I don’t trust clinical data in the obesity field.  But it was a nice run…..


  35. "for those of us that like things that are less volitile"
    Pharmboy, you seem to know what you’re doing, but that sounds funny coming from someone trading these small-cap pharm stocks.


  36. my HTE play
    Thanks guys…..maybe I’ll try the Covered Call as Phil suggested.
    DIA Dive..Dive, take her down caption. 120 Ft


  37. the dollar and oil are both down… is there any significance there?


  38. Pharm
    OREX not enough volume for my blood plus 50 cent spread.  ITMN low volume also.


  39. Eric – I know, I do play both sides of the fence.  I feel comfortable playing small pharma as I understand the targets (how the drug works), risks, etc. but when the results from a company come out, I am usually long gone, so I miss the real excitement. 
    When exciting results are coming, traders tend – I say tend, to run up the stock  2-3 monts ahead of schedule.  right before, many get out – the stock drops, then the real volitility sets in.
    FWIW – If you want to protect the OREX gains from Phil’s play, I suggest buying the 2.5 P in Aug 15-20c), as we do not know when they will release the data (b’f or after OpEx).  If it fails, OREX is $1.


  40. SS – I bought the OREX outright and let it run.  Didn’t do the Option play.


  41. EricL, FYI ToS Forex order routing has been fixed :)


  42. Big surprise: people in Oil bus. are against a climate bill. Maybe they can hire Lutz to rename it something like Climofascism and have all the "blue dogs" vote against it.


  43. IR   Anyone have any thoughts medium term?


  44. Pharm, I haven’t followed your trades, but I’m going to start paying more attention — thanks.
     
    fast, thanks, they never tell me anything, lol.


  45. VIX/Sam – Check your Alert inbox (or my first comment).

    GLUU/Pharm – Opt likes to play them but they’re a bit of a trading vehicle so be careful.

    BIDU $300!!   PALM $15.75 – so much for the after hours shorts paying big…

    Forex trading is broken because there’s about to be a deval in the Euro (the ECB just had to commit another $1Tn in aid this week) and I’ll bet currency trading is going to get very messy soon. 

    INTC/Chaps – That’s exactly the right logic on those plays.  For any stock that you can keep in a range, those plays are great.

    VZ/Pharm – In NY/NJ, everyone who can get FIOS is pretty much doing it.  The word of mouth is huge.

    QID/Mllange – I liked the $34s because they had .20 per $1 less downside risk but still returned .35 per $1 to the upside (the delta).  Since the delta on the $32s at $1.80 at the time (both down a bit now) was .55, you would be far better off buying 2 $34s for $2.10, which would gain .70 on a dollar move up than the one $32 for $1.80.  Since there is less downside risk and since we ALWAYS scale into positions, it would be much easier to DD or roll the higher puts should the Qs go against us, which they very often do.

    CY/Steve – We loved them at $5, it’s hard to get excited at $9 and I’d rather wait for a correction than risk it way up here.  With the low VIX, even a buy/write’s a little tricky here. 

    Dollar-oil/Roamer – Yeah, it means it may be over for oil and I wouldn’t trust the dollar moves at all. 

    LOL Maxt!  I think Obama is surprised (and pissed) about how many Dems got pushed by oil lobbyists.  I think they are going to get a reaction out of him over this.

    IR/Eph – We always liked them, they were on the Buy List.  Probably test $19 or even $17 before they go higher though but that’s no reason not to sell naked Aug $20 puts for $1.25 as a starting point.


  46. IR   It is about like CAT.  When industrial cunstruction etc picks up it should too.


  47. dear phil
    I sold the ICE July 100p at 2.4 and the 120 call at 3.25. Greededly I bould back the 120 for a $2.00 profit and sold the 115p for 2.4.. What should I do here?


  48. Phil – Thanks for the clarification and education.


  49. V and MA seem to have decided that consumers are just kidding this month with all that silly "savings" they’ve been doing.  This market is in for one hell of a shock if this becomes a trend.  Remember when they said that our driving habits couldn’t possibly change?  That was one year and 7% demand ago.  Gas and oil are 50% lower than last year and demand is STILL trending lower.  These retailers have their heads in the sand thinking they can’t break the American consumer….

    CAT just got some upgrade from JPM too.

    UN Secy General weighing in on recovery:

    "Some see financial stabilization and growth in some countries. But I want to say this loud and clear: These are merely signs," Ban said. "For a large number of countries there are no `green shoots’ of recovery. There are only fallow fields. The real impact of the crisis could stretch for years."

    General Assembly President Miguel D’Escoto Brockmann, a leftist Nicaraguan priest and former foreign minister, said the 192-member world body was the best place to seek an inclusive global solution to the crisis, which he blamed on the "egoistical" exploitation of "material capitalism."

    "It is neither humane nor responsible to build a Noah’s Ark only to save the existing economic system, leaving the vast majority of humanity to their fate and to suffer the negative effects of a system imposed by an irresponsible but powerful minority," D’Escoto said. "We must take decisions that affect us all collectively to the greatest extent possible."

    The draft document calls the conference "a milestone" in engaging all U.N. member states to address the economic crisis.

    The document paints a depressing picture of the current state of the world economy: millions of people losing jobs, savings and their homes; more than 50 million additional people driven into extreme poverty, according to the World Bank; and the prospect of over 1 billion hungry and undernourished people, a historic high, according to the U.N. Food and Agriculture Organization.

    It calls for the International Monetary Fund, the World Bank and other lending institutions to be flexible in imposing conditions on developing countries so that they can take action to deal with the economic crisis, including adopting stimulus packages. The draft also calls for measures to avoid a new debt crisis and new approaches to restructuring debt.

    ICE/Drum – Actually, I kind of like them short up here.  The $115 puts at $4.40 if you sold them, could give you trouble if they fail but, otherwise, they are all premium and you can roll them down to the Aug $105 puts better than even so nothing to worry about.   In fact, as a new ICE spread, I like the Aug $110 puts at $6.55, selling the $115 puts IF they fall to $4 or if ICE breaks $117.


  50. Hey Matt, your mixing up of when is the end of the quarter was hillarious!  That thought came to my mind when you laid out this week projection, which by the way is largely correct, just off by a day or two (you predicted a huge rally today, and it happened yesterday).  What’s your upside and downside target on SPX?  I don’t have a target, but will react to adversed price movement.  My short CALL is currently at 990 and short PUT is way down at 750. 


  51. INTC/Chaps
    I have a very similar position on INTC. A few months ago I bought the JAN11 $10 CALLER for $5.70.  I sell the CALLers near or at the money every month.  If I get in trouble, then I roll up by selling the following month PUT naked.
    So far so good, although I’ve been debating about selling the OCT 13 put naked in order to buy the $18 CALLer for protection.  That way I don’t have to worry about INTC running past $18.
    Current July Position
    Naked $15 PUT / Covered $16 CALL
    It seems that you can collect about 30-45 cents per month on INTC per Strike


  52. what the heck is that stuff!


  53. Phil,
    BIDU @ $300, time to buy puts?
    Thanks


  54. 84.06 on DIA is the line to watch; for now, it is looking like DIA will hold that, and possibly rally a bit.
     
    very slow, boring, low volume day.  Except for PALM.  Had a bkfst meeting and my cover orders did not get hit.
    patience there; it will fold, maybe not today; but no doubt.


  55. SLG meandering higher; almost flat for the week now (closed last week at 22.55).  Volume pathetically low.
    Look for some kind of rally in reit stocks into next week as many go x-divvy by end of month.


  56. Tv time Dail dose of the prez any move today?


  57. Obama just has to break down and give Merkel a neck massage and then she’ll forget about her country’s horrible experience with hyperinflation. It’s funny how our view of things is guided by our own experience and even Obama who preaches empathy can’t see that we are guided by our fear of massive deflation during the Great Depression and the German’s by their experince of hyperinflation. Merkel who is from the former E. Germany experienced this even during her own life, when the real value of the E German Mark was nothing and one could only buy government subsidized staples with that currency.


  58. To show what a slow borning and perhaps fake trading day it is, my 400 share order to short AMZN at 83.22 virtually stopped its trading for a minute and a half as the MM and computers figured out if they should hit my offer.


  59. DIA testing resistance again to downside, if it breaks below, could have some fun …., otherwise, more boring trade.


  60. Singapore Steve - LM soaring today (of course, because I got out yesterday EOD).  I hope you decided against shorting it!


  61. BIDU/John – They are a very dangerous short as they are consolidation at $300 breakout with a rapidly rising 50 dma about to punch through $300 in about 2 weeks and China’s on a roll so it’s tempting but VERY scary to short them.  I think if I was going to short I’d buy the Aug $280 puts at $17.40 and sell the $260 puts for $10.90 so you’re in the $20 puts spread for $6.50, a nice triple if it works.  I like this because the spread between most $20 puts in July is still $4 or better so you’re spending $2.50 for a month look at the play but, like I said, you should get out by the time that 50 dma gets near the $300 line!

    Good point Maxt.

    Vol 52M by the way after 2 hours.


  62. Sorry, I should \have said that I sold the ICE 115 call for 2.4.


  63. 84.03; breaking down ?


  64. I guess yesterday was not the right day to DD on VLO.


  65. MrM
    Did not get into LM.  Like I said , better off at the craps table.   yesterday it was a bunch of lemmings buying and selling the stock on rumors that the billionaire would add to his stake.


  66. They just spiked the NYMEX back over $70 to catch the suckers but we’re right back to $68.85 already.  Obama and Merkel should be strategizing on a coordinated way to shut down the NYMEX and ICE and put this nonsense to and end.   Let them list oil barrels on Ebay and see who really wants them! 

    So funny that as soon as the markets pushed down a sudden flood of orders comes in for GOOG, AMZN, PALM and a whole bunch of 4-letter stocks.  They almost have the Nas back to green now…

    ICE/Drum – Oh, well that’s worse then isn’t it?  Same deal though, they have so much premium just let it run down and adjust when you roll. 


  67. Looks like we could push higher through lunch with the selloff coming around 1:15pm thru close or if it happens  quickly thinking there will be a stick save.
     
    Peter, you didn’t specify a time frame regarding SPX.  But that’s ok cuz I don’t really have a call to give you.  But I think it’s pretty safe to say your calls and puts will expire out of the money next month.  I still see July being a down month.  But not down to 790.  There’s no way they are going to let the wheels just fall off this thing.  It will take a little more time then that.  But it should start in July.


  68. Phil, they really have this manipulation down to a science.  I still can’t get over goog’s trading yesterday.  It was falling all day while the Naz wasn’t.  Then, in the last 5 mins, goog got spiked hard to help drive the Naz back up.  They have figured out ways to save the market and move the market using the least amount of money and at the most critical times.  Makes complete sense.  But also makes it extremely difficult to momentum trade with it.


  69. XLF’d/iNTC: Thanks for the reference point. If I can average what you’ve been averaging on front-month premiums, I’ll be a happy camper.


  70. On the ICE $115s, are those July?


  71. I think they are going to try and take out last Friday’s high in the Naz before dropping it for the rest of the day.  Gotta make the chart nice and obvious for people to jump on board next week!


  72. Pharmboy, I’m in your ITMN trade and I believe when you recommended it you said resistance was 14.50, we’re there, are you setting tight stops?


  73. Damon Vickers (Nine Points Capital, up 67% last year), says "Time to get short."

    PALM on AAPL: "There’s room for 3-5 players to win in this space. We don’t have to beat each other to prosper."  Yeah, tell that to MOT….

    Manipulations/Matt – Yeah, it’s amazing stuff.  I’ve been conemplating going long GOOG when the Nas falls on that basis.  Same with AMZN as they are used more often than GOOG.

    ICE/Samlayer – Yes, covering with the July $115 PUTS as they can be rolled down to Aug $105 puts even at least and even then you are in a nice spread.

    Possible 1pm sell-off so watch out for that.  Volume just 62M and they can’t get it anywhere, very hard to sit on this over the weekend if you are a fund manager looking to leave early today and it won’t take much volume to push us lower.  End of day is rip for major stick save though with half the traders gone on a low-volume day.  Back to 8,300 and holding it again and I’ll be going long into the close

    Upside watches are USO $37.50 (oil $69), S&P 918, Dow 8,460, NYSE 5,900, XLF $12, QQQQ 36.50, below that is not really bullish. 

    Downside we have AAPL $140, GOOG $420, RIMM $70, QQQQ 36, XLF $11.50, USO $37.50 (oil $69) and XLE $47.50.

    We’ll see which side wins (maybe both by the end of the day).


  74. Phil-
    Like your prediction of the day’s end.  I am going to buy up some DIA calls cheap and flip them (hopefully) into the close.


  75.  Phil, what do you think the fair price is for V? Seems like their is a lot of incentive for wall st. to pump them up as they own a big chunk of Visa.


  76. Phil,
    Any news on the TOS group buy?


  77. This reminds me of our Junior High dances, everybody standing around waiting for someone else to start dancing.


  78. I sold YRCW at $1.87 and will buy back at $1.60 and out at $1.50 and just hold the july $2.5 puts I sold.


  79. JPM just said S&P could dip to 830 in next few months.

    Republicans falling on swords trying to stop energy bill from coming to vote in the House. 

    DIA/Celeste – Don’t forget I’m looking for that dip first.  I won’t go long from here.

    V/Jo – I find it very hard to believe that a fair price for V is more than the $65 IPO price of March ’08 when the consumer was alive and well and the IPO had been priced out by professional fund managers who had studied and debated the potential for 3 months ahead of time and ended up settling on an offering price of about $45 which jumped almost 50% on day one and was $80 a month later.  People are friggin’ nuts, V is a financial instrument, their profits are a function of US commerce, nothing more.  There is no magical thing that they can do to make more money in a down economy.   Their current p/e is 42 and, based on very optimistic projections their forward p/e is 20.  So a "fair" price for V is $45 and I was all gung-ho to buy them in November at that price.  To me, $60 is the pumped up price but I wouldn’t short them as this is what we expected when we bought in.  If you want to play them long.  I’d go with 2011 $50s at $19.45 ($6 premium) and sell $62.50s for $2.30 as they can be rolled to the Aug $65s so not likely to get you in trouble and if you can chop $1 of premium a month, you have a free leap and $2.30 pays for 70% of a $5 roll down – hard to be unhappy with it.

    TOS/Maxt – It’s such BS, they have to talk to like 3 committees but we’re making progress.  Also talking to TradeMonster and haven’t liked 3 others enough to bother.  Probably down to those two now, they route the same way and I’m going to be testing Monster’s platform next week.

    YRCW/Maxt – You can just day trade them for a living these days!

    Oil heading into the usual NYMEX closing pump.  ‘


  80. JPM AND Damon Vickers ? Lets hope one of them’s right :-)


  81. Short / Vickers:  I plan on getting short, and sticking with it, just before the July 4th holiday.  But I"m going to wait for all those 401K funds to get spent on the 1st and 2nd of the month.  I’ll start averaging in by eod on the 1st or the morning of the 2nd.


  82.  Morgan Stanley also said to sell two weeks into the rally few months ago…..no one f’ing knows!


  83. How are V actually doing revenue wise? I should just research maybe.
    Am wondering if, in a recession, people may switch from charging luxuries to charging essentials on credit. For example, money which may have been used to purchase or lease a new car last year may turn into money spent on credit cards to repair an old car this year.  Slightly short on cash? Finally follow up on that offer to start charging your utility bills. Unexpected medical expense? Those checks the card company sends you every 2 weeks may finally come in handy….


  84. jomama – Goldman Sachs knows, they’re just not telling!


  85. ".  I’ve been conemplating going long GOOG when the Nas falls on that basis.  Same with AMZN as they are used more often than GOOG "  Phil  I’ve been trying to go GOOG on any weakness @ 40X but only opportunity was when overall market looked scary. Any thoughts on support or NAS levels?


  86. MrM - Goldman Sachs doesn’t know either. They decide every day fresh what they are going to do next…..


  87. TOS/Phil: What’s the current deal from TOS for PSW members?  It could be better than what I am getting now.  I’m getting $8.95 + 0.75/contract, which is Schwab’s rate.  TOS matched Schwab’s rate because I told them I have another account at Schwab.
    If PSW’s rate is better, how do I get that rate?  IE, how do I show them that I am a PSW member?
    I am thinking I might as well get the current PSW rate and start saving now.  If you do negotiate a lower rate later, that’s even better.


  88. Hello Phil,
     
    is it a good time to buy 2011 C $2.5 calls to start the 2.5-5 spread ? and wait for the price go up to sell the $5 call ?
    or you think C could break down from here ? its been pinned against that $3 line for a few days now.


  89. Phil/RIMM
    After kicking myself for missing the Oxen Group trade I bought some RIMM 65puts when I thought it had reached a top for the day.  Understand it’s benefitting from the PALM’s earnings, but is there something else behind this rise?  Is it being used to prop us NAS?
    Anyway, at this point, gonna hold over weekend and hope gravity catches up with it on Monday.


  90. Curious how optionshouse is as a broker? Very attractive commissions, but then you often get what you pay for….
    Anyone have any experience?


  91. AMZN – 60% of CD sales are Michael Jackson.  Probably says more about how low CD sales probably are at AMZN.  Can’t imagine they had a big inventory to begin with.


  92. Oh yeah, the UN will solve the world economy.
     
    ROTFLMAO !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!


  93. I think it was Singapore Steve who said yesterday that lately everything happens in the first and last hour, he’s spot on today.  Maybe Phil’s rule should be amended to "Always sell into the initial excitement.  Then go do something for 4-1/2 hours."


  94. jofori
    Sometimes best just to take your loss and preserve what you have for another day.  You will loose 10 cents holding them over the weekend.  and the delta is low, 18.  Not the type of short I would risk.  Maybe Cap would do it.  3 weeks till OE. 


  95. MrM
    Same thing happening today.  Could have had 18 holes in between the excitement today.


  96. Steve … me ??
    It depends on what the trade is; what your conviction is; etc.   How big is the loss, what was your expectation.
    Sometimes better taking the loss; depends.
    Or sell the 60′ puts; make it a vertical.


  97. Maybe Cramer will tell everyone to buy PALM on their fantastic LOSS. 
    then the damn thing can fall hard !


  98. FED Fisher:  "US Growth Likely to restart in 2H 2009".
    whatever that means "likely to restart"…..
     
    LOL.


  99. Restart in 2H 2009 ? Thats next week isn’t it ? Watch out for the green shoots next week then !


  100. C’mon Goldman.  Hit the buy button already.  I have a tennis lesson this afternoon.


  101. My FSLR trade is sitting here flat.  Should have sold during the intial excitement.  You can never loose when you do.
    Cap, probably selling the 60 puts for a quarter maybe the only way to salvage it.   Those won’t move much on a 5-10 dollar drop but it also ties up some margin too.    But RIMM just seems too strong to drop that much, even on a bad day. Now 6-12 months ago that was another story.


  102. Singa Stv: I bought a few shares of RIMM a little too late this morning. Hardly made enough to cover commissions. Sounds like you would advise just holding the stock?


  103. Looks like us bears are going to suffer the indignity of yet another stick. Already picking up.


  104. V/Steve – People are pretty maxed out already and not much new credit coming.  Defaults are up and banks are pulling cards in, not handing them out.

    Cramer is such a tool.  He comes in and finds tricky ways to repeat the phrase "We’re going to have 4% GDP growth" without committing to that being his actual opinion. 

    Support/B1 – Oh 1,750 is great support until it breaks, then 1,600. 

    TOS/Cwan – I think people are getting 0 + $1.25 so it depends if you do a lot or a little what’s better.  We don’t have anything better lined up yet and I think things are all screwed up as Ameritrade is taking them over.

    C/Micro – I’d be fine with the naked calls as I’d be happy to buy more for less if C went lower and wait for a bounce back.

    RIMM/Jof – Certainly they are one of the Nas manipulating tools.  Media hyping them like crazy.   I’m wondering if anyone has any idea if either RIMM or PALM are making good margins on their phones.  They key to the IPhone is AAPL manages to pack all that stuff in and still have a net margin of better than 35%.  RIMM can get away with a loser as they make it up on the back end but not PALM.

    Optionhouse/Steve – I was not happy with their platform 3 months ago.  I need to look again.   Also, they don’t really shop your bids, they generally clear internally (IB does too) which is not always a good thing.

    It’s time for GOOG to goose the markets!

    LOL Celeste!


  105. morx
    You could always sell the 70 for about 3.50 for some protection.  3.4% return in 21 days  if called away.


  106. Volume 100M at 3pm on a rebalancing day – this market is MESSED UP!

    Something very large may happen soon. 


  107. Daggone.  So what exactly was it about Monday and Tuesday of this week that caused the selloff?  Because for the last 3 days so far.. there has been an unwavering committment by the buyers in this market and they are steadfast in their determination today!


  108. CNBC … VLO getting "crushed today".   Down 38 cents is crushed ???


  109. Phil
    Are we going to get hit by an astroid?


  110. Shorted more PALM at 16.53…. this will turn out to be a gimme putt.


  111. MrM – sorry, out to meetings.  ITMN still looks good to move up next week.  I am waiting them out.


  112. I can’t believe that PALM is up 17% on crappy numbers.  There used to be a time when a company would be taken to the woodshed.  And to say it will all come together in 2010 with positive cash flows when by that time AAPL, RIMM will be eating there lunch again.   Reality will soon set in.   Cap,  looks like you can buy a good bottle on that put.


  113. PALM IV is still sky-high. Buying put calendars with me long Aug 25s, selling the July 15s.


  114. Sing Steve
    I thought the same thing about Palms 2010 statement.  How many new devices and operating sysytems will be out between now and then?  The landscape will be so different by then.
    Cap
    you holding your Palm short over the weekend?


  115. This market is an earthen vessel full of waste matter.


  116. "CNBC … VLO getting "crushed today".   Down 38 cents is crushed ???" – Cap that is good.  They are within yesterday’s range, the day before, the day before, and the day before!  VLO is asleep…  Don’t wake them.  Shhhhh…


  117. By the way should we be buying VLO, should they wake up?


  118. Brokerage – I may need to check out IB shortly.  Getting nervous having too much money in TOS.  I already have OptionXpress & TDA (whose trading platforms are very painful to do rolling).  I did look at the account insurance at TOS, which is the standard $100k in cash and $500k in equity, and they have additional insurance of a total $200M from all accounts  from Lloyd (it’s on their Web site).  However, they have $4Bn in asset a few months back, so $200M may or may not be enough to cover the excess balance.  I’ll be talking to their insurance guy after getting back from vacation.


  119. chuck … oh yes … palm.


  120. Asteriod/Steve – Nah but they way they try to avoid touching 8,200 you would think there was hot burning lava below that line….

    The slowness of this market is amazing.  VIX still down at 26.15 but no bullish activity.  Oil dropped from $71.50 at Europe’s open to just over $69 now and OIH and XLE are flat.  There’s a mid-year energy outlook from the EIA on Monday, that will be interesting but with all these idiot economists off by 100%, 200%, 600%…. in their estimates – what difference does a report really make. 

    VLO/Grant – We like them down here ($16.50ish). 

    115M now, woo hoo!  Very stickable…


  121. maxt, maybe we should be calling you Isiah or Noah.


  122. PeterD – The insurance protects against fraud, otherwise even if the company goes BK your account cannot be touched by TOS creditors. The question to ask is if the cask in your account is held in the general or separate account, and I may be wrong, but I do not think a brokerage firm can hold client assets in a general account.


  123. Phil/FAZ
    Still have the stock from yesterdays Oxen Trade.  Bought for about $5.  What calls would you recommend selling against it?
     
    Thx.


  124. If the XLF gets over $12 I am going to be a very happy camper


  125. morx,
    just keeping it clean for you all’s sensetive ears.


  126. It’s amazing how little actual trading is occuring.  Looking at level II for QID/QLD they are almost all intermarket swaps.  I attribute those trades to balancing between the two or MMs just moving the thing around.  Very few normal trades are made.  Just a computer driven chess game to extract money from our pockets.


  127. looks like Mr Stick just showed up.


  128. Whoa stick it to me!
    look at the big green candle on RUT  (5 min chart)


  129. There is so much stick anticipation that we keep getting selling just before each 15 min mark and buying just after between 2:30 and 3:45 it would be nice to have a hook-up that could trade those pennies….  The fact that the sellers go first though makes me think there’s a lot of shares waiting to be sold.  We could have another gap-down Monday but would rather have a big fat stick move to sell into.

    Oh here we go!

    FAZ/Jofor – If you can stand it, I’d say stand fast for now


  130. I feel really cheated and frustrated by this. Your stock market stinks


  131. Will an investigative journalist ever look into this or would (the firm that shall not be named) just have em killed?


  132. They won’t hold it!


  133. They’ve already been killed Chuck – that’s why there are no investigative journalists left.

    What a disappointment!


  134. Just another $hitty day in the la la land we like to call a stock market.  Well, my bad.  Instead of it being a red candle in the naz with nice long tails it turned out to be a green candle with hardly any tails.  I was just about as wrong as you can get.  Which means my ‘or’ scenario happened.  Which is to say the madness from yesterday continued today.  I don’t get it.  Shoot.  I don’t even try to get it anymore.  I’m just working on acceptance. 


  135. If this market was jam, it would be called Schmuckers.


  136. Have a Goooood Weekend heavy body, look forward to reading your mad posts.


  137. I already moved half my money back to the UK at the start of the month. This crap each day means I’ll probably move the rest soon. Phil will have to open a UK trading blog for me.


  138. Nas/Matt – You can’t play that thing, it’s just a joke these days.  I’m playing the QID longer-term but the Nas is untradable ont he charts because GS doesn’t give a damn what the chart says. 

    305M in the end.  All day long 115 and then 200M in the last half hour and over 100M was the last 5 mins.  Ridiculous! 

    Oh well, not a bad week though, mainly because we pretty much watched from the sides. 

    UK/DB – FTSE way too dull and predictable for me.  8-)

    Have a great weekend everyone.  Don’t forget the next one’s a holiday!


  139. I wonder if GS has guys like me on staff?  I mean, they have me so figured out it’s ridiculous.  Think about it.  A panel of matt1966s.. where they have them provide premises for market moves on a daily basis.. they take the consensus from the panel, throw it over the wall to the programmers and they just put an ! in front of it.  For you non-programmers, ! means NOT! 
    I would really like that job.


  140. DB – Are you the one tanking the USD by converting to the Pounds?    If that is true, you are doing the opposite of what GS does.  A theory is that they have returned the TARP money, so they are getting out of commodities at a high and buying the USD at a low (while you are selling the dollar at a low and buying the pounds at a high).
     
    I can see the frustration being a bear or a bull in the past few days.  But remember that the Neutral Strategies are raking in big bucks in this stagnant market.  Try to sell premiums while you wait for a direction.  For the Short Strangles, you can always turn bullish or bearish by cutting/reducing one side of the strangles.  There are plenty of rolling options too.  The key to the neutral strategies is to avoid that one big loss (due to sudden movement of 5-10% of the entire market), and I’m sure it can be managed as we are a bunch of relatively experienced traders.


  141. Matt – LOL !
    It’s crazy; that’s for sure; somehow my hit and run trading is working out ok…. that’s good enuf for me.
    Good weekend all.


  142. PeterD – Given that my dollars were 2 to the pound this time last year I was happy with the 1.6 this time round. Not quite the 1.39 of the low. I think the dollar has more to lose yet, hence the move. (And also because , as stated, I’ve had enough of the crap in the pre-market and the end of day pump)
    I know I harp on about being a bear (because I am bearish on the economy/market) but I still have spreads and some bullish bets to cover when I have a bearish position. Wouldnt be able to afford being here otherwise :-)