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Monday Market Movement – Are We Done at 1/3?

There it is!

The Nikkei gave up another 2.5% overnight and is now down 1,000 points for the month of July, retracing 1/3 of the gains since March 10th, at 7,000.  The Hang Seng also fell 2.5% (this is why we have rules!) but finishing at 17,254 is down just 1,750 points (10%) since July 1st but also represents a very neat 1/3 retrace off 7,650-point run to 19,000 from the March low of 11,500.  I hate to say I told you so (actually, it’s kind of fun sometimes) but the 2 full paragraphs I devoted to playing the FXP (ultra-short China) in Friday’s post are all huge winners, with the July vertical spread looking like a clean double already – how’s that for weekend protection?  Don’t be greedy, if we are not heading lower today in the US, it’s a good idea to kill the short-term trade and take the profits off the table.

On a global basis, we need to be concerned with this 1/3 retrace trend as the Shanghai has not gone down much at all off it’s 54% run from March.  The Shanghai Composite only fell 1% this morning and has miles to go to match the sell-off of the other indices.  Over in Europe, the FTSE is down to 4,125, falling from 4.500 in June (8.3%) after rising from 3,500 in March (28%) so, PRESTO, a 1/3 retrace there too!  The DAX is right on the 1/3 line at 4,600 and the CAC is right on the nose after rising from 2,550 to 3,500 (37%) and falling back to 3,100 (12.7%), just about 1/3.  Are we sensing a theme here? 

The Dow rose from 6,500 on March 9th to 8,800 on June 12th (up 35%) and is now back to 8,150 (down 7.4%) with about 5% more to fall before hitting the magic 33% mark.  Call 700 the floor on the S&P with 950 as the top and we have a 35% gain there as well with 880 being a 7.4% drop.  Wow, what a coincidence!  Only there are no coincidences, just quant trading programs that decide these things long before you read the paper and decide what stocks look good and bad…  The Nasdaq was our Icarus index, flying too close to the sun with a 50% move from 1,300 to 1,850 and they are down just 100 points which works out to 15.4% down, a 30% retrace

We’ll be watching the 1/3 line on the Nasdaq with great interest to see if it holds.  1/3 of the 650-point gain is 217 points and we arrive at 1,633, quite a ways down from 1,750.  Had the Nasdaq gained the same 35% as the Dow and S&P, they would have gone from 1,300 to – you guessed it: 1,750!  So the Nasdaq is holding the top of the range that the other indexes ran to.  If the Nas can hold 1,750, it will be a very good signal that the drop is over here.  Not to be forgotten, the NYSE ran from 4,300 to 6,200 (44%) and pulled back to 5,600 (9.6%) but, if we throw out the spikes up and down on the NYSE,we have a pretty neat run from 4,500 to 6,000, back to 33% there and the expected drop zone would be 5,500.  The Russell ran (non-spike) from 350 to 525 (50%) and has pulled back to 480 (8.5%) also a very good sign if they can hold it. 

SP 500 Chart

Last week, Jesse’s Café Américain gave us this S&P chart which shows the various resistance points the S&P is meeting on both sides.  We were bottom fishing last week into the move down to the heavy resistance at 870 which, as I pointed out last week, is just about 10% off the spike high so we liked it for a bounce at least.  I’m no chart guy, my technicals are math-based on our 5% rule, which just happens to often agree with charts, but I think if you draw a line from the November support line at 800 to the 890 line that was holding when this chart was drawn, you’ll discover a hidden uptrend that I believe will be established as long as we get some reasonable earnings results.  That line would put us on a path to establish a new uptrend that could take us about 10% higher by the end of the year IF we can break through the top of the major downtrend in September.  That is, of course, a lot of ifs to get through so don’t mistake this for a gung-ho bull premise but we are keeping an open mind! 

For now, let’s just enjoy the ride as we have little upside resistance and a very heavy negative sentiment that can lead to a lot of bears getting caught with their pants down as it will be hard for the earnings news and economic data of the coming week to be as bad as what has now been priced in during the panic of the last 30 days.  As I said in my weekend post, this is simply the pullback we predicted when we went to cash after Memorial Day – we stuck with our plan and finally put some of our sidelined cash to work after 6 weeks of waiting.  If we don’t hold these levels, it’s easy for us to flip more bearish but, hopefully, we caught a good bottom and we’ll be pleasantly surprised by the week’s news.

We have plenty of data coming out this week as you can see from the Briefing.com chart:

Date ET Release For Actual Briefing.com Consensus Prior Revised From
Jul 13 14:00 Treasury Budget Jun   NA -$77.5B $33.5B  
Jul 14 08:30 Core PPI Jun   NA 0.1% -0.1%  
Jul 14 08:30 PPI Jun   NA 0.8% 0.2%  
Jul 14 08:30 Retail Sales Jun   NA 0.5% 0.5%  
Jul 14 08:30 Retail Sales ex-auto Jun   NA 0.5% 0.5%  
Jul 14 10:00 Business Inventories May   NA -1.0% -1.1%  
Jul 15 08:30 Core CPI Jun   NA 0.1% 0.1%  
Jul 15 08:30 CPI Jun   NA 0.6% 0.1%  
Jul 15 08:30 Empire Manufacturing Jul   NA -5.00 -9.41  
Jul 15 09:15 Capacity Utilization Jun   NA 67.9% 68.3%  
Jul 15 09:15 Industrial Production Jun   NA -0.6% -1.1%  
Jul 15 10:30 Crude Inventories 07/10   NA NA -2.90M  
Jul 15 14:00 Minutes of FOMC Meeting June 24          
Jul 16 08:30 Initial Claims 07/11   NA NA 565K  
Jul 16 09:00 Net Long-Term TIC Flows May   NA NA $11.2B  
Jul 16 10:00 Philadelphia Fed Jul   NA -5.0 -2.2  
Jul 17 08:30 Building Permits Jun   NA 523K 518K  
Jul 17 08:30 Housing Starts Jun   NA 530K 532K

Not too much going on today but busy, busy starting tomorrow morning with PPI, Retail Sales, and Business Inventories in the morning, allong with earnings tonight from CSX and NVLS and tomorrow morning from GS and J&J, followed by AIR, ADTN, INTC and YUM.  Wednesday morning we hear from ABT, AMR, SCHW, CBSH, GCI, NITE, TXI, WOR and GWW.  CSX will be very telling, they should have had a good quarter moving commodities around but the outlook is going to be key as commodities are tailing off and there is no uptick in building, supplies for which is another major part of what the rails move.  David at Oxen Group is expecting good things from GS and the whisper on the street is they are heading to another beat this Q so we’ll see.  Word is out already and they are gapping up pre-market so I wouldn’t chase them.

Bears are chasing the bottom with bets against the S&P 500 Index rising to the highest levels since April as investors shorted more shares of health-care, technology and financial companies.  Short interest on the S&P 500 increased to 10.01 billion shares as of June 30, a gain of 2.4 percent from two weeks earlier, according to data compiled by U.S. exchanges and Bloomberg yesterday. That’s the most stock sold short since April 15. Wagers against health-care shares (the ones Cramer was pushing) rose 8.1 percent, the most among 10 industries, to 962.8 million.

12-07-09-02It doesn’t take much to force short-covering at these levels of bearishness, perhaps something like Goldman Sachs upgrading the tech sector or Atlanta Fed President Dennis Lockhart saying: "I see the economy beginning to recover in the second half of this year” like he did yesterday.  Even President Obama is on the case, using yesterday’s radio address to defend the stimulus, saying: "As I made clear at the time it was passed, the Recovery Act was not designed to work in four months – it was designed to work over two years.  We also knew that it would take some time for the money to get out the door, because we are committed to spending it in a way that is effective and transparent." 

We went into the weekend with lots of bullish plays, mainly hedged entries and we still have a long way to go before we get super-confident in the market but hopefully this week we’ll get a little bit of clarity and hopefully we’ll find that we are still in our predicted consolidation channel, not failing a breakout as the head and shoulders crowd would have you believe.  We have some speculative DELL calls in our $5,000 Virtual Portfolio, hoping GS still has some market mojo left after their bullish call on Friday and we intend to play some more earnings this week but not until we see how the morning goes.  We also still have our SGR play outstanding and all updates will now bee posted on Seeking Alpha’s "Stock Talk" section and you can sign up to follow the $5KP trading HERE

It’s a watching and waiting kind of day, we already made or bullish bets during last week’s panic so our finger is going to be on the short trigger if our levels are failed in the morning rally.  Last Monday was a fairly straight-up 100-point day but we gave it all back Tuesday and then some on Wednesday but that was all based on rumors, not facts.  With any luck, the truth shall set us free – or at least back to 8,650!

 


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  1. Ah, hell, say I told you so. Because I took that FXP ride, man. Wheeee! Site-Rookie question now: Am I legging out or trading it all? Sold FVWGM against FVWGL. Grazie.


  2. And…Can you comment on today’s Oxen play in the context of the GS put play you/we made on Friday?


  3. Meredith now a financial, at least, GS bull …
     
    Meanwhile, BAC out to screw us taxpayers coming and going:
    Bank Of America Trying Not To Pay Guarantees Fee – Bloomberg
     
    4:40 AM ET 7/13/09 | Dow Jones
    Bank of America Corp. (BAC) is trying to avoid paying billions of dollars in fees to U.S. taxpayers for guarantees against losses at Merrill Lynch, alleging the rescue agreement was never signed and the funding never used, Bloomberg News reported on its Web site Monday, citing unnamed people familiar with the matter.

    Regulators say the bank should cough up at least part of a $4 billion fee it agreed to pay in January – even without a completed legal document – because the company benefited from implied U.S. backing on about $118 billion of Merrill Lynch assets, the people said, according to Bloomberg.


  4. Meredith knows how to kick off an expiry week, doesn’t she ?


  5.  Goooooooooood morning Phil & all,
     
    Asia down hard, but futures defended in the West and have made a huge turn around already. Phil, what do you think?  Maybe an early tell that Da Boyz are long bullish for an upside move?
     
    GS, INTC, JNJ and YUM are earnings plays I’m looking to position today in order to possibly sell tomorrow. Got some ideas on those?


  6.  hi phil, back from barcelona – saw the tour de france and u2. ready to get back  to work again. airplanes/airports full. sounds like you guys had a prosperous week.


  7. gloomy news for Citi this morning (every morning) but the premarket indicates the stock is moving up? Any analysis of this? I have to decide to stay in a call or take advantage of the little bounce and exit.
    thanks


  8.  wow big reversal on oil!


  9. Morning @ all !
     
    Before start I have a question for you all. Are you using any software for visualization options plays? And witch other soft you recommend?
     
    I have been using one called Visual options ( http://www.voptions.com ) for some time.  The 3D-charts are great and has many preloaded strategies. But it has some limitations, like you can not track a portfolio or combine already open positions with new ones to be open, to visualize an roll consequence  and  so.
     
    Any soft or excel recommendation will be very appreciated!!  – Spider


  10.  Any reason for the sudden reverse of oil back down below 60???
    It was looking strong this morning then… BAM


  11. Cool Dstill!  As I said above, if we’re heading up then take the money and run on the spread.  China can go up 4% as fast as it drops 2.5% and that’s a big move on FXP.  As to Oxen’s GS play – I don’t like chasing and they are gapping up so I wouldn’t chase them.  As to our play, we bought the Aug $130 puts for about $5 and sold the July $135 puts for about $2 and that was a straight play on the premium crush.  We’ll see how those hold up but ahead of earnings I doubt the July puts will give up too much premium. 

    Meredith has flipped more bullish for quite a while but now she’s saying 13-14% unemployment and 40-50% housing price declines WHILE being bullish on GS and some banks – I’m not sure I can reconcile that set!  As to BAC, I don’t think I’d be too keen to pay a $4Bn fee on money I was forced to borrow that I never used either….

    Earnings/Merk – I’d rather see a few report before betting on the rest.  INTC or JNJ I would probably buy on a sell-off if they miss, especially if it’s over exchange rates.  YUM would be a surprise if they miss so hopefully not.  As to Da Boyz – hard to say what they want lately.  The markets looked forced down if anything last week but maybe we’re just returning to reality after the EOQ pump into June and now we are going to drift along the more rational, lower end of our channel.

    Welcome back Jo!  You didn’t miss too much, see the weekend post for our buy-ins, most are still makable.  There were a bunch of more speculative plays but there will be a new bunch this week so nothing to worry about there.  Seems like you really picked a good week to be in Barcelona…

    Oops, oil just got slapped back from $60.50 to $50.50 at the NYMEX open, probably back to test $59 now and that took the wind out of the pre-markets.   Gold STILL at $912! 

    C/Morx – I think most of the bad stuff is priced in so easy to move up despite everything else.   I’m staying away from them other than the leap spread, which is fun if it pays off. 

    Visuals/Spider – mine are all in my head….


  12. Well, The Oxen pick its already up, at resistance level. Do happen many times, David get it right, but target is reached in premarket. 
     
    What do you suggest?


  13. Oil/Merk – The real question is was there any reason for the run from $59 to $60.50 between 3am and the NYMEX open and the answer to that is – NO.  Oil is, hopefully dead but also hopefully dead and slowly falling so the market can get over it and move on.  That’s another reason I’m overall bullish, most of our recent losses can be traced back to a bursting commodity bubble, that’s not a bad thing overall.

    Levels to hold and break over are

    • Dow 8,100, 8,300, 8,500 to break H&S pattern
    • S&P 870, 900 and 930 to break pattern.
    • Nas 1,750 (can’t afford to be red), 1,775 and 1,825
    • NYSE 5,600, 5,800 and 6,000
    • Russell 475, 490 and 510.

    Without $60 oil the best we can really hope for today is to claw back to our middle set of figures.  Earnings can take us up over the higher numbers as the market rotates out of commodities (if they see that other stocks look "safe").  So that’s the outlook for the week (so far).


  14. GS/Spider – I suggest it’s a fish that got away, let it go. 


  15. My stop loss triggerred on my SPY puts… now 100% cash
    can’t find anything this morning that interests me to buy yet…


  16. Morning all!
    This mornings commentary seems cheery and optimistic :) just curious are we still looking for a capitulation day?


  17.  BIDU feeling the pain!


  18. Phil = GS / Of course I let it go.
     
    My question goes on how to deal with those situations, where you agree with David. Do you buy stock in premarket? Or you short stock (buy puts) when opens at target?


  19. YRCW way down again


  20.  AIG has hit my dead cat bounce target… just adjusted my bid and grabbed a 1x set of august put on the 12.5 strike


  21. Phil – (Repost of a comment I made on your Green Shoot article) This (and "Green Shoot…") article has echoes of those you were writing 18months-2 years ago. Back then you were saying that companies "values" couldn’t go any lower and that their earning/capitalisation didnt justify the hamering they were getting in the market. But lower they went and I suspect this will be the same. The only diference was that back then we were doubling down on covered calls and rolling lower (which didnt work) this time we are more in cash. Back then we couldnt see the full extent of the woes of the bank sector and housing markets and the worlds indebtedness. this time we can. Basically there is room (and justification) for valuations to fall much lower Why do you think its different now ?


  22. XLF flying up 2.5% at the open, nice if they can hold that but 11.50 is just ahead and we need 12 just to be able to breathe. 

    XOM and CVX not happy and not helping the Dow.  BA under $40 sucks too. 

    POT way down at $82 now as crops report looking like a surplus so that sector is a drag. 

    Whole market just got a big smack-down, Nas dropped like a rock (glass jaw) as did the RUT.  Transports down 1.7% but VIX is down 2.6% so hard to reconcile these moves. 

    GS getting stuck at 2.5% along with whole XLF.  V is a drag as well but AXP having fun.  

    Capitulation/Steve – It would be nice to see but conditions aren’t right for it unless we have earnings or data disappointments and that would not be something we want to see.

    Volume just 22M so far so not very telling.  Gold blew $910 and oil is testing $59 on a not very strong dollar. 

    GOOG Dec $530s are a nice, speculative play at $5.80.  If GOOG drops, you have another crack at earnings so they should hold half their value unless GOOG fails $380 but, on the upside, a $30 move up in GOOG should return about $5 so a good risk/reward profile for a bullish GOOG play.

    David/Spider – I prefer to not buy pre-markets so I like to see a slow or opposite reaction at the open for a buying opportunity.  Even if you only get a good opening one in 5 times, that’s still once a week and I’d rather get a great entry once a week than chase 4 bad ones and pray…

    YRCW/Morx – Gosh if they can’t hold it together on that news (union deal last week) what will it take?

    AIG/Merk – I agree, they are a good short. 

    Transports down 2.5% now, SOX off 1%, VIX coming back.  XLF having second thoughts at 2.5% now and that will kill us fast if the financials tip over. 

    I expect one more run up but if the Dow fails 8,200 again, then the $81 puts, now .80 are going to be very attactive, maybe .65 but only if rejected, using 8,220 as stop line.


  23. guess we should get out of the Dell call?


  24. Good Morning Everyone,
    I am fairly new to this and hate to ask phil a dumb question so could someone please tell me how to roll over an option. I bought an option thats really down and I would like to roll it over so something is left on it. What do I put it in as?  Do I make a new spread? I use TD ameritrade. Thanks and if you could also tell me where I could get some help in the understanding how to do all these option plays icluding these call/write, I would very much appreciate it.


  25. Miracle -  try starting here for reading.  I don’t have TDA, but put a sell/buy in for the option you want to roll to.  One order if TDA let’s you do it, otherwise it will have to be 2 legs.
    http://www.philstockworld.com/2009/05/30/stupid-option-tricks-the-salvage-play/


  26. Phil
    Clarification on DIA $81 puts- look to buy @ .65 =/- stop out / sell if DOW crosses 8200 and holds?


  27. Details on some important earnings and the probablity that they will be met.


  28. Different/DB – Well, for one thing the markets are 35% lower than where they were last January.  What’s different for you?  What’s going to give you an additional 20% below the 40+% we’ve already lost.  What is going to cause the long-term market outlook to be so terrible that you expect earnings to be less than 1/2 of what they were 18 months ago for the next 3 years.  What companies have actually reported a 50% drop in earnings and how many of them have outlooks that believe that will continue further?  The bears had free reign all from November through March to paint the worst possible doomsday scenarios, none of which have actually come to pass and all they could manage when people believed them was to take the markets 20% lower than where we are now.  What’s your magic bullet that’s going  to destroy the market now?  

    As I keep saying, if earnings suck and outlook sucks then we can go bearish and ride this market back to the March lows but how many times do you want us to panic on the same old song and dance that’s been playing since Septemeber?  Don’t get me wrong, thank goodness there are people who feel that way or no one would be selling us VLO at $15.50 for BA for $39 – these are end of the world close-out specials and it is really amazing how the same people who hang onto their homes as a long-term investment dump their stocks like they turned toxic….

    DELL/Morx – I wouldn’t do anthing at the moment, that was a .50 drop based on what exactly?   We’re down 1% on the Nas on the lowest morning volume (35M at 10:10) since last Tuesday, which was also a big down day. Anyway, as I said above, we’re good for one more run up and if we fail that, then it’s time to get the hell out.

    Dumb Questions/Miracleniss – Don’t worry, Monday’s are great days for dumb questions as we usually watch more than trade on Mondays!  As to the mechanics of rolling, you should talk to a rep at Ameritrade .  All a roll is is selling one and buying another but we say roll as it’s easier to say "roll the DIA $83 calls the Aug $86 calls for net .35 than saying "sell the DIA $83 calls for .40 and then buy the DIA Aug $86 calls for .75" but it’s just the same thing.  Many brokers have a roll function and that is very useful as it is the net we watch on the rolls but you can make your own any time.

    DIA/Pstas – I’m guessing the price of the $81 puts will fall to .65 at around 8,200, the stop is if the DIA breaks 8,220 but, of course, if they don’t look like they are stopping at 8,200 then it’s no trade anyway.  Speaking of the July $83 calls, they are a fun spread gamble at .40, looking to pick up the $80 puts for about the same (now .50).  A 200-point move in the Dow one way or the other should make it a good trade.

    Good link DB!


  29. VIX : VXN
     
    Today in the morning, at open  the ratio was 28.20 : 31.71 = 0.889
    Now its 29.15 : 32.11  = 0.908
     
    As usual, when they diverge we have to expect a correction, (VIX up or VXN down). In this case both moved up, closing a bit the spread.  I do usual look into this ratio and, for me, today looks bearish, with VIX heading into 30′s.  But you never know. On Opion Ex week the VIX its wild. Probably because so many rolling/ closing options-  Spider


  30. Phil – We had an old play – GOOG – long 370 Jul call, short 400 Jul call.  Given expire of the caller ITM this week – how should I handle the short caller, into expiry.  Thx


  31. Question from newbie:
    In TOS I am trying to find historical implied volatility to determine if the current IV is high or low. for an option Too often I have bought options when the IV was too high and got crushed (learn the hard way). TOS customer support said they do not supply historical volatility (my experience is that they are sometimes wrong). Is that true?
    If so, is there another source for this that others use? And how should it be measured, i.e., 30 day average?


  32. AIG / Merk : Consider AIG went into a reversal 20:1 split. Today stock price translates into $0.70 old price. Maybe you are right, and AIG is worthless. But I will not surprised if it climbs to 20 (old $1). Just be careful, this stock is like paying with fire. :-)


  33. allen060 - I find ivolatility.com veru useful – steve


  34. Oil down to $58.60 now, OIH down 2.5%, XLE down 1.5%, XOM down 1%, CVX down 0.5% – that’s the entire market drop right there and what the hell is wrong with the Transports, where oil is their major cost?!?  They are down 2% and I think that’s the tail wagging the dog to some extent. 

    I like the GLD March $90s at $6.95 as an inflation hedge ahead of the CPI/PPI data.  Gold should have good support at $900 so you can buy here and hold naked for the reports.  If things look bad for gold, you can sell the Aug $90s, now $1.95 and that is enough to roll the March $90s to the Dec $83s, which put you $7 in the money to the callers with a $7 net entry if gold starts heading up on you.


  35. Phil – Whats different is back then the "Stock Market" (mainly) recognised some of the problems while Joe Public watched the drama unfold. Now EVERYONE has seen and felt the impact and have reigned in. Consumers and Householders are on strike and are retrenching (not unnaturally) so are the millions of jobless people that have been added since that date. So they can make it much worse. The first wave was investor driven,causing market drops not necessarilty based on valuation (yes maybe by panic)  the next will be driven by the consumer/jobless destroying demand and hence further falls in valuation. And just wait until the Government has to reign in its spending. Basically demand is being taken out of the system very quickly now, which it wasnt two years ago.


  36. Phil re gold – i have had AEM for long term. Covrd call has been a blessing recently! Inn the past this has been a good price to sell puts. Do you think I can apply this again now?


  37. Spider / options software
     
    I like http://www.samoasky.com/


  38. No DIA put play right now as it was way too fast of a climb to 8,200, best off just seeing how it goes up here through 11.

    VIX/Spider – I see down 5% now, I think they are just messing with us…

    GOOG/Partha – If you can take it off the table with a profit ahead of earnings, no point in pushing it but I am still thinking GOOG holds $400 into earnings – just not worth risking $30 over (or net $17 if I remember correctly).

    AIG/Spider – Yes they could go up but, ultimately, I doubt there is any value there.  Of course GM holders are happy idiots today…

    Impact/DB – Yes but that "impact" was all priced into the doomsday scenarios.  Credit would contract, borrowing would grind to a halt, corporaitons wouldn’t get financing, the auto companies would go BK —  Ahhhhhhhhhhhhhhhhhhhhhhh!!!!  We are just NOT going to go off the cliff you want to drive the market towards but you didn’t believe me in March and you are not going to believ me now right?  I do think there is long-term demand destrusction and I don’t think the economy is springing back to a level that will sustain S&P 1,200 but I sure don’t believe that we are so far off that the S&P should be 800.  I drive around looking for vacant stores and empty malls and this is NOT worse than the mid-70s – THAT was a recession!

    AEM/Morx – Not my favorite miner.  I think if you own the stock you are taking a big risk selling naked puts with gold in a shakey spot at $900.  Marginal gold producers are much more sensitive to price moves in gold and AEM got slaughtered in the fall when gold fell from $900 to $700.  It’s one thing to have to deal with your own stock but why compound it with putters while gold is looking iffy?

    We need that breakout soon or it will be time to hit the DIA puts…  Maybe around 11.  Volume 54M now.


  39. DB if the employment rate went from 5% to 12% and those people totally stopped spending can I assume that would shrink overall spending by 7%?
    For the rest of the population to make up the 50% shortfall in earnings everybody else would have to cut spending to account for the remaining 43%.
    Do you think that people have really cut their spending almost in half? For people who previously had a close to zero savings rate, is this even going to be possible?


  40. Phil, do you have an opinion currently on TNK. I’ve seen your comments regarding this dividen play, but that was a while back. Would now be a good entry point or do you see a better entry in the future?


  41. Dashboard is out of gas????  Everything is red…and my screen says green FWIW.  Whoa nelly, now we are moving….


  42. Good point Steve!

    TNK/St – I love them down here, they paid .59 dividend in May and, even if they don’t pay it, you can buy them for $9 and sell the Feb $10 calls for .95 and the Feb $7.50 puts for $1.20 for a net $6.85/7.18, which is 20% off even if put to you and a nice 45% profit if called away.

    Dashboard/Pharm – I think it’s about 20 mins behind so not a perfect indicator…


  43. Software / newparadigmz  = TY VERY MUCH! Just loaded and see is free :-) i will take a look after mkt.


  44. DIA $83 calls up 50% already, watch that 8,220 line and don’t be greedy!


  45. StevenP – Well depending who you believe the unemployment rate is already between 9.4% and 26% in the US. I dont necessarily believe the later but everything – Unemployment. House Prices and Consumer spending is still getting worse. The trend is still down , even though some of the figures are better recently it is only the RATE of descent that is slowing. If you believe this is true how can earning and valuation get better ? they can only get worse at a slower rate yes ? they can make earnings look better by cutting jobs and expenses , but that’ll just make it worse next time round unless things start actually moving in the right direction rather than just slowing down. To answer Phils point I dont think there’s amagic bullet to make the market fall off a cliff but i do think theres a dawning realisation that things aren’t as good as suggested by the market between March and May and given that I think that was caused more by meddling than true investing I dont believe there is support for prices at those levels and hence I believe there is potential for a collapse back to those lows.


  46. Phil,
    Liking Aug buy/write and selling puts with XLF around 11.50, but a little worried about outlooks as the banks report earnings.  Also looks like FAS/FAZ behaving well after the reverse splits last week.  Your thoughts?


  47. Market is turning up.  The option market thinks so as the PUT are loosing value fast.  It might be a head fake but it doesn’t help the plights of the PUTs.


  48. What do you suggest Peter D


  49. spikder, If you sold the PUT, like RUT Sep 360 PUT as I mentioned last Friday, you are winning big, so roll them up to RUT Sep 380 or 390 for more credit.


  50. Yo Pharmboy – you going paddling today?
    something that came through Trading Goddess over the week end said to buy at least 10000 shares of NNVC and they would be worth 1M buy 2014. Have you done it yet? :)
    seriously, what do you think of the company?


  51. Phil,
    Oil inventories on Wed, What do you think about purchasing DUG or go with the puts on OIH/USO


  52. DIA – When you are day-trading a play like this and make 40 or 50% fast, always keep in mind that you can take 1/2 off the table and then, even if you stop the rest out even, you will still make 25%.  If you stop the rest at 25%, you make 37.5%, barely worse than 50% and, even if the stock flies up and your second half makes another 50%, you still net 75% average and wasn’t it smarter to be safe?

    26%/DB – Oh come on, how can you even put a number like that into a range?  Do you seriously believe that 26% is a number the government can hide by deneying it?  Can they hide 20%?  We had a very good article on Unemployment/Underemployment last week and the worst-case estimate is about 15% currently, not nearly double that at 26%.  If you are going to buy into those kind of figures of course it will skew your entire outlook.  Also, there is no zero spending – people have to live and they spend to do so.  Barbaric as America’s social state may be, we do have unemployment and wellfare and our wellfare payments of $12,000 a year is more money than people in 80% of the world earn when fully employed.  You are also applying false math to consumer spending, which is 70% of the GDP in a good economy ($9 of $13Tn) but, in  a poor economy, where consumer spending drops to, let’s say $6Tn, then government spending can (and already has) moved up $1.5Tn so the total loss of spending is just $1.5Tn, not $3Tn.

    As to earnigns and valuations, they don’t have to get better than projections because the projections have been cast by people who are betting on 26% unemployment. a level that matches the bottom of the Great Depression, when we had not only a total collapse of the financial industry but a global drought that wiped out farming, an occupation held by 80% of the people at the time.  Again, you look at those lows as if they had some real meaning but they have no more meaning than any spike ever does – it’s an aberration, not the new "normal".  The Dow was wrong at 14,000 by about 20% and the Dow was wrong at 7,000 by about 20% – there’s no mystery there.  How many disposable razors will JNJ sell this quarter?  How many diapers, how much shampoo?  That is reality, things may get a little worse but not too much because the government can and will create jobs if they need to, the American public just isn’t ready for rampant socialism yet but 20% unemployment would fix that right up!

    XLF/Cuaeu – If you are in it for a long-term hold, then $11.50 and selling the Aug $11 puts and calls for $1.52 (net $10/10.50) with the intent of doubling down at $9 to bring your basis down to $9.75 where you sell the Oct $9 puts and calls for $1 to bring your basis down to $8.75/8.87 gives you 23% leeway from $11.50.  If you think XLF is going to drop 23% then why the heck would you buy the ETF in the first place?  Once you are in 4x at $8.87, as long as you can sell $10 calls for .20 per month (Aug $13s are .21 for example) then you are collecting about 20% a year while you wait for banking to come back.  At some point with a stock, you need to find a place at which you are happy to make a stand and that’s the only way you will be able to buy low.  If every time you see low all you ever do is talk yourself out of a position over fear it will go lower – then you are unlikley to ever get good stocks at low prices.

    FAS and FAZ have been behaving very well since the split.  Right now FAS is up 10.22% and FAZ is down 10.17%, amazingly close.  Perhaps they fixed something in the algorithm to make things work better…

    VIX is down 7.5% now, thank goodness I got that VIX chart over the weekend, it kept me much more bullish this morning!

    Cool, we’re movin’ now!


  53. DB/Phil
    Lurking ETF Trader comments
    The times are unprecedented. Think about what is going on right now, with little attention from the mainstream media: The U.S. Post Office is in SERIOUS trouble. The 8th largest economy in the world, the state of California, is essentially bankrupt. They now are issuing their own currency, California IOU’s, because they do not have enough Dollars to transact business. 
    Dow Theory still has a primary degree sell signal. Primary Trend Indicators are indicating as much as a 20 month substantial decline. Long-term Elliott Wave charts are calling for substantially lower stock prices before wave {IV} down finishes.
    This tells us not to trust the rally from March 6th, 2009, that this rally is counter-trend, is a secondary rally within a primary trend decline. 
    There is a dangerous pattern that has shown up in the U.S. Russell 2000, the small cap index, and international stock markets, Germany’s DAX, Japan’s Tokyo NIKK, and Australia’s SPASX200. Each has a massive Bearish Head & Shoulders top pattern nearing completion, with SUBSTANTIAL downside targets possible. These patterns are not yet complete, and not confirmed yet, meaning prices have not fallen from a right shoulder top, below the neckline. If they do get confirmed, it means the probability of the downside targets being met are high.
    Icon General Motors declared bankruptcy, and has been tossed from the Dow 30 Industrial average. Major Wall Street Investment Banking firms Lehman Brothers, Baer Stearns, and Merrill Lynch are either gone or sold in distress. The U.S. government owns AIG and GM. The FDIC closed 7 more banks on Thursday, July 2nd. The Labor Department reported that another 487,000 non-farm payroll jobs were lost in June, and the unemployment rate has risen to 9.5 percent. That figure excludes those unemployed who have given up trying to find a job. There are now 6.8 million people collecting unemployment checks.  Most of you heard a responsible projection of 13% unemployment this morning.
    Another catastrophic leg of this Bear Market that started in October 2007 is probable as it is unlikely that price earnings multiples will EVER return to previous levels. This is due to the structural systemic changes in USA and world economies and when this realization occurs it will be the catalyst to new lower lows on all indexes worldwide. Good Luck.
     
     


  54.  I guess Da Boyz do have a bullish intention eh?… chuckle… glad I got stopped out way below this run up


  55. Phil-
    What’s the best way to play the Asian markets going up tonight? 


  56.  AIG looks like it may have topped out


  57. Morx – never heard of them.  Another company in the nano pathway for treating influenza and other viruses.  Mjr holder has been selling small lots since March. Worth a flier if you like to meddle in the penny stocks…..


  58. Big level tests coming up, DIA 8,300, S&P 900, Nas 1,775 (leading us over of course), NYSE nowhere near 5,800, Russell 490 so it’s up to the Dow and the RUT to break over for us, then the S&P should confirm and then we need a move past 2.5% on the NYSE so doubtful for today to get past that

    Inventories/Wes – Too much chasing with them down 20% already.  $60 should offer some support so betting on oil already below there is very risky.  If they break $57.50, then it may be time for another leg down but this is iffy at best. 

    Comments/Daniel – So we should put you down as a bear right?  8-)

    Good stop discipline Merk – like I said, you can’t afford to have an opinion in this market, you need to go with the flow when the techichals tell you.  That is not, however the same thing as obeying Daniel’s long-term chart technicals.  All this Elliot Wave and head and shoulders nonsense is also UNABLE TO COPE with UNPRECEDENTED market moves.  I don’t understand how the same argument to used to negate one side of the debate is supposed to support the other???  As to Da Boyz, like I said, it seemed more to me that they were pushing us down last week for whatever reason…

    Asia/Celest — A little late now as a lot of the movement is already anticipated (FXP now .60 off the open) but FXI is fun and has good premiums buying the ETF at $36.57 and selling the Aug $34 puts and calls for $4.70 for net $31.87/32.94, which is better than 10% down from here and, because of the $1 strikes and high premiums, it is fairly easy to roll month to month.  If we can survive that sector dipping we may be in good shape for the next leg up. 

     

    It would be a shame to come this far and not get to 8,300.  Obama knocking the health care sector back down with TV talk pushing the policy.   Very strong lanuage, I think he’s pissed about all the BS that the program was dead while he was away.


  59. incredibly,  VIX  was nailed, still i do not expect to stay in 26′s for long . I’m taking some profits out of table as Phil recommended.


  60. Moderate FMD in progress; we may have seen the top.
    VIX way down to 26.89


  61.  axp has been behaving very well – it has been on its own planet


  62.  financials are up ridiculously all because Whitney was on CNBC this morning ?!?!?…
    I bet her blackberry is getting lots of messages from her Wall St friends for almost single handedly popping up the markets


  63. what is FMD?


  64. Major Senate Bloviation going on at the opening of the Sotomayor hearings.  Lots of gasbags speaking.


  65. Free Money Day.
     
    not in energy space however; although great swing trading to be had there.


  66.  Phil… how bout GS at 150?
     
    July premium looks quite fat and juicy with just 4 days left. What about buying an August 150 call and selling the July?
    I’m assuming the run is done and they flat line GS for the rest of the week for a pin at 150.


  67. Noon volume 87M, nothing special.

    $5KP Moves

    On SGR, we want to take $2.50 and run if it goes that high.  Otherwise we are considering roll to Aug $23s for + .50 and selling Aug $25s for $1.50 to lower net to $1.10 on $2 spread. 

    On DELL we are wait and see.  Right now the $13s at .20, down .15 but any good tech earnings could bring us to .50 so worth holding for a gamble but out at .45 if we hit it today. 

    Dow just hitting resistance at declining 200 dma at $82.92 on DIA but that is not real Dow resistance, which is 8,356 so there is not reason we can’t pop over 8,300 after a pause to refresh down here but we need to do it by about 1pm or too many trendlines will look toppy.

    Keep an eye on Nas 1,775, that will be our first sign of a breakdown if it comes.  Transports are flat, getting them green would be important for us to move up.  Also, watch GS at the 5% rule ($149) for a breakout indicator and RIMM at 0% ($66.66) for a breakdown. 

    Still the possiblility of a run back to $60.50 into the NYMEX close (2:35) and that will pull USO out of a funk and maybe pushup XOM and CVX for 20-30 badly needed Dow points.


  68. Phil, AAPL Oct 130s covered w/ Jul 135s. Should I roll to Aug 140s or can I wait till later in the week, hoping for a pull back?


  69. Phil,
    You’re not posting DIA put cover plays anymore, what’s the status with those?


  70. Phil – Too late to do the GLD trade you suggested earlier? Same format?


  71. All – Last time I’ll say it, but new to site – been trading basic options (a ton) over last 12 months.   Modestly complex and fast-moving option trades are a little new, but I trust the team and members here.  Question:  Can someone point me to appropriate link here that will help guide me on cashing/closing spreads?  (Vertical and diagonal, puts and calls) – I’m looking at some juicy legs right now (ie short DIA and GS puts) and am curious about what to take and how I play out the red legs of the spread (ie the further out GS or DIA puts I bought to cover the shorties.)  Thx.  DS


  72. DB I would totally agree with your view of sentiment, to the world is gonna end and back in 90 days. Isn’t it amazing?
     
    I would be curious to know what unemployment rate the 26% brigade thought we had a year ago? Is the difference down to assumptions on size of employable workforce, and a tighter definition of employment?
     
    I wonder should we be ignoring "unemployment" numbers altogether and focussing on "employment". There are less assumptions in payroll numbers, and the change in employment is what we really need to see, isn’t it?
     
    If I can read (debatable) ADP shows a loss of 6 million non farm payrolls from the peak. We don’t know the distribution of those, but if they hit the median income of about $50K then that is $300bn taken out of the $9Tn consumer economy. 
     
    If we very scientifically triple this number for good measure then that is still only 10% of earning power gone.
     
    Just how low can stocks go based upon a 10% drop in earning power?


  73. Phil
    DIA- mattress – looking for some guidance here for the coming week. I am just getting started with the mattress play / insurance w/DIA.
    On Friday- went long on Sept 82 puts @ 4.15; 1/2 covered w/Aug 80′s @ 2.30. I took out the putters this AM on the run up.
    When and/or if should I be looking at rolling the longs/Sept puts? What is the decision point on covers of any mid-week?


  74.  AIG retesting intraday high


  75. GS/Merk – They have earnings this week, that’s a pretty dangerous assumption.

    OK, if we don’t break 8,300 on this run we use it as a stop to flip bearish on those DIA puts.   The $82 puts are .67 so .65 was probably the right number so we’ll watch them around there using our GS signal as a secondary clue.   

    AAPL/Ajay – This is where stops are good thing Ajay!  Those $135s were $3.75 at 9:45 and are now back to $6.85 so a 100% gain on the day off the lows.  Even if you don’t want to buy them out, you get your best roll price while the front-month is falling as it has a bigger downside delta.  Now you are hoping for another pullback I guess but keep an eye on the net cost off the roll, now a .90 credit and figure your best would have been about $3 credit.

    DIA/Maxt – Last we left off we had the Sept $82 puts and sold the July $81 puts against.  That play is going well at the moment. 

    GLD/Concreata – A little more expensive but not too late.  I wouldn’t chase it right this minute, we may get a sell-off soon but if the Dow does break 8,300, then you want to get in before things take off. 

    Spreads/Dstill – That’s a big topic but exit strategy is always to protect 20% profits on a position.  Remind me after hours and I’d be happy to go over some basics.

    Earnings/Steve – Don’t forget the marginal profits on that extra 10% are, in fact, a higher portion of earnings than 10% but still, not 50%, probably not even 30% and we’re talking US – there’s a big world out there and 75% of the NYSE stocsk and 90% of the S&P stocks do plenty of global business.

    Rolling/Pstas – Well you want to roll when there is a move up that you think will be reversed but, as a rule of thumb, you want to roll up any time you can for .45 and, if you collect $1.50 from a putter than you should be willing to spend .50 to roll up.  Try to make as much progress as you can using other people’s (your putter’s) money. 

    Also, keep in mind that your next roll is to Dec when you sell Aug so rolling up Septs is kind of a waste at the moment as you need to roll out when you sell the Augs. 


  76. Any easy to read/understand books out there on how to do all this rolling and stuff. I read some stuff on the website but need more of an understanding.



  77. SNDK – Up nicely but looks overbought in the short-term as it heads towards the upper band of the channel that tops around $16. See http://finviz.com/publish/071309/SNDKc1dl1336.png
    A good buy-write candidate. Buy stock for $15.15 now and sell Aug $15 calls for about $1.50. If brave and you think this rally continues a bit more (especially for SNDK), then wait and sell the call later for more…


  78. Thanks.  I know you active traders are uber-busy, so I don’t expect personal or quick replies.   Let me just put my real world spread question in the mix, and if and when Phil or others have relevant guidance, I’m all eyes:  
    I’m short GS July 135 Puts – in at $1.95 on Friday I think.   Covered with GS August 130 @ $5.05.   The former is up 65% for me, the cover (of course) is down.   I sold and bought an equal number of both.  The profit on the short leg is obvious, but my (stupid) spread question is what am I doing with the red leg.  Are we looking for GS to suck down into August?


  79.  Phil… GS has a double top at 150 on the recent chart… if GS hits a home run on earnings and gaps over 150, that would technically signal a very bullish double top breakout.
     
    There is several old resistance levels from 155 to 170 right above the current trade price. I see you really don’t like the OE week flat line idea to crush July premium, so I suppose you are leaning to a high volatility move.
     
    Would you think to buy the calls or set up a put-call straddle? Or are you too nervous to do any kind of play ahead of GS earnings and prefer to wait after the announcement to make a play?


  80. Phil:
    Question on the $100K Portfolio: We’ve got STI July $14s. Is the assumption that we allow ourselves to be called away if nothing else is indicated?


  81. Fed interested in helping CIT group.  Long shot….Aug 2 calls for 30C


  82. Rolling and stuff/Miacle – Have you read our on-line trading book?  It’s in the educational section and covers a lot of that stuff within the various strategy chapters.  Oh thanks New! 

    Well we have now tested and failed our mid-levels but you have to consider the day a success if we stay here through the close.  Up over 1.5% across the board (not Transports) but no one up 2% so we need to watch the 1.5% lines on the indexes for failures.  The Nas is right on the line at 1,782 so watch them closely.  I think that may be it though without a good catalyst and oil is just laying there at $59 so no help from that sector….

    Volume at 1:45 is 116M so still stickable (140M at 3pm is rule of thumb for small enough to push around). 

    GS/Dstill – Well the Aug $130 puts are holding $2.75 and the July $135 puts are .60 so this trade is not really working so far but you can sell the Aug $140 puts for $5.40 (+$4.80) and roll up to the Aug $145 puts ($7.25) for + $4.50, which leaves you in that $5 spread for net $2.80 but it’s pretty risky so maybe just killing it with the small loss is the way to go, although you will be kicking yourself if GS misses. 

    GS/Merk – Well the consensus is they get back to $180, which I think is ridiculous given the obvious risk in their earnings model but you can’t fight the tide if they hit the expected numbers. I would not touch them with a new play but they could be very interesting after earnings. 

    STI/Chaps – Yes we’ll let it go if there’s no good roll.  I think the sells were unattractive last time I looked, I’ll check again tomorrow night for Wednesday moves of course.

    Indexes doggedly trying to bust up from here.  Movement no longer natural looking, more like a forced top which could be a good sign for the bulls if they can stay here until 3pm but that’s a long hour to hold these gains.

    Oil going down if anything!   $59.17 now. 


  83. I’m baffled! Why did the market go up so much. I didn’t hear any news or earnings that would trigger this. Last week it was down everyday for no apparent reason. Am I missing out on something?


  84. CIT/Pharm – Rather than put out .30 for Aug on CIT, why not do the 2011 $2.50/$5 vertical for .27?  Poss $2.50 win with a lot longer-term for them to work through their issues. 

    Reason/Miracl – They don’t need no stinkin’ reasons!  Today’s excuse for a rally was Meredith Whitney not saying the world is going to end but she turned more bullish 3 months ago so how is that news?  We were just oversold for no reason last week, today makes sense as people are placing some bets ahead of earnings and big bets are going on GS to lead the financials up on their earnings. 


  85. I hold several MSFT July 17 Calls which have performed well.  I sold half of my position on Friday, any thoughts on when would be the right time to take my profits on the remainder?  Earnings come out after expiration, BING has been doing well and prodcut upgrades will be introduced next quarter. 


  86. Phil,
    You recommended getting out of the short term FXP earlier today. Do you still recommend holding the Aug $13/$14 spread?


  87. Hello all, I still maintain my prediction from some time back that the peak for July will be GS reporting tomorrrow.  I think the rest will be a sell on the news event.  But who the hell knows.  Looks like they are upto their old tricks today.  Just pushing stuff higher for no good reason.  After a sell off this am breaking Friday’s lows in the Naz, we’re now in an FMD situation.  How’s that for keepen ‘em guessin?  Bastards.


  88. Phil,
    I wanted to stay in the GS trade so I bought back the July $135 and sold the Aug $125 which puts me in the GS Aug $130- $125 put spread at $1.50.


  89. >>GS/Dstill – Well the Aug $130 puts are holding $2.75 and the July $135 puts are .60 so this trade is not really working so far but you can sell the Aug $140 puts for $5.40 (+$4.80) and roll up to the Aug $145 puts ($7.25) for + $4.50, which leaves you in that $5 spread for net $2.80 but it’s pretty risky so maybe just killing it with the small loss is the way to go, although you will be kicking yourself if GS misses.>>
    Nooooo.  Not from my guru.  This was your play, Big Daddy Phil.   I’m just along for the ride.   Don’t tell me I shoulda just hitched up with Oxen this morn.  LOL.  Seriously, tho, eat it all today?   Or what about maxt1234′s play?   I can’t imagine GS will miss tomorrow – it would be like the earth reversing its rotation – so is there a "make-up" play to cash in on some calls today/tonite/morn?  (Not panicky at all or uptight or blaming – just giggin’ ya – and I won’t make a "go on tilt" play just to get back the cash I lost on that river flush GS suck out)  ; )  DS


  90.  Phil, what volume indicator are you using, the NYSE and NASDAQ volumes are much larger than the numbers you quote for volume?


  91. ice has had a nice run up today . too bad i m not in the call.
    think it will stay up?


  92. MSFT/Sarahd – Well it’s very dangerous to hold any front-month calls during expiration week, one big move down can put you in a position you won’t recover from in time.  Of course MSFT isn’t going back to $17 but at $23, that’s a 5% gain on the day and a bigger % than that on your calls. If you want to stay bullish, why not take 90% off the table and buy some Aug $24 calls for .55, you made more than that much today and can just as easily lose it tomorrow if MSFT falls back to this morning’s open while the longer calls will hold 1/2 their value.

    FXP/Wes – That one is probably still good, I didn’t notice if it had a good profit this morning (70 cents ago) but if it’s there as downside protection against more bullish positions then it can still do it’s job for another couple of weeks.  Once we feel good that we’re going to hold these levels, then you can take the protective puts off and your loss is the insurance fee. 

    Peak/Matt – Well I hope not, it would really suck to go downhill from here BUT, if you look back at last Monday, we are looking virtually identical in today’s movement and Tuesday we headed straight down so we need to see more than one day up before we can say anything nice about this market. 

    GS/Maxt – It’s a good trade, most likely the $125 putter will be killed on a move up and you will be able to take the out and then wait for a pullback at worst.

    GS/Dstill – Well it was my play but it isn’t foolproof if GS rockets up like this.  Maxt’s play works but you are adding risk and we have become less sure that GS will sell-off now, which was our original hope as it was a generally bearish market play.  You have the Aug $130 puts, still $2.85 (down $2.20) and the July $135 calls at .60 (down $1.40) so it’s a .80 loss, which is just over 20% of the spead.  This is what I was talking about this weekend re. decision points.  What is it you expect to do to get the .80 back and what additional risk are you taking on and is any of that worth it?  If you want to be fancy you can buy the bull vertical of the Aug $150s for $8.45 vs the Aug $155s for $6.25 for net $2.20 on the $5 upside play.  If you buy back the July $135 puts for .60 you have a net entry of $5.85 so if GS goes up, you only need to retain .85 on the put side to get out even and if GS goes down you should be well over $5 on the put side and your call side is gravy.  Of course there are ways to work them in between but it’s a start….

    Volume/Mr. M – I just use the one that ETrade prints next to the Dow.  I don’t think it matters what volume indicator you use as long as you watch the same one every day and get used to what constitutes high and low volume. 

    Speaking of volume, 142M just coming into 3pm, very stickable and we’re going to need it to prevent a sell-off here.  Another 100 points would be very nice though but I’m thinking we run into trouble at last Monday’s high of 8,325. 

    ICE/Morx – I think the fear sell is over on them but I sure wouldn’t be bullish on them.  CME was the better upside play, even though ICE outgained them today.


  93. Long LEAPs on AIG: If you sell 2011 12.5 calls and 7.5 puts for $9.15 net and own the stock if and only if it’s above the 12.5 call strike, you’re covered down to BK and can make 241% if AIG settles above $12.5.


  94. All I know is I shoulda bought the 82 July DIA calls for 0.73 on Friday ….


  95. Long LEAPs on AIG continued: I should add that assumes you pay the current price ($14.26) for AIG and that $ is tied up for the duration.


  96. Hi folks, any recommendation pls for UAUA July $4 buy/writes ? I should be able to get about .3 just rolling both sides out to Aug. Wonder if there is a smarter way?


  97. ZION having a good day – the way they trade that’s a good reason to short them!

    XLF stuck right at 5% ($11.66), still no indexes over 2% with S&P right on that mark at 896.66 so that’s critical. 

    GS over 5% and I’m seeing a lot of stocks stuck around 5% or 2.5% so that means we have a lot of machine trading and it also means that one guy hitting a buy button can trip a lot of buy programs as we "break out."  Timing is everything though so it will be interesting to watch each 15 minute mark to see if someone executes a play. 

    AIG/Chaps – That’s a nice play as it’s amazingly unlikely that someone will buy AIG for a premium, which is the main danger of those plays..

    UAUA/Steve – .30 a month is $3.60 a year – what can be smarter than that on a $3 stock?


  98. Thanks newparadigmz for that link earlier. The only thing I didn’t realize is that I can’t print it. Is there a book addition?


  99. Great stuff, Phil.   Thanks.  I’ll bone up more, but do appreciate the time you take for education during the day.   I can take me lumps as we go along too.  


  100. Cool!! I got .38 for the UAUA roll and should have negotiated harder on the put side. Only a small position (I hate airline stocks) but good for practise :)


  101. Phil,
    I hope there was no major caveat to the GS indicator you pointed to earlier, so I’m buying back some putters here!!!


  102. ZION / Phil, What  you mean with   "that’s a good reason to short them"?  You are now bearish on ZION?
    VOLUME / I also like to know witch volume is the one you check?  – TY spider.


  103. Wow.  What a joke this market is.  Now all of a sudden volatilty is gone and she’s steady as a rock.  It’s funny how they try and suck people in (steady market) so they can flush em out (volotile market).  Today we’re hearing a giant sucking sound off in the wall street distance…


  104. miracle: i was able to save the Optionsoracle quickstart guide then  convert to word so i can print specific pages. Is that what you were talking about?


  105. Book Miracle – It’s an Ebook only thing (I don’t own it) but you can follow links to buy a downloadable copy.

    GS/Maxt – No, it’s a good sign that they are breaking up and XLF is confirming it over $11.66 but S&P not holding 2% is biggest worry.  Waiting for Mr. Stick to give us a big finish at the moment, then they have reason to jam it higher in after hours if GS says something nice…

    ZION/Spider – No just joking as they pretty much go up and down $1 every day.  Volume I check is what ETrade says is volume on the Dow, I have no idea whether it’s right or not but it is consistent so it gives me a good idea of busy/not busy on a real-time basis and the fact that it’s small (I just see the millions) means it’s easier to track than the 1,968,035,000 on the NYSE…. 

    Sucking/Matt – If you just accept the fact that it’s fixed and play it that way you’ll be much happier!   8-)

    Damn, hit that wall right at 8,310 but now S&P up 2% and SOX up 2% and NYSE up 1.97% so a little more there and we could break through to 2.5%. 


  106. Well I wanted to read the whole guide but it doesn’t allow me to print it. How would I convert it?
    Thanks


  107. I picked up GE on friday and enjoyed the 6% run today.  I was planning to hold for a long term position but 6% in a day is looking juicy. Would you consider selling calls at this point or maybe locking in a gain and looking for a better re-entry?  I am currently uncovered.


  108. I’ve totally accepted the fact that the market is 90% fixed.  The problem is they change how the manipulate it on a nearly daily basis.  Furthermore, they move it in directions against conventional wisdom, as in this am, so that you never really can trust, or at least shouldn’t trust, its moves.
     
    As for a stick save today.. I don’t think you can use the term on a mostly up day like today.  What  you are asking for is an acceleration in upwards manipulation.  Very different from a stick save!


  109. GE/EP – I think their earnings are a wild-card so if you want to lock in gains with a sale of the Aug $11 puts and calls at $1.62 then I like the ROI but it’s a risk vs taking the quick profit off the table. 

    AUM/Matt – Well I’ll take that too!

    Pure greed to keep the DIA calls by the way, we could gap down tomorrow if GS misses or some bad data comes in.


  110. Dear Phil,
    do you recommend selling GOOG & GLD call before reports coming out?
    Thanks for morning’s advice…has a nice profit.


  111. Notice how everyone is congregating on their 2.5% marks – that’s actually a bullish sign for tomorrow if we hold it, indicating possible 1.25% follow-through, which is another 80 Dow points and takes us right to 8,400. 

    Dear Lafitu, no I like GOOG and GLD but from the perspective of I’d be willing to hold either through 2011 until the market agrees with my outlook.


  112. Wheee – that was great fun, what a ride!

    I’m sure glad we bought stuff last week when it was cheap but I’m also glad we covered them as I can hardly trust this…

    Later all.


  113. Wow!  What an utterly silly day in the market.


  114. Miracle – after Phil’s response I am not sure which guide you are talking about?
    First download the PDF version to your computer. Then google "convert PDF to Word"  and select one of the free services that comes up. It will take your doc and give it back to you in word.
    Hope that helps.


  115. Got wayliad firefighting my shorts. Considering the overnight futures had S&P at $87 that was some pump.
     
    Phil – Re 26% unemployment mentioned earlier. Like I said not sure I believe it but here is an extract from an article Ilene posted in Phils favoutrites TODAY….
     
    …which is why this sort of reflexive "buy everything!" reaction to Merideth saying that Goldman probably had a great quarter (does anyone doubt it when you have your fingers in the taxpayer’s wallet via AIG payoffs and sales of record amounts of Treasury debt?) is beyond stupid.
    The economy does not run on going into debt on any sort of sustainable basis, even though certain people make a lot of money by conning you into going into debt!
    Of course when you’re a banking analyst, and banks rent money (that is, make loans), you’d have a bit of trouble justifying your existence if you told the truth – that pulled-forward demand via credit eventually must end, and when you delay the day of that reckoning you make things much, much worse than they would otherwise be.
    I sit in bemused amazement at the spin job that Kudlow and others on CNBC put on this sort of "presentation" by an analyst.  There is never an exposition on the fact that 13% unemployment will absolutely blow the cover off all records in this regard, and that it is flatly impossible for there to be economic growth with 13% of the employment base out and on benefits, with another 10% or more off benefits and not counted!
    That is one in four people of working age in this country without a job!
    If you buy this pump as an investor you deserve what you get.


  116. That is one in four people of working age in this country without a job!
     
    This says it all. If I can create my own definition of the size of the employable work force I can declare what ever unemployment number I like. That is why we have to look at employment numbers, not unemployment numbers.
     
    If there is a person that never had a job, isn’t looking for a job and doesn’t want a job, the fact that they didn’t have a job yesterday and still won’t have a job tomorrow doesn’t change the economy one jot.
     
    Bullshit is published on all sides of this debate.


  117. CIT – well, woulda shoulda….up after hours….damn shame.  Still like the Aug 2s…..the reason for not taking the Jan11s is that spread should be good anytime.  I was playing the short term debt relief due by months end.  The next round it 1Q next year, that is more iffy.


  118. By the way, Advanta – GOB (going out of business).  Layoffs of most coming FWIW.


  119. StephenP – jobs. You should read the whole article in Phils Favs to get the context. When she upgraded GS Meredith forcast 13% unemployment. Everyone should read Phils Fav to get a Bears view. :-)


  120. Sorry Mispelled StevenP.


  121. Pharmboy
    You seem to be the guy in the know on these- any insight/knowledge/inspiration on Spectrum Pharma (SPPI)
    Thanks,


  122. Does anyone know what time will GS release their earnings tomorrow morning? The conf call seems to be at 11.


  123. GS….8:30…earnings


  124. Pstas – I think I noted them a while ago here when they were at 2.6 or so.  Pricey here, but cancer gives a big bang for the buck right now.  Don’t follow them regularly, but they have a shelf registration for more shares 3.2M or so, and some insiders are buying (at 2.6 albeit, small lot at 5.15 by a Director – I like Officers buying, not directors), but institutions are selling (last quarter data).  They do have an FDA answer pending for an extension for their lead mAb. Overall, I would look at other companies now, and revisit in a few weeks – closer to the approval/rejection by the FDA.  Most likely that is the reason for the sell off (FDA delay).  I like CRIS better.  Below is fexcerpt from SA.
    On 7/8/09, Spectrum Pharma (NASDAQ:SPPI) submitted a formal response to the Complete Response Letter (CRL) it received from the FDA 7/2/09 regarding its supplemental Biologics License Application (sBLA) for Zevalin (ibritumomab tiuxetan) in the first-line consolidation setting for non-Hodgkin’s Lymphoma (NHL) patients. Zevalin is currently FDA approved and marketed by SPPI for the treatment of patients with relapsed or refractory, low-grade or follicular B-cell NHL, including patients who have rituximab-refractory follicular NHL.
     
    The FDA requested the Company to submit data files from the FIT study to support and verify a subset of the data that are currently under review to support the proposed labeling. CRL resubmissions are classified as either Class 1 (60-day) or Class 2 (6-month) reviews by the FDA once they are officially accepted by the Agency. My expectation is for the FDA to formally accept Spectrum’s resubmission within 1-2 weeks and classify it as a Class 1 review.


  125.  morx / miracle
     
    you’re both talking about two different things.. i posted two links today…
     
    you cannot print the options book…you can print the optionsoracle software guide…


  126. Pharm-thanks- looked mighty tempting w/ November puts & calls selling for almost $3. Do you think its worth $2?


  127. This is a good piece …. watch and then think about what you saw transpire today ….


  128. Volitility….Wasn’t looking at the options.  1.23 is book value/share, so could B worth a small gamble as that would take it 2X price to book. I don’t like playing with FDA data, like going to Vegas.  Even a delay can crush the stock, esp small ones (e.g., Neurocrine).


  129. Pharm:
    Thanks,- I think I will pass on it.


  130. Against all prognostics (bears) Phil pointed in the morning the correct direction, and in middle of day he pointed the possible move to 2,5%  Incredible…I’m starting to serious believe on the program trading and the human nature behind the programing those "trade-bots".
     
    I’m worried about the day (if there is such day) they pull the plug. Will be like the music chairs game. Liquidity will drain, spreads will widen, etc .  This is discussed in the parer "Toxic Equity Trading Order Flow on Wall Street" By Sal L. Arnuk and Joseph Saluzzi.
     
    Sometimes I think on stop trading and put my savings to work in other place. But can realize where. Nothing looks interesting. And probably I’m not alone with that conclusion.  A couple of days ago I asked Phil about  where "he parked cash" because I’m getting 0% on money market founds. The answer was:
     
    "Cash/Spider – Just the normal account sweeps but there’s nothing paying so much on cash that I’d want to forego an opportunity to make an obvious bet. "
     
    This, the lack of invests alternatives, probably, can explain a big % of market  rally. Even if we think there are not much fundamentals. Its what it makes rational this irrational market. Crazy, I will join the bandwagon (carrying my chute & mattress) and hope those trade-bots don’t shoot me. :-)   Spider


  131. Hey Phil,
       Looks like FAS and FAZ are converging on a price point again at around $45.  What was the play that you suggested for that? 
    Thanks in advance.


  132. scobe, i think it is short both


  133. Good Morning Phil & all


  134. Asia/Pacific Markets    Tuesday, July 14, 2009
    (The following is from Yahoo, please confirm with other sources)   

    Australia All Ordinaries*             3,858.80    120.80    3.23%
    Nikkei Average*                         9,261.81    211.48    2.34%
    Shanghai Composite*                3,145.16      64.60    2.10%
    Hang Seng*                            17,885.73     631.10    3.66%
    Seoul Composite*                     1,385.56        7.44    0.54%
    Singapore Straits Times*           2,310.55       43.91    1.94%
    Bombay Sensex                      13,902.55    502.23    3.75%
    Baltic Dry Index                         2,975.00    -10.00    -0.34%

    * at Close


  135. Asian Markets Bounce, Japan Breaks Losing Streak

    Asian stocks bounced Tuesday, extending gains as a rally in U.S. financial shares helped Japan break a 10-session losing streak, while also reversing a little of the recent safe-haven rush into the yen. Helping was upbeat news from Singapore, as economic growth in the trade hub climbed 20.4 percent annualized in the three months to June, putting an end to four quarters of contraction. Analysts said other export-dependent Asian economies were also expected to see improved second quarters, but questioned whether improvements can be sustained amid still weak consumer demand in the region’s major Western markets.

    Japan’s Nikkei gained 2.3 percent to snap a nine-day falling streak, with banks buoyed by upbeat analyst comments about the U.S. financial sector and exporters lifted by a halt in the yen’s sharp appreciation.

    Seoul shares ended half a percent higher after volatile trade, with gains led by banks and steel issues but markets trimmed earlier 1.7 percent gains as shipbuilders and OCI retreated.

    Australian stocks finished 3.5 percent higher, helped by better economic news at home and abroad, though traders played down the move pointing to extremely thin trade volumes.

    Hong Kong stocks rebounded from a seven-week low, up 2.3 percent, after strong gains on Wall Street spurred bargain-hunting in banks and financials, but traders said the rally could fizzle out as fears about the broader economy weighed.

    Singapore’s Straits Times Index advanced 1.9 percent.

    China’s Shanghai Composite Index closed 2.1 percent higher, boosted by solid gains in overseas stocks and hopes for an improving earnings outlook. Financial shares led gains.

    Bombay Stock Exchange’s Sensex was up 500 points. Markets were near day’s high on Tuesday in line with the global markets. Positive opening of the European markets had also boosted sentiments.


  136. Euro Shares Gain as Financials, Miners Rise

    European equities extended previous session’s sharp gains on Tuesday, lead by banks and miners, with investors keenly awaiting quarterly results from companies such as Goldman Sachs and Intel. The FTSEurofirst 300 index of top European shares was up 0.5 percent at 833.90 points after surging 2 percent in the previous session.

    Financial shares were in demand, with Standard Chartered, HSBC, Barclays, Lloyds, Royal Bank of Scotland and BNP Paribas up 0.7-2.7 percent.

    Miners got strength from higher metals prices. BHP Billiton, Anglo American, Antofagasta, Rio Tinto, Xstrata and Eurasian Natural Resources rose 1.1-3.2 percent.

    Q-Cells, the world’s biggest maker of solar cells, fell 11.3 percent after it withdrew its full-year sales outlook, expecting a substantial operating loss in the second quarter, as market environment remained dire.

    Around Europe:
    FTSE     4,232.16     30.03     0.71%
    DAX       4,763.92     41.58     0.88%
    CAC      3,071.08     19.00     0.62%
    SMI       5,362.54     47.25     0.89%


  137. Oil Rises Above $60 Amid Stocks Rally

    Oil reversed the previous session’s losses and rose above $60 a barrel on Tuesday, thanks to improved sentiment amid a stock market rally, but lingering fears of the deep and long recession capped oil’s gains.

    U.S. crude [ 60.39    0.70  (+1.17%)] for August delivery rose. The contract finished down 20 cents at $59.69 on Monday, after briefly touching its lowest level in almost two months.

    London Brent crude [ 61.49    0.78  (+1.28%)] rose.

    Separately, Nigeria’s main militant group widened its offensive against Africa’s biggest oil producer on Monday despite the release of its suspected leader, raising concern there might be further attacks.

    Dollar Steadies Ahead of US Earnings

    The dollar and yen were steady on Monday as risk appetite improved on the back of rising equity prices, spurred by expectations for stronger U.S. corporate earnings and some positive economic data. Currencies perceived as higher risk such as the Australian dollar rose, also buoyed by a robust business conditions report.

    The dollar index, a gauge of its performance against six major currencies, fell 0.1 percent to 79.984.

    The dollar [93.07    0.17  (+0.18%)   ] was flat against the yen after hitting a five-month low of 91.73 yen on electronic trading platform EBS on Monday.

    The euro was steady against the Japanese currency [ 130.13    0.19  (+0.15%)] , and also the dollar [1.3978  0.0003  (+0.02%)].

    The Australian dollar climbed versus the yen [73.29    0.47  (+0.65%)    ] and the dollar [0.787    0.0039  (+0.5%)] and the New Zealand dollar [0.6332   0.001  (+0.16%)] was up against the greenback.  

    The German ZEW investor sentiment survey due out at 10 am London time is forecast to rise to 47.8 in July from 44.8, while the current conditions index is seen at minus 88.0 versus minus 89.7 in June.

    Gold inches below $920/oz after rally

    Gold gold had fallen to $918.45 an ounce by 0249 GMT (10:49 p.m. EDT on Monday).

    he world’s largest gold-backed exchange-traded fund, the SPDR Gold Trust, said its holdings stood at 1,109.81 tonnes as of July 13, unchanged since July 8.

    Silver was unchanged at $12.82 per ounce from the notional New York close. It hit a fresh 10-week low of $12.44 on Monday as economic worries helped investors to focus on the white metal’s industrial uses.

    Platinum was at $1,092 an ounce against $1,104.50, while palladium was at $227 against $232.


  138. Good morning!

    Unemployment/DB – If only 1/3 the people in this country have jobs and make the average income of $48,000 that’s 100,000,000 x $48,000 = $4.8Tn.  Corporations make $4Tn and the Government spends $2Tn = $10Tn GDP (there is some in between turnover along the supply chain that adds 30%).  It doesn’t pay to make up numbers and throw figures out there when you have reality.  Raising unemployment from 10M to 20M (20%) would remove $480Bn from the GDP.  25% would remove $720Bn.  Of course, the reality is the lowest-paid people tend to lose jobs in great numbers so the average lost would be less but we’ll give you a possible $1Tn of GDP removed even if your 25% unemployment figure is accurate and even if the government doesn’t spend $1Tn (like they already are) to make up for it.   Do you see why that logic is flawed?  It’s very easy to throw out scary figures like 25% unemployed and MILLIONS out of work – that’s how you panic the sheeple into selling perfectly good stocks at ridiculously low prices - just try not to be one of them…

    CIT/Pharm – Even if they get bailed out, how dillutive would it be?  On the other hand, looking at AIG and GM, it seems like you can have plenty of suckers to sell shares to regardless of their liquidation value…

    Alternatives/Spider – Also, now we see money coming out of commodities and out of emerging markets – where is it going to go?

    FAZ/FAS/Scobe – Yep, Foss is right, we short them both (long puts or straight shorts).  In theory, you can, at worst, break even and, in practice, we generally see both ETFs wear down over time, FAS and FAZ were both over $50 a year ago and were both under $10 before the reverse split – how’s that for a nice bonus?

    Futures looking iffy so far, kind of flatlining from yesterday’s close.  Europe followed through a bit but lost momentum, up about 0.5%.  Oil is super-pumped to $60.75 ahead of the NYMEX open but we have real data and earnings today and that will move the market.


  139. Morning !
    Yes, I realized money from EM & commodities into US stocks too. And Europe isn’t in a great shape. The problem I see: we have stock demand fueling stocks. Better we have some good fundamentals coming from earnings to support current levels.
     
    FAZ/FAS and any other 3x : Consider the acceleration this things can have. Acceleration happens  with several consecutive moves in the same direction.
     
    For example, if we had a 3x on the Nikkei, both starting at 100, this last 10 consecutive down days would make the +3x down to 75 and the -3x up to 132. Not so bad. But consider another run like this: +3x=56 -3x=175. Ouch. Its unlike to happen that way, but still there is a small probability.
     
    So, as I understand, you need to rebalance time to time to keep under control.