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Which Way Wednesday – Beige Book Edition

The new Beige Book is here! 

Today we get the "anecdotal" information on the current economic conditions from each of the twelve Federal Districts, we find these reports very useful as they tend not to be sugar-coated and the last BBook release (June 10th) marked a clear top to the the last round of irrational market exuberance when there was no significant improvement in the Fed’s outlook despite the market having rallied 10% in the month leading up to it.

That’s all it takes to pop a bubble – the simple lack of additional air.  Members would do well to review the comments of that day as we got a quick read on the Book, which backed up our generally toppy view of the market and we jumped right on POT $105 puts for $1.15 at 2:03 as I had been targeting them as the most ridiculously overpriced stock and my quick read from the Fed confirmed it.  POT fell from $117.88 that day to $92.72 on expiration day and bottomed out at $82 on July 13th.  This is the way to play the Beige Book, you need to have a premise that is either confirmed or denied by the facts and you can make a play accordingly but you can’t simply REACT to the information, it can quickly be too late by the time you figure out what to do.  Having a plan and alternatives based on various outcomes allows you to take advantage of market data as it comes out.  That’s why we get so excited when we get our Beige Book!  

BBook days are often market movers.  This year’s Books came out Jan 14th (down 250), March 4th (up 100 ahead of huge drop) and April 15th (up 100) and June 10th where we went down 130, up 100 and finished the day back down just 24 points.  Going back to my June 10th post, I see a lot of similarities, including the China bubble – which I also said was overdone at that time ahead of a 2,000-point pullback that began on the 12th.  Oil was $71.50 that morning and it’s "just" $65.50 now and that’s a ray of sunshine if it heads lower.  That was also the day I called for a class action suit against GS for their blatant manipulation of the energy markets – something I still have not found a law firm brave enough to take on! 

I sent out an extensive review of the Beige Book in a 2:35 Alert to Members and my key comments were:

Same as everything else, all the "good news" is outlook.  That 60% of consumers who are too dumb to realize their homes have declined in value also answer Fed surveys.  This is probably the biggest problem with economic forecasting, they base soo much on the outlook of clueless people that all data is skewed going forward…

"Vacancy rates for commercial properties were rising in many parts of the country, while developers are finding financing for new commercial projects increasingly difficult to obtain." – That last statement is a recipe for total disaster!  I have certainly seen better reports.  It’s not that this is so terrible, it’s just that this run-up into a report like this is in no way justified.  If we were at 8,000 and got this report, I would say "Yay, now we can go to 8,650 over time."  At 8,650, there’s a lot of stocks that have gotten way ahead of themselves based on assumptions that simply are not playing out.  This is very like to follow through to the downside once people get a chance to examine it

There is no need to remind you that we did, in fact, fall to 8,100 over the next 30 days but not before a "stick save" that day took us all the way back to 8,740 and we re-tested 8,800 that Friday but that’s the last time we saw it until July 20th.  8,800 is now 300 points below us so we don’t need to worry about shorting individual stocks if we get another problem reading today, we can just short the whole market!  We took our usual flyers into yesterday’s stick, grabbing some extra DIA puts and QID calls into the bell but, generally, we still have a ton of bullish positions so we’ll be hunting for bear plays if things really start to go south.

I just did a review of our now $112,007 Virtual Portfolio (we started with $100K on April 10th) and we put the breaks on our very bullish stance that we had flipped to in early July as we think the market has run it’s course and we need to protect our profits in this generally conservative group.  In our $5,000 Virtual Portfolio, we flipped entirely bearish, giving up on our YUM calls, doubling up on our SRS $16 calls at $1.30 and taking a bearish vertical spread on WHR, ahead of this morning’s durable goods report, which we don’t feel will be able to sustain a $55 stock price for the appliance maker. 

We hit a home run today on Monday’s MSFT play, where my 10:53 Trade idea for Members was: "Good spot to speculate long on MSFT as they held $23 before and word is YHOO gives up their own search engine to brand Bing, which would be a big win for MSFT…  I like the Jan $21s at $3.15 with $1 in premium over 6 months (.17/month)."  Those calls already hit $3.45 (up 10%) but today we got the news we expected as MSFT officially announces the partnership.  Again, this is another good example of seeing an opportunity (MSFT’s earnings sell-off), reading the news (a rumor we considered credible AND timely) and making the right play BEFORE the crowd catches on.  Market moving information before the market moves ™ – That’s what PSW is all about! 

The worst play we had in the $100K Virtual Portfolio was our new FXP puts, which we sold short last week but today’s 489-point drop in the Hang Seng (2.5%) and a 5% drop in the Shanghai should help to get us back on track on what will be Sept $10 puts that we sold short after we roll them.  China fell sharply as their own earnings season begins with a wave of disappointing reports and only hopes of further stimulus are keeping the markets from falling further. "The [Shanghai] market does need to correct after five consecutive sessions of gains, and it will likely continue to fall in coming days," said Wu Dazhong at Shenyin Wanguo Securities. "I expect the market to resume its upward trend after corrections if the PBOC keeps its appropriately easy monetary policy."

Europe was in a much better mood than Asia this morning as the ECB reported that banks were requiring much less liqudity aid this quarter, a sign of stability returning to the market.  A lot of this has been driven by a significant tightening of lending standards by Euro-zone banks, but that’s not as bad for Europeans as it is for Americans as their people are not living on credit the way Americans tend to.  "The market is proving very resilient," said Ioan Smith, director at Knight Equity Markets International, "but we will need to see people come in to buy it today for me to believe these levels can be sustained, as earnings are coming in mixed and sentiment [has] changed a little from this time last week."

8:30 Update:  Durable Goods Orders came in much worse than expected by "experts" (but just as we expected) with a 2.5% decrease in June, led down by Autos (duh, they shut down the plants!) and planes (duh, didn’t BA just say so in their earnings report?).  The amazing inability of "economists" to actually read the news and consider its impact on the upcoming data led to the expectation that Durable Goods would be flat to slightly up after being up 1.1%  in May (as surprise at the time).  On the bright side, ex-transport, other durables were up 1.1% but overall activity in capital equipment financing is down 37% from last year – mainly because it’s so hard for businesses to get a loan these days.  This is right in line with our general impression that the "right" range for the markets is 33-40% off the highs.  Now that that’s out of the way, it’s all up to the Fed later.

We’ll continue to watch the dollar as it struggles along the low at 78.50.  There are the usual rumblings that we can’t keep selling our notes or that the rest of the World will be moving to a new reserve currency but, until that happens, most people put excess dollars into commodities (including China) and we’re seeing a turn down in oil, gold and copper this week and copper needs to be watched very closely as they broke below 250 today as stories of China’s vast copper stockpiles (which we’ve been talking about for ages) finally begin to catch on in the MSM, casting a pall over the commodity hedgers.  Oil demand is also very much in question as the summer winds down with NO evidence whatsoever that demand for fuel is making a comeback, even at 1/2 of last year’s prices

Goldman Sachs, JPM and others will be testifying before Congress this morning at the CTFC hearings and that will be entertaining but price of ICE makes me think that GS already has this one in the bag.  I still like the speculative play of the Aug $95 puts, now $7.75 into inventories this mornig, hopefully selling $90 puts for $5.75 (now $5) or better to make a cheap vertical.  The U.S. “must seriously consider” strict position limits on energy markets to curb speculation, Commodity Futures Trading Commission Chairman Gary Gensler said.  “The report should send an alert to Capitol Hill that we need regulatory reform that provides the agency with oversight into dark, over-the-counter markets,” Commissioner Chilton said in an e- mailed statement.  By the way, "Dark, over-the-counter markets" are pretty much the entire raison d’etre of ICE! 

We’re in "take the money and run" mode on our puts as we’ll be happy with a quick dip and a quick profit as we test our lower levels.  If the oil inventory shows a nice build as we expect, then the energy sector should lead us lower at 10:30 and that will give us a good look at supports.  Ahead of the Fed though, and with the GDP looming tomorrow morning – anything can happen but we can’t wait to get a hold of that data this afternoon, hopefully it will clear some things up. 

Meanwhile, hold onto your hats today, it’s going to be a wild one!

 


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  1. DB

    Despite the bad durable goods numbers (and the previous month was revised downwards) pre-market isn’t even at yesterday’s lows.

  2. jamie

    Phil, Looks like the MSFT deal will give YHOO an extra .50C annual EPS, what do you think of the Jan2010 15′s on this sell off? J

  3. jamie

    Sorry calls that is.

  4. Cap

    SLG reported yesterday and had a conference call.  Results were solid and no meaningful hiccups.  However, no reason to get excited about the stock going forward.  These guys are very good operators and balance sheet in good shape.  They also have a great pulse on the real estate market, particularly NYC and Westchester, CT and Long Island office markets; and the capital markets.  While office markets are no longer falling off a cliff (like the economy) market occupancies are expected to drop somewhat over the next year or two; properties are not trading; and banks are not lending (except in very limited circumstances, at very low leverage levels on high quality properties).
    Rather than attempt to summarize here; I recommend for anyone interested to read carefully the conference call transcript on Seeking Alpha.
    I think SLG will trade in a $ 20-25 band for quite a while.  Buy low 20′s; sell around here.  Or better yet, sell $20 puts and hope you get assigned.

  5. smasher

    Love when a play works as expected.  Took the MSFT calls for 3.20 and just let em go for 3.70.  I’f it runs up some more, I don’t care.

  6. Phil

    Durables/DB – I don’t think it was all that bad.  BA had delays and our automakers were almost BK – Imagine how great the comps will be next month! 

    YHOO/Jamie – I think they are just a dead company that gave up their only asset for peanuts.  I wouldn’t play them other than as an income producer.  MSFT, on the other hand, is off to a slow start for a company that just tripled their market share for peanuts.

    SLG/Cap – Thanks!  So far, the REITs are hanging pretty tough.  I think this Xmas season will tell the tale as so many retailers are hanging on by their fingernails…

    Same watch levels as yesterday to the downside:  Dow 8,950, S&P 960, Nas 1,940, NYSE 6,232, and Russell 535

    We need to keep an eye out there but I do expect oil inventories at 10:30 to give us another push down.  COP earnings were not exciting and that’s sending XOM and CVX down and costing the Dow 20 points right there.  OIH down another 3% already and XLE down another 2.5%.  Don’t forget, if we get a big energy sell-off and the markets hold our levels – that’s GOOD rotation.

    Gold down to $934, oil at $65.50 on no particular dollar strength so these are demand concerns.   VIX up 2.5% at 25.65 but that’s not too high yet.

    MOS down another 4% at $48.90!   8-)

    DIA $88 puts from yesterday already up .30 (35%) at $1.15 don’t let $1.07 (up 25%) slip away!  Generally it’s a .15 trailing stop if we head lower but 9,000 will probably be tough to break and that’s about $1.25, which is about a 50% gain and would be a good place to get 1/2 out.

  7. Phil

    MSFT – Don’t forget, for those who wanted to stay in that trade our target was to 1/2 cover with $24 calls at .50, which is on target right now!

  8. where

    I think that if we hold 962-ish on the S&P after the inventories we’ll probably have to turn bullish again.  Phil, what do you think?  That’s my target for killing my QID calls.

  9. spider

    Hello, morning all.
     
    Again im late, just to see I hit jackpot wit WTS. For some reason I went straight long with Sep 25 calls.
    Im biased bullish on that one. Even their earning does not sound "great (for me)" there be something im missing
    making this one to go up so fast.
    Thanks Phil, great call!
     
    Today AMC we have FLS earnings… im not so bulish on this one, but maybe it worth a look.

  10. Phil

    Bullish/Where – This is very impressive so far.  Volume just 30M into 10am but we’re down 3% in energy and materials and the indexes are only getting dinged by 1%.  Actually, now that I’m thinking about it – that hardly seems possible but here it is…

    The Dow is turning green with just 12 components postive – that’s crazy!  I am so blown away by this that I will ask someone else to explain this to me!  Bibe if tge greebs are impressive yet CAT fell 2.5%, CVX 1.7%, DD 1.9%, GE 2%, HPQ 1.25%, MMM 1%, VZ 1% and XOM 1.5% – how does this add up to Dow down 6 points???

    WTS/Spider - Congrats!  FLS is selling off on the same news so far…

  11. EricL

    EWZ (Brazil) failed to make new highs from June.  This is a commodity-heavy index. I’m buying Sept. 56 puts. Stop at 57.80. 

  12. samlawyer

    Love the photo of Navin R. Johnson.  Wonder how many people remember him . . .

  13. EricL

    Yeah Phil, weird. Someone’s gobbling up SPY and Qs too. I’m basically long US equities and short commodities, gold, brazil and china, for lack of a better idea.

  14. Phil

    LOL – "Bibe if tge greebs are impressive" = None of the greens are impressive —  Must have had my right hand one key off position for a moment (hey, that would be a cool code – probably tough to crack). 

    EWZ/Eric – Good idea but be careful as Brazil’s economy is showing actual signs of improvement.  Russia (RSX) is very oil sensitive and may be a good short if crude fails $65 on this inventory report. 

    GOOG certainly doesn’t seem bothered by MSFT/YHOO deal. 

    C up another 3% today.  That’s why I had no desire to cover it in $100KP.

  15. Jordan

    Law firms continue to lay off people.  Two cases I heard of in the past week.

  16. RMM

    PhiL:
    are there any more important earnings reports coming ? If so, which ones ?
    Looks to me the market is going to drift into a summer/august lull with some down movement.

  17. Cap

    Algorithms or Specialists ?
     
    This happens to me quite a bit; has happened three times so far today.  Saw a bid / ask price on a stock that I liked for a trade.  Placed buy orders at the ask.  And a short order at the bid.
    All three times, before my orders were filled, the price immediately jumped away resulting in my order not getting filled.  For example at 12.58 / 12.60, I placed order to buy at 12.60.  As soon as my order submitted, price jumped to 12.62/12.65.
     
    I can only conclude that there is continued front running of orders in this market (which is illegal).  Nobody does anything about it.  It could be these HFT programs or specialists.
     
    Anyone else seeing this regularly ?
    Placed order to buy

  18. Cap

    Algorithms or Specialists ?
     
    This happens to me quite a bit; has happened three times so far today.  Saw a bid / ask price on a stock that I liked for a trade.  Placed buy orders at the ask.  And a short order at the bid.
    All three times, before my orders were filled, the price immediately jumped away resulting in my order not getting filled.  For example at 12.58 / 12.60, I placed order to buy at 12.60.  As soon as my order submitted, price jumped to 12.62/12.65.
     
    I can only conclude that there is continued front running of orders in this market (which is illegal).  Nobody does anything about it.  It could be these HFT programs or specialists.
     
    Anyone else seeing this regularly ?
    Placed order to buy

  19. JohnC1

     Phil:  I sold MOS Aug 50 calls for $4.56 and Aug 55 calls for $3.34.  I own the stock.  I have about a $2 profit on my calls.  I am considering buying some back now in hopes that I can resell them if the rumors about a MOS sale resurface and push the stock up again.  Or given what seems to be an overbought market would you wait to buy them back a while longer?  Any thoughts would be appreciated. 

  20. smasher

    Well, at least CNBC is being honest about their cheerleading now.  They just said "we had a Debbie Downer segment, lets have a bright light segment, thats fair, right?"

  21. Phil

    Oil inventories up 5.1Mb, Gasoline down 2.1Mb, Distillates up 2.1Mb - certainly worse than expected for oil bulls. 

    That’s sendiing oil down to $64.50 already.  Very nice that 4% drop in OIH and 3% drop in XLE is not making much of a dent on the broader markets but we’ll see if it lasts.

    This is what we expected this morning and if the indexes don’t get below the morning spike down on this run, it may be time to take some calls as there is no point in fighting Mr. Stick.

    Dow volume at 45M at 10:30 so still light.

  22. concreata

    Phil – mattress mgmt – I am long DIA 89′s and 1/2 cover DIA 88′s. What would you recommend if anything?

  23. Jordan

    QQQQ up half a percent, but whole Nasdaq down half a percent.

  24. concreata

    oops, I am long DIA DEC 89′s and short 1/2 DIA AUG 88′s. thx

  25. spider

    RMM :  Try this link. Is a stock screener. The link im sending you is the ones reporting in next 5 days, sorted by market capitalization. But you can configure to see:  todays after market close and tomorrow before market open. This two screens will give the tickets of the company you want to track toda for a earning play. 
     
    Once you have the list, then you can sort by mkt capitalization, sector, p/e and many many other data.
     
    Link  : tinyurl.com/mtkl9g

  26. sheenass

    phils thoughts on DRYS for friday

  27. RMM

    spider: txs, what 1,2,3 do you pay attention to ?

  28. allen060

    Suggestions needed for investment/trading tracking software for tax reporting purposes: I still use Excel which is burdensome and not efficient, especially now that I am doing option spreads, partial sales, etc. Does anyone use investment tracking software that can handle options and spreads, and accurately report capital gains/losses from ongoing multiple purchases and partial sales? I have multiple accounts and do not mind manually entering data.

  29. EricL

    14 of the last 15 sessions, it has paid to buy the SPY at the open. Today doesn’t look any different, so I guess I’ll once again shut off the trading platform, secure in the knowledge that our market overlords will protect us from any harm, lol.

  30. sheenass

    Do you see another downleg for China this week on the lines of the 5 % drop ytday………and what do you think of FXP for that trade.

  31. spider

    Well, im looking for battled down companies,  looking for reports "better than expected" even a little and company with moderate to hight short interest. That can trigger up if the report is not so bad. And if the report is bad it can give some support on the downside. Its a bit dangerous.  And after you pick some tickets think on the way to play it, and before that ask for an advice, like here to Phil.  Sometimes you are missing details that can be pointed from someone knowing the ticket. (like WHR with a factory in china, or beter play WTS instead FLS, be carefoul with TXT).  Those comments make i play striaght WTS,  bulish on TXT with some cover on the downside, and stay away from WHR.  So far, so good.

  32. drumkeerin

    As C rises above $3, the attractiveness of the 2011  2.5/5 strike vertical spread at 56 cents becomes apparent. Should one take another bite?

  33. where

    Oil still falling…down to $64 now.  I suspect this may be about it for the bears today.

  34. Phil

    Earnings/RMM – Just these.  Next week is another big week and, with so many reports, it’s hard to focus on one or another as no one really stands or falls on their own.  Sill, we usually find one a day for the $5KP….

    Orders/Cap – Happens all the time.  You have to be really patient to get your spots.  Notice I lost interest in mo trading this Q because of this nonense – the quick in and outs are just not working as all the dimes are being scalped elsewhere. 

    MOS/John – how about cash out at $49.25 and cover with Jan $55s at $5.10?  That takes $44.15 off the table and leaves your callers well covered.  The big risk is that they do get a buyer at $55 as that would mean you owe the $50 callers $5, and get nothing back yourself.  It really depends on your outlook but mine is bearish on MOS. 

    CNBC/Smash  – Note the combination of cross-promotion and subtle psychology here as they are trying to make people who point out negative market news seem like losers…  This seems like a follow-up to their attack on bloggers last week as CNBC wants to make sure they are the ONLY people you listen to…

    DIA/Concreata – Those are fine for now.  If we head lower, you can roll them 2x to the $86 puts or maybe $85 puts so you have no downside issues.  If we head up, you can sell the $90 puts, now $1.75 and put tight stops on the $88 puts at which point you’d want to consider spending .50 to roll to the Dec $90 puts (something you really should do now anyway if you can get it for .45). 

    QQQQ/Jordan – The law of supply and demand kicks in…

    Finviz/Spider – Hey, that’s very nice! 

    DRYS/Sheen – They are strange as their financials trump the earnings.  It’s all a quesiton of how managable is the long-term debt load because the shipping rates go up and down but the real investors just watch the 200 dma, which has pretty much bottomed at 2,000 so now it’s a question of can they pay their bills going forward at that price.  I think so but it’s a very risky bet.

    Tracking/Allen – Ask your broker who they are compatible with.  I hear good things about Gainskeeper but use an accountant so I never try them. 

    Good plan Eric!

    China/Sheen – Well I hate chasing the FXP but I do, on the other hand, think $10 is very cheap for them despite the fact that they were $9.50 yesterday.  Our goal in the $100KP was to roll to the Sept $10 puts, now $1.20 and I think being in FXP long-term at $8.80 is not something you are likely to regret, especially if that’s a scale-in and you can DD at $6 and $4 (in case China goes back to the old highs).   The reason we like it is because we expect, even at net $6, to have many years of monthly sales of .20 or better in options which is a 40% annual return.  Not a bad "worst" case…

    Oil $63.75!

  35. brianma

    That bottom in oil is what you would expect US markets to look like after a long drop and without the manipulation of green shoots.

  36. spider

    Well, im looking for battled down companies,  looking for reports "better than expected" even a little and company with moderate to hight short interest. That can trigger up if the report is not so bad. And if the report is bad it can give some support on the downside. Its a bit dangerous.  And after you pick some tickets think on the way to play it, and before that ask for an advice, like here to Phil. 
     
    Sometimes you are missing details that can be pointed from someone knowing the ticket. For example, he toldme "WHR with a factory in china"; "beter play WTS instead FLS"; "be careful with TXT, i like em at $5".  Those comments make I play straight WTS,  bullish on TXT with some cover on the downside, and stay away from WHR.  So far, so good.

  37. David Ristau

    Hey all. Hope you got in the CONSOL Energy Inc. call for today. If you got right at the beginning you could have caught it for a price around 33.60 – 33.70. The stock has moved down with the rest of the market and is trading around 33.20, with lows near 32.80.

    I think at this point if you have not sold, let’s try a limit buy back around 32.90 – 33.00. That will be a nice 2% or so gain. If you feel a bit more risky and think the market will continue to drop, looking for a 32.70 range would be a nice 3%.

    My personal opinion is that I am not sure it can get that low. The market and the particular stock seem to be supporting when we get around .50% to .60% down.

    David Ristau

  38. Phil

    Wheee, oil sure is slippin’ now, testing $63 here. 

    C/Drum – I hate to chase it but yes, it’s always appealing and I don’t think it’s likely to get too much cheaper unless we get a real breakdown but then your move can be to DD on the $2.50s and wait for a bounce back…

    11:30 volume is 67M, not a lot of conviction so far but that will be rectified this afternoon.  Looking ahead to the move, it would be nice to buy some DIA $92 calls at $1.12 and maybe some $88 puts for about the same or hopefully closer to $1.05 if we get a bounce back up to take that spread into the Fed and maybe into tomorrow’s GDP

    Good call David! 

  39. RMM

    Phil: Just these (red): is this supposed to be a hot button ?

  40. microflux

    is it possible to have you 2 in 2 slightly diffirent shades of blue :) ? o please, some times we just need to find one of you quicly by scrolling through. o please :)

  41. where

    PFE taking a hit this last couple of days.  Has good support around 15.  Should be a decent channel to sell some premium into.

  42. Jordan

    Phil, how about shorting MEE here? (using puts)  it’s one of the few oil companies that’s up, and it’s earnings related.

  43. Phil

    Red/RMM – What???

    Hearings must be going well, ICE has beein going straight up since the open….  See, it’s not about the price of oil, it’s all about how much money they can make screwing people!

    Blue/Micro – Oh man really?  You know Opt has that same blue too so poor Matt will probably go insane trying to work that all out.  As it is right now, it’s the same color to promote a consistent look when you go to each of our sections.  David’s will be up and running next week like Opts is so I don’t think it will be too much of an issue ongoing.

    PFE/Where – I’d like to see them test $15.

    SPWRA holding up well. 

    TIE took a nice dip but held $8.  I like them at $8.19, selling Sept $7.50 puts and calls at $1.60 for net $6.59/7.05.

  44. cwan120

    Hi, David: For those of us who didn’t have a chance to get into CNX, do you recommend a buy later today, betting that it will recover tomorrow?

  45. RMM

    Phil: at 11:05, you have in red : just these ‘, what is it ?

  46. Phil

    MEE/Jordan – It’s the right kind of thing to look for (companies that are up more than their peers in a declining sector) but MEE just had impressive earnings and are going up for a reason and they are coal, not oil and they are a well-run operation that is surfing the demanad curve very well.  I’d be more inclined to want to buy them if they fall back to $15 than to bet on that happening here at $25 although, for fun, it is a good statistical play to go for a pullback here. 

    11:05/RMM – It was a link to this week’s earnings.  But I see now that it was a broken link (something strange is going on here).  Try this

  47. David Ristau

    Cwan120 – I don’t like to speculate going into earnings. I mean you can definitely get into the stock at a nice price, and it may jump going into earnings. What I would say if you want to play a possible earnings bounce is wait until around 2 PM. Buy in then and you may be able to ride up an afternoon upswing in the stock as people are waiting to buy going into earnings. You can take 1% there. If you don’t get the one percent then hold to tomorrow. However, I would be weary and cannot make that recommendation because it would be purely a guess. I would be more confident in an upswing in late afternoon.

    Did anyone hold CYH overnight?

  48. Grant

    Allen060 – I have an E*Trade account and use TradeLog for tracking trades for taxes each year.  The instructions for exporting from E*Trade (and other brokers) are easy.  You then import it and it matches up trades for you.  You then proof it (they have errors/?’s stand out) and you make any manual adjustments.  I usually have one or two out of hundreds.  Then import into TaxCut or TurboTax.  It also handles 30 day rule (whicjh I don’t understand) and carries over from one year to the next. 
     
    They are at:  http://www.armencomp.com

  49. Phil

    Oh good, someone bought 33,000 FXI Jan $35 puts! 

    10,000 SDS Dec $59s went out too….

    CFTC Chairman Gary Gensler backs exemptions from commodity position limits for "bona fide hedgers" even as support for limits seems to be firming up: "No longer must we debate the issue of whether or not to set position limits."

    AXP buys back their warrants.  Government makes 26% profit on $340M.

    CME moving up too, hearings must be going very well (all you have to do is get GS and JPM in the vicinity of lawmakers and the payoffs must just flow through osmosis…)

  50. spider

    "the payoffs must just flow through osmosis" – ROFL 
     
    briefing.com – great link, all week resumed there, including gidance icon fo a fast oulook / search.

  51. Phil

    Speaking of paying off Congress – Health Care sector still holding up well so they are fearing legislation less and less…

    SOX doing well holding 300, Transports holding 3,500, Nas does not want to give up 1,950, S&P 970, RUT 545, NYSE 6,250, Dow 9,020. 

    This is very impressive with energy and commodities so weak and our tech leaders asleep..

    Uh oh – Major lightning storm.  If I go off-line for a while, it will probably be because I lost power..

  52. chaps

    Phil:
    What do you think of AMZN as a double diagonal? The rationale: (1) "wide moat" supports the price from below, but it’s hard to argue the stock ever gets really cheap. (2) plenty volatile.

  53. craigzooka

    CNBC is saying the treasury auction went extra shitty with a side of poop.

  54. DB

    So much dip buying there’s hardly any dips !

  55. Phil

    Bid to cover on 5-year note auction just 1.92 (2.20 average) for $39Bn in notes at 2.69% (high).  This is not good! 

    AMZN/Chaps – Generally I prefer something that stays more in a range but I think you are reasonable safe as long as you allow for $70-$100, at least for this month!

    Health care bill rumored to be making progress in house.

  56. spider

    I see yahoo 11% down.  Its the deal so bad? 

  57. DB

    Auction – had to happen sometime.

  58. Phil

    Dips/DB – Here’s one for you, the trick is having the faith it will hold up at the bottom.

    YHOO/Spider – It’s the end of the company only it’s a slow, silly death now.  Don’t forget they are scrapping their whole massive search project and they are killing future R&D in exchange for 5 years use of BING so they get $500m a year and save $200M a year (on a $20Bn market cap) while MSFT builds a brand image with all their customers and, at the end of the term – what is Yahoo?  Effectively they are a marketing portal that gets a lot of hits but now MSFT can study all their traffic and start replicating all the things that are popular in YHOO (and, through MSN, Yahoo can’t claim that MSFT "stole" their ideas since most stuff is already laying around there).  This is the same exact way MSFT destroys software companies – they buy their way in, rape and pillage until there’s nothing left and then terminate the agreement as it "doesn’t make sense to renew."

    XLF still holding $12.50 but SOX blew 300 and Transports blew 3,500.  Volume 94M coming into 1:30. 

  59. morxlntway

    Has the BRCM trade come & gone? Should i be getting out while there is still some green? I got in Mon AM.

  60. Cap

    Borderline FMD Bear conditions …. stealth FMD to the downside developing ?

  61. Phil

    BRCM/Morx – Oh for sure you should be out of successful bullish trades.  That’s why we killed YUM yesterday (though not successful).  We’re expecting a big pullback and it really doesn’t matter how good your stock is – it probably won’t be safe.

  62. spider

    YHOO + MSFT = WOW… incredible!  And I remember not long ago they offer something like $30 .  So, based on you resume, YHOO can half their value in the time… ?

  63. Cap

    Watch yesterday’s low in DIA … does it hold for W bottom and go up ?  Or break thru to downside ?   90.08

  64. RMM

    Phil: as you expect apullback, what DIA puts for protection ?

  65. Peter D

    RUT – I was holding the indices up for 15 minutes or so, trying to cash in a few of my short CALLs.  There was lots of phantom orders by the machines trying to jump ahead of my order, creating a false sense that many other people are buying CALL, instead of just me taking profit.  Looking at the RUT Sep 580 CALL, it’s only 103 traded today, but the Bid/Ask size shown is a few hundred, and those phantom orders shift around whenever there is a real order coming in.  As soon as my trade was executed, RUT dropped like a rock.

  66. DB

    Out of my SPY puts ahead of the FED – but will be looking to get back after the bad news !

  67. deano

     Phil
     
    I have DIS shares net at $22 covered fully by Aug 24′s, so I am buried now – any suggestions on a good roll? Thanks,

  68. cwan120

    CNX/CYH/David – Thank you for your analysis.  I’ll skip buying CNX.
    I bought CYH Sep $30 Calls at $1.80 yesterday afternoon, although Phil suggested to get in at $1.70.  This morning I saw CYH jumped up.  In excitement, I thought my price was $1.70, so, I entered an order to sell at $1.90.  Only after it was sold, I  realized that my profit was $0.1, instead of $0.2.  After commissions, it’s $0.07.  Not too bad for a trade less than 24 hours.

  69. Phil

    FMD/Cap – About time the bears got some free money but I don’t think it will be that easy, market still doing very well considering the commodity sell-off but in 20 mins, all that can change. 

    YHOO/Spider – I don’t see an exit strategy for them.  What’s the value of a popular web site that can’t generate any search revenues of its own.  Obviously it’s half at best because they have to split their revenues with a real search company.  Right now, YHOO gets 100% of their ad revenues but down the road they will have to give up space to put in adds by MSFT so they can get the same crappy .10 per 1,000 they offer to people like me (notice I tell them to shove it and don’t engage in that kind of advertising).   With YHOO valued at $20Bn currently and having earned less than $500Bn in the past 2 years and on the way to making, at best .35 per share this year (p/e 45), what are they going to do to make $1Bn a year, which would still be a p/e of 20 to MSFT’s p/e of 13 or GOOGs p/e of about 25?   That’s IF they manage to earn $1Bn and it’s really not at all clear how that would happen…

    W/Cap – BBook breaks all technicals.  Hopefully we get a nice move to 8,800, that would be a sensible sell-off.   If we could test that on volume and then come back to 8,900, even if it’s a stick, then I would feel better about buying more stuff. 

    DIA/RMM – Well the $88 puts we took earlier were a good play, the long DIAs are still good too.  It’s the same pullback we’ve been expecting since last week but we may have to wait another week until we get a proper sell-off if it doesn’t come this afternoon or on tomorrow’s GDP numbers.  Remember, earlier in the week I was hoping for a sell-off ahead of the BBook and then getting a BBook that saved us to help us break higher.  We never got a proper sell-off so I am more bearish into the book but we have to see what it actually says.

    RUT/Peter – See, that is a fraud being committed on you.  We should tape this action and bring a class action suit! 

  70. morxlntway

    even TASR? :)

  71. Phil

    DIS/Deano – No hurry, let them protect you for now throgh GDP.  They can shove their 1.3% dividend and you can always flip to leaps but let’s see if they don’t fall back to $25 or less by expiration anyway.

    WHR dropping off and SRS heading up, all is well in the $5KP! 

  72. Cap

    Beige Book – nothing new, nothing we don’t already know; no green shoots.
    So what will the mkt do ?

  73. Phil

    Beige Book Quick Notes:

    Weak economy, decline moderating.

    Retail sluggish.

    Some manufacturing improvement.

    Lending still weak, loans hard to get.  Outstanding loans falling behind.

    Weak labor markets across the board (but the upside is that means low wage pressure, which reduces costs).

    Certainly not a strong looking book but nothing awful either.

  74. David Ristau

    Be interesting to see now what the market does. The largest pullback we have seen in some time, so will it hold, go lower, or move back up.

    I think we are trending lower probably due to mostly that weak auction. That money that was flowing into the market that was holding it up and reviving it the past few days I don’t think will have any reason to enter today. The past three days we have at least had some bullish data or earnings. None of that today, with more bad news coming into the market

    Only places we may see some upward ticks is on companies that are reporting earnings in after hours. Visa, for example, is in a great upward trend. Other big names are Hartford and CB Richard Ellis. CBG is huge for some of those housing shorts we have been discussing as well as Realty Income Corp. (O) in after hours. I have decided to hold my SRS shares going forward. I like the techs too much right now on housing. These companies will really have to blow things away to keep up this housing appeal and it just is not possible.  REITs are still really bad and I think got worse in Q2 than Q1.

    David Ristau

  75. Cap

    My 2 cents … if market rallies into 3 pm or 3:30, go short at DIA PP or higher; SPY 97.65 or higher.
    China down 5% last night ; continuation of that might unnerve markets.

  76. DB

    BB – Ah but no Green Shoots anymore !

  77. spider

    Peter =  Those are bastids!  See, once I used that in my favor…. I wanted to sell some TOT options and the spread was a shame. So I placed a BUY order (close to the value I wish to SELL them) only to make the computers jump in front of me. IT Worked!  As soon the placed a better bid I canceled my BUY order and fast placed a SELL MKT.  :-)
     
    The sad story was I get fined because that! (with cancellation fees) . Was on my firsts trades and later i was thinking if that was incorrect, even illegal… so i never done again, and i always look into spreads before enter a trade on tiny traded options.

  78. sheenass

    phil thoughts on INO as speculative play in it at 2 ………its now 3 and running…….volume is tremendous this is just a spec position

  79. Emotrader

    Out of my 88 DIA PUTs

  80. Emotrader

    BBook – so based on that, are we going up or down?

  81. barfinger

    I hedged to the bearish side before the BBook. So, where’s the big pullback?

  82. RMM

    Phil and David;
    Earnings after hours which look good:
    AEM
    DRIV
    ENTU
    GG
    MANT
    V
     
    any of these worth getting into as an uptick possible ?

  83. cwan120

    If treasuries didn’t sell well, how about a play on TBT?

  84. dstillwe

    CYH – David, sorry for checking in late: <<Did anyone hold CYH overnight?>>  I held the spread that u or Phil laid out yesterday.  What say ye?  And, PD, I bought puts on today’s short-sell reco – proud of me?  [not that its paid off yet, but that I went puts rather than short sale]

  85. Peter D

    VIX – is up 4.6% in anticipation of the Biege Book, or anticipation of a drop.  In fact, it’s been up 14% in the past 3 days while the market is basically flat.  If you think we are heading down, sell CALLs or covers while you can get a good price.  One way the machines can trick the putters is to have a head fake into Friday.  That would drop the VIX, kill the putters, then buy more PUTs, and drop the market.  I’m sounding like Matt now.

  86. Peter D

    QQQQ vs NDX -  Qs quotes are up +$0.2 while NDX is down $8.8 (-0.5%), and /NQ is down $7.  We shouldn’t be mistaken that the Nasdaq is up while all others are in the red.

  87. DB

    That early "twiglet" took out my stops – what a pain these sticks are.

  88. Phil

    Selected readings from the Book of Beige:

    Most Districts indicated that the pace of decline has moderated since the last report or that activity has begun to stabilize, albeit at a low level. Five Districts used the words "slow", "subdued", or "weak" to describe activity levels;

    Most Districts reported sluggish retail activity.  Manufacturing activity showed some improvement in the Richmond, Chicago, and Kansas City Districts; while St. Louis and Dallas reported some moderation of declines; Philadelphia and Minneapolis saw activity decrease; and most other Districts indicated that manufacturing activity continued at low levels.

    Residential real estate markets stayed soft in most Districts, although many noted some signs of improvement. By contrast, commercial real estate markets weakened further in recent months in two-thirds of the Districts and remained slow in the others.   

    Let’s go SRS!!!  How can these guys possibly be putting in good reports this Q when the 4/10 and 7/29 Books both say commercial real estate is terrible?  I think the market is very delusional regarding this sector.

    Most Districts indicated that labor markets were extremely soft, with minimal wage pressures, and cited the use of various methods of reducing compensation in addition to, or instead of, freezing or cutting wages.  Boston, Cleveland, Richmond, Chicago, Dallas, and San Francisco cited a range of methods firms are using to limit compensation, including cutting or freezing wages or benefit contributions, deferral of future salary increases, trimming bonuses and travel allowances, reducing hours, temporary shutdowns, periodic furloughs, and unpaid vacations. 

    All Districts indicated that labor markets remain slack, with most sectors either reducing jobs or holding them steady and aggregate employment continuing to decline, on net.

    Another thing that doesn’t show up in unemployment numbers.  What if you pay the 91% of the people you claim have jobs 10% less?  Isn’t that the same as losing 10M jobs?  This means the workforce is taking a big hit and that hit is helping companies keep their bottom lines but if we don’t pull it out there, there is not really anything left to give in the next round.

    Consumer spending in the early summer remained below previous-year levels in most Districts, as households continued to be price conscious.  Consumers focused on purchasing less expensive necessities, while sales of big ticket items languished. Retailers in Boston, Philadelphia, and Dallas characterized their outlook as cautious.  Travel and tourism declined in the majority of Districts.  Tourism contacts along the Atlantic coast reported that with the exception of July 4th holiday bookings, business was generally weaker than a year ago.

    District reports regarding nonfinancial services industries were largely negative, although they included a few bright spots.  Reports from the healthcare sector were largely positive.  Technology-related firms in the Kansas City District also reported heightened activity, especially in the clean technology and defense-driven aerospace markets. Richmond and Minneapolis noted increased demand for information technology workers, and Atlanta saw hiring activity in the defense and aerospace industry.  

    Nearly all Districts reporting on transportation services observed continued weakness. Freight transport respondents from the Atlanta, Dallas, and Cleveland Districts noted that cargo volumes remain below year-earlier levels. While Cleveland contacts reported that competitive shipping rates are being maintained, trucking contacts from the Atlanta District noted that an oversupply of trucks relative to demand has exerted downward pressure on rates.

    So Tech and Health Care ARE bright spots!  Looks like transportation really sucks though, we may need to think about shorting some of those guys if they had a big run.  Hotels sound like they are shaping up into a catastrophe when they report their summer numbers. 

    Reports on the manufacturing sector remained subdued but were slightly more positive than in the previous Beige Book. Many Districts characterized manufacturing activity as remaining depressed but with selected signs of modest improvement.  Various District reports noted cancellations of orders for commercial aircraft and continued weak demand for most types of equipment and machinery. Among the positive developments in manufacturing, several Districts mentioned pickups in technology sectors, or cited strong or rising sales of military products or pharmaceuticals.

    Commercial real estate leasing markets were described as either "weak" or "slow" in all 12 Districts.  Office vacancy rates continued to climb in the Atlanta, Boston, Kansas City, Minneapolis, Philadelphia, Richmond, and San Francisco Districts, as well as in Manhattan, resulting in sizable leasing concessions and/or declines in asking rents. Significant weakness in the retail leasing sector was reported for the Boston, Minneapolis, and New York Districts, and industrial vacancy increased in the Atlanta, Dallas, Minneapolis, and St. Louis Districts. Commercial real estate sales volume remained low, even "non-existent" in some Districts, reportedly due to a combination of tight credit and weak demand. Construction activity was limited and/or declining in most Districts.

    Residential real estate markets in most Districts remained weak, but many reported signs of improvement.  Of the areas that continued to experience year--over--year sales declines, all except St Louis--where sales were down steeply-- also reported that the pace of decline was moderating. In general, the low end of the market, especially entry-level homes, continued to perform relatively well;   The Boston, Atlanta, and Chicago Districts mentioned that the increasing number of foreclosure sales was exerting downward pressure on home prices.

    The farm sector reported better weather in much of the country in June and early July. As a result, the supply and condition of many crops have improved, and prices have fallen.  Livestock contacts in the Chicago, Kansas City, and Dallas Districts report that prices for dairy, hogs, and cattle have fallen by more than operating costs and some ranchers are liquidating herds.

    So Ag stocks are NOT the place you want to be putting your money right now.  The savign grace is a massive drought in Texas means that a lot of soil replenishment will be needed in the fall so those type companies should hold up but, in general, there is a surplus of everything running headlong into lower deamand.

    In most reporting Districts, overall lending activity was stable or weakened further for most loan categories.  As businesses remained pessimistic and reluctant to borrow, demand for commercial and industrial loans continued to fall or stay weak.   Residential real estate lending decreased in New York, Richmond, and St. Louis. Dallas reported steady but low outstanding mortgage volumes.  Bankers in the New York District indicated no change in delinquency rates in all loan categories except residential mortgages, while Cleveland, Atlanta, and San Francisco reported rising delinquencies on loans linked to real estate.

    So no inflation pressures in this report.  The government may be throwing money into the system but it all seems to go to GS and nowhere else.  I don’t think this is anything people didn’t already know and it’s certainly not supportive of the recent rally but, even as I write this. the dips are being bought as the markets very impressively hold their levels.

    Oil is finishing the day at $63.25, gold is at $931 and the dollar buys 95 Yen but you need $1.40 for a Euro and $1.64 for a Pound. 

    Don’t forget Asia and Europe were closed when they got this news and we’ll see how they take it but this is a very discouraging report if you think of Americans as your customers – doesn’t sound like they have much to spare does it? 

    Out of all this, I’m still loving the SRS calls we already have and it’s certainly not too late to short the Dow, with the DIA Aug $88 puts still just $1.08.  It’s dangerous because we have GDP tomorrow but if we miss the -1.5% expected (and durable goods and retail sales make that very possible), then we may finally see a little capitualtion with some volume that will hopefully give us a proper look at what levles will hold

  89. dstillwe

    WHR – i don’t think the second leg of the play executed, but I’m not complaining about the WHR 60 August puts, Phil.  Shall I cash?

  90. DB

    Phil - It’s dangerous because we have GDP tomorrow but if we miss …… I think thats Friday , Unemployment tomorrow.

  91. DB

    By the way – great summary of BB – Thnx. How do they read it that quick after its released and react immediately ?

  92. bigs

     Would you do a new entry on the SRS calls here?

  93. hatorade

    Phil,
     What do you think about WYNN, they have earnings tomorrow…

  94. Cap

    MCO:
     
    Moody’s Corp said Wednesday that its second quarter profit fell to $109.3 million, or 46 cents a share, compared to $135.2 million, or 54 cents a share a year ago. Revenue fell to $450.7 million, from $487.6 million a year ago. Analysts polled by Thomson Reuters had expected the company to earn 40 cents a share in the second quarter. Moody’s Chairman and Chief Executive Raymond McDaniel said in a press release Wednesday, "We are raising our full-year 2009 EPS guidance to $1.45 to $1.55 based on first half performance; however, we remain cautious about business conditions for the remainder of the year."

  95. Cap

    Current view suggests we are bouncing along at the lower end of a rangebound day w/ a negative bias.
    We could dump lower; or we could have another late day stick.  I would go 60-40 in favor of a weak stick attempt; but not playing it either way at the moment.

  96. matt1966

    DB, me, too.  Those sneaky stop sniffers!  Only positive for me is only half of my order got executed.  Maybe they’re slipping??
     
    Yay, tech workers!  I’ve noticed alot of job posting for developers these days which has been very comforting to me given my contract will be ending soon… or at least that’s what they’ve been tellling me for the last year.  Of course, round here, 7 out of every 10 tech workers is on a gov’t contract so not really representative of the country as a whole.

  97. jofori

     Phil/SRS
    Would it be chasing at this point to get in on the SRS calls?  If not, which strike?

  98. microflux

    Phil whats a reasonable proce i should be getting from TOS for the option contracts and stock sales and buys, and who should i talk to ?
     
    thanks
    david

  99. Phil

    Well, my satellite is out but I still have electricity at the moment so we’ll see how it goes. 

    TASR/Morx – Well some things can be ridden out but even TASR, it’s like ZION.  Sure you can hold ZION while it goes up and down 10% a day but, if you just keep buying at $10.70 and selling at $12.20 then you would be an extra $3 ahead of the game over the past couple of months.  Just because you intend to own something long-term, doesn’t mean you have to hold it every day….

    China/Cap – With Shanghai down 5% (and 10% is limit down there) and Hang Seng down 2.5%, it seems very much like program selling that is not likely to stop after one day. 

    Green shoots – Oh I should have mentioned that – there really weren’t any in that book!

    INO/Sheen – That sector is not my strong suit but, as a rule of thumb, it looks like you missed the bus and I wouldn’t chase a 320% one-day gain, nor would I short it as they may have an excellent reason for shooting up.  They don’t even have options so there’s nothing much to do but stare at them…

    BBook Pullback – Do not expect instant gratification.   As I pointed out before, it took a couple of days after the last book for the big boys to decide maybe they had gone a bit too far with the buying.  It’s a big report so someone has to read it all and then teams have to match the sector overviews with the book of investments and the forecast models have to be re-run and then all that has to be made into reports with pretty pictures so the bosses can sit down at a table and decide what to do – THEN they sell. 

    Earnings/RMM – Ahead of the GDP, you must be nuts!  I wouldn’t go long on anyone at the moment but V will be very interesting.  My play on them would be to short MA as they will move down in sympathy on a V miss but they won’t run up the way V will if V hits so the MA Sept $165 puts at $2.75 have a good risk reward as they should double up on a $10 move down by MA and they probably won’t lose more than 1/2 if MA goes up $10 and, of course, the Aug puts can be sold against them if the move goes the wrong way

    TBT/Cwan – You are always trying to get me to play those!  The BBook was not at all inflationary, if we get another market correction those things can fall very fast and the chance of them breaking 60 without a fight is very slim.  You can buy March $56s for $4.50 and sell Sept $55s for $1.60 as a pure income producer.  Since you are bullish, you wouldn’t mind adding to your long side if they head up right?

    Puts/Dstill – I am proud.  Isn’t it good to hedge?

    Oh that’s strange, oil bleow $63 AFTER the NYMEX closed.  Looks like they pulled all the stops out to hold it up while in session.  Gold skating right on the $930 line.  I think we may be heading to another big down day in Asia and a big down move in Europe and, if our GDP misses, LOOK OUT BELOW!

    OK, now the Qs are officially strange!  It seems to me that the Aug $40 puts at $1.43 are a gift.  I don’t like shorting the Qs because Tech is the only bright spot in the Book but not that bright

    WHR/Dstill – Well congrats on screwing up the play!  Yes, I’d take that and run.

    GDP/DB – Oh my bad – FRIDAY!!!!  That does change things.  We COULD get good jobs numbers (because they are nonsense so they could say anything).  All the more reason to take profits off the table!

    BB/DB – I don’t think they read it much at all.  Today’s moves were pretty much pre-ordained, the important stuff comes after the GDP which, if weak, confirms the market is overpriced. 

    SRS/Bigs – No, I would not chase even though they are only up at $1.55.  Watch for jobs tomorrow and we’ll see if oil recovers but if we lay around or go down tomorrow, then we can pick up something else in SRS. 

    WYNN/Hatorade – I’ve been looking at casinos but they are literally a crap shoot as you have the hotel business and the real estate buisness and the casino business.  I’m inclined to short WYNN way up here – you would think there is no way they do well but the thing is – well compared to what?  They made $2.50/share last year and probably $0 this year but all they have to do is have a winner with Encore and China and suddenly they are making $5 a share.  When they were 1/2 this price, I was bullish and if they get back to $100, I’d be bearish but at $44 – I have no idea. 

    Volume at 3pm 125M, very stickable so lack of a stick would be a bad sign.

    SRS/Jo – See above, wait for tomorrow.

    TOS/Micro – Contact Scott@thinkorswim.com - Seems to me that $1.25 per contract is worst-case but if you trade more than 100 a month, you should be able to negotiate better.  Don’t tell him I said that, I’m supposed to stay out of individual negotiations so I’m just conveying what I’ve been hearing from others…  8-)

  100. dstillwe

    WHR Screw-Up – I don’t know why ET left the back leg unexecuted.  Tho maybe I entered as two sep legs – ET Mobile Pro doesn’t do spreads – gotta leg in.  That musta been it.  Oh well.  
    Hedging good – and cheap(er).
    MSFT – Been waiting to get closer to $24 to cover Aug $21 – sit tight?

  101. Jordan

    TOS/Micro – what happened with me is they asked me to count the number of option contracts I traded in the last year and after I told them they said I was not a very heavy trader, but they could give me a $1.25 per contract cost structure with no ticket fee.

  102. RMM

    Phil: ahead of earnings:OSK is way up and oversold, yet the earnings projection is very bad, -0.18 from previously +1.19,
    THIS LOOKS TO BE SHORTED ???

  103. DB

    Wht do we have to have these B******* sticks every B******* day ?

  104. Cap

    This is getting ridiculous !

  105. Cap

    And the problem with this, is that while tempting to go short right now; its kinda crazy to place a bet for the last 18 minutes.

  106. Cap

    SPY kissed the resistance line at about 97.68 … I targeted this earlier.   DIA to 90.71; close but not at the 90.78 I targeted..  That’s where I would have gone short if this hit earlier today…

  107. EricL

    Logged back in to check the close. Good to see the boys jamming my stocks back towards green in the face of all this ‘bearish’ sentiment.
    Check out RTH. We’ve had consecutive drops in confidence and continued contraction in consumer credit (confirmed again by the BB today), yet it just runs higher. This will all end badly, of course, but in the meantime, SPX 1000 + looks very likely in the weeks ahead, IMO.

  108. Cap

    And AMZN has sold off throughout this stick pump ….

  109. cwan120

    TBT/Phil – Wow, you still remember me being the guy keep talking about TBT.  Okay, I’ll shut up.
    [How do I put a smiley here?]

  110. Phil

    MSFT/Dstill – Well you have the stick into the close but I’d sure cover there, whatever it is.  Jobs are kind of a wild card tomorrow. 

    OSK/RMM – Too good a company to short.  If they come back down I’d like to get in but you don’t short good companies just becase you think they might dip.  Effectively, you’re putting yourself into a trade you don’t really believe in – it’s like betting your kid is going to strike out in a big game – you may be right but do you really want to win?

    Stics/Cap and DB – I don’t know, when the sun comes up 354 times in a row on the 365th day I tend to bet on it coming up again…  You could tell when the volume was low at 3pm that they could do it and how often have they been able to stick it and missed an opportunity.  Goldman just breezed in and out of two "investigations" this week, they are like a mobster who gets off on charges – they guy doesn’t go home to pray and meditate – they go out and bust some heads!   We went through this in June before the drop and put up with 10 sessions of this nonsense and 2 after the BBook, we’ve only been at this top for 4 sessions so it would be a huge stretch to even assume that Monday will be the day.

    Meanwhile – DIA $88 puts once again getting to .95, was $1.20 at top today so .85 is a no-brainer to enter or DD if in at $1.08 already.  QQQQ Aug $40 puts are $1.29, nothing worth doing there.  QID $27s at $1.30 is our usual sweet spot for theat play.   Shorting is a bit more dangerous today because of the jobs report, which was treated like the second coming last week with "only" 554,000 jobs lost.

  111. dstillwe

     MSFT – 17% in how many days?  I’m out, Daddio.  The less I have to manage, the better.   

  112. Phil

    RTH/Eric – Good thought although I think we are covered with SRS.  You’ve got tons of analysts on CNBC calling for early entries into real estate but I wouldn’t touch a builder with a p/e over 5, which is what they used to trade at all the time (and for a reason as they were cyclical, like investment banks and oil companies – they are NOT supposed to be growth stocks).  

    TBT/Cwan – I don’t mind you asking but we should probably look for something in that family that pays better than they do. 

    MSFT/Dstill – That was the plan – out at about $4 (nice profit) or sell for the long-term income but there’s lots of stuff to trade and that’s great money for a few days work.

  113. EricL

    I’d pick RE to short first too Phil; IYR put diagonals are one of my few remaining long-term shorts, although I’m not really sure why I’m bothering with them.
     
    Qs just short of a new closing high this year.

  114. Cap

    competely rangebound !
     
    Check it out ….
     
    http://capmarketspot.blogspot.com

  115. pstas

    DIA- I guessed I missed this earlier- 88 puts – Is this a "day trade"? Still good to buy @ .85 if, big if, we open up ?

  116. microflux

    Thanks Phil, they were very nice about it, and gave me the flat $1.5 a contract. turns out i was paying twice as much, i was wondering why my expensis were racking up so quickly.

  117. cwan120

    Here is an interesting article that’s bullish on the market.
    http://www.cumber.com/commentary.aspx?file=072909.asp&n=l_mc
    I am not trying to argue bullish vs bearish.  But this guy raises some interesting points.  The following excerpt is interesting, as we’ve been talking about Friday’s GDP number:
    "In our view the biggest news this week will arrive on Friday.  There will be an advance estimate of second-quarter GDP.  But that is not what I mean.  In fact, that estimate has little meaning to money managers, and markets are likely to ignore it as old news.
    The really big news will be the revisions in the benchmark national income and product accounts.  These are revisions done infrequently and substantively.  They are the basis for much of the work done by analysts and economists.  These numbers are critical to the development of national policy and to the longer-term valuation of financial markets.
    We do not know what the release will say, of course, but we do have some expectations.  We think the revised savings rate will be higher than the currently computed series.  If so, that will give the markets some comfort.  The newly revised numbers will also help in the projection of a longer-term growth rate for the United States, and they will give guidance on inflation and productivity.  We believe that the forthcoming revisions will be positive on both counts.
    If we are correct, the revisions will become an economic data platform that will support arguments for a higher movement of stock prices.  The upward trend that has been powerfully active since March 9 will continue.  In Cumberland’s ETF accounts, we are fully invested and have taken our target for the SP 500 index to over 1100 by the early part of 2010."

  118. colberg

    July 28th, 2009 at 7:05 pm | Permalink  
    Phil, My PGF got called away, right before the Div was paid. How do I reposition? Also, Still have Cat cover 22.50’s Now deeply agaist me. Missed sell…your suggestions appreciated. I was thinking of buying back and Moving out futher and Up to 25′s

  119. DB

    Phil/stick – I didn’t say that I was suprised by it – I was planning for it and had stops. I just said why do we have to have the b***** things when they’re patently not normal, if people can complain about HFT and "Front running" why not complain about the stick ?

  120. ocelli7

    Phil, can you explain more how the stick benefits those who use it…..how much cash does it take to do it, and when do they reap the benefits…..unloading stocks as it the index rises, or does it set them up for the next open…..not quite sure how it works……thanks.
     
    BTW thanks for the DIA put suggestion yesterday…I was able to do that yesterday and a few times today successfully (for a change)….made up for my other slow bleeding…….

  121. confizzled

    Are DIA options the only ones that can be traded after-hours?  Any otheres (QID, etc)?  Thanks

  122. EricL

    cwan, I don’t know why those Cumberland guys think that a savings rate that gets revised higher would comfort the markets. This would be a deflationary force that would indicate less spending and further credit contraction, IMO.

  123. cwan120

    Savings rate/EricL – Good point.  I don’t know, either.  But at least for me, that article reminds me to look deeper than just the GDP number.
    One possibility that a high savings rate may benefit the market is that more savings can help finance the big deficits (both the national and the personal deficits) somewhat, and thus keeping the interest rates from rising.  [Ahhh... That may be the argument against TBT.]

  124. tradansh

    crooks!!!
    /ES gained almost 10 pts and made up for the day’s loss in the last hour without any real reason.

  125. spider

    yes crooks!  Sold at close ES @ 975  . It will be my mattress.
     
    Placed some bets on earings: My max profit will be IF:
    V -5% to $63
    VALE -5% to $18
    CLF stay close to $25 (volatility crush play)
     
    we’ll see

  126. spider

    FLS Rocks! But didn’t take positions… should have placed a positive one, after WTS results.

  127. Peter D

    cswan/TBT – I like playing Short Strangles on them, but it got tricky with the low VIX.  My point of reference for TBT is TLT, which has a range of 85 to 93 (ignoring the crazy spikes). TBT equivalent is about 49 to 59 (with some decaying as it’s an Ultrashort).  Bond doesn’t suppose to move more than 5% a month, but it did for several months late last year and early this year.  This means, if we can ride out the peaks and valleys by rolling, then the Short Strangles are profitable.  Selling TBT Sep 49 PUT and Sep 59 CALL would get us $1.7 credit.  The Initial margin is $6.8 (or $0.7 with PM), so we are looking at 10-25% profit for 2 months (but some months you don’t get a profit and have to roll).  On PM, it’s 100-250% profit for 2 months, meaning we can commit 1/10 cash and getting the same profit.

  128. Phil

    DIA/Pstas – It’s all about the jobs now.  Of course, these trades aren’t so risky with 3 full weeks to expiration.

    $1.50/Micro – Well half is very good!

    Bullish/Cwan – Yep, if we break higher here we’re going to have to switch off our brains and follow the crowd but Eric makes a good point as higher savings does mean less spending and it’s hard to celebrate that when consumer SPENDING (not saving) is 70% of the GDP – if consumers save 5% more (spending 5% less) that’s a -3.5% impact on GDP right there! 

    PGF/Colberg – Damn, that one is getting away!  Well that was 2 weeks ago and the correct answer is you buy it right back and sell again if you want to remain in the trade long-term.  As it is you got called away with a nice profit and you are well ahead on the puts or they expired worthless.  I would not buy back into them here because they went up too far and the premiums aren’t enough to cover your risk (the Sept $15 puts and calls are just $1.10).  CAT is a different issue, you have the $22.50 calls sold now $20 and they are WAY in the money.  My solution here would be to sell the 2011 $30 puts for $4.20 and then spend $6 to roll the caller up to the 2011 $30 calls.  That means you are only dipping into your pocket for $1.80 to roll the caller up $7.  You can also do that with the $25 puts and calls , which would cost you nothing but I think it’s worth spending $1.80 for the extra $5 as CAT would have to fall 25% before you have trouble and you can afford to stop out 1 put at $6 and one at $7 and that would only add net $2.50 and then you will have spent $4.30 ($1.80 + $2.50) to roll your caller up $7.50 – still not bad… 

    Stick/DB – That’s why I went with the DIA spread today, the expectation of the stick, no matter how dumb it seems!  As long as the VIX climbs faster than the premium falls we’re in good shape! 

    Stick benefits/Ocelli – There are many benefits to the stick.  #1 – GS makes derivative bets (essentially options) that would make your head spin.  So it’s not so much about the actual stocks for them as it is the broad market movement.   #2 – They buy and sell Billions of dollars worth of stock every day for themselves and clients so big market movements give them endless opportunities to buy low and sell high.  #3 – The "saves" are cheap to run.  I have comments in the post that is linked under strategy explaining this.  GS makes money trading for others, the more "exciting" they can keep the market, the more customers they get.  #4 – Its the game.  If I can demonstrate to Barack Obama that I can give him a 300-point week on the Dow into his speech on the economy – is he more likely to put me in jail or on his speed-dial? 

    Don’t forget they only have to move a few stocks to move the market so they can accumulate $100M worth of RIMM at $75 and run AMZN, which they own at $65, up to $85 which rallies the Nasdaq and takes RIMM up to $80.  They then sell RIMM at $106M and then sell AMZN at an average of $82 for another $10M profit and that’s how they can take a $15 profit on AMZN (at $80) on say $100M and spend $20M to run it up to $85, which puts them in for $120M at about $68.80 (assuming the pay avg $84 on the pump) and then they get out at $82, still a $13.20 profit but on 20% more shares so actually a $15.84 profit off the original $100M worth so a .84 improvement overall!  So it cost them nothing to use AMZN to generate a profit on RIMM.

    Of course, this is a major simplification.  In reality, they have massive computer systems and they may target 700 stocks to jack up that have the highest percentage chance of rallying 2,000 other stocks they will get in and out of.  If you know that a rally will begin at 11:30 and you start buying 2,000 stocks into a dip like this morning’s and you know the "rally" will last 2.5 hours and you get in and out of your 2,000 stocks while the indexes are moving up 1% – you are very likely to do well.  These guys get to do that every single day and, since no one is throwing them in jail – why shouldn’t they.  In fact, if you are a shareholder of GS and you know they can do that and they DON’T do it – then you can sue them for not working to maximize your shareholder value…. 

    DIA/Conf – Lots of indexes trade after hours, including the Qs but that and the DIAs are the only ones I play AH.  Not QID (at least I don’t think so). 

    10 points/Trad – I know, 1% in an hour – it is truly amazing….

    V had pretty good earnings but dropped after hours, not good enough for this run.  Unfortunately, not bad enough to bother MA but V’s volume was down 7% from last year, that’s the key metric for MA. 

    FLS/Spider – that’s the good part about the later stages of earnings.  We can start picking things based on how the sector is performing. 

    GMCR on a wild ride after earnings.  Profits were excellent but top-line revenues missed and they got clobbered and it shows you can’t sell a p/e over 50 once reality hits a stock: 

    In the three months ended June 27, Green Mountain earned $14.1 million, or 36 cents per share, from $6.3 million, or 16 cents per share, in the same period a year earlier.

    Analysts surveyed by Thomson Reuters were looking for a profit of 28 cents per share.

    Revenue jumped to $190.5 million, up 61 percent, from $118.1 million a year ago — below Wall Street’s forecast of $194 million.

    I like this company but they got way too pricey for me after Apr earnings.  I’m surprised they are doing this well as so much of their sales is to office coffee machines but I guess their rest-stop business is booming.  That’s something else we should look for – high p/e stocks coming into earnings…

    TLT/Peter – That’s a nice idea for trading them.  What’s the safety for a major spike (like in Nov)?

  129. Peter D

    TLT/TBT – the only two defense mechanisms are stop loss and time (for rolling).  In fact, when the announcement came out about interest rate going to zero, it was an easy bet to go long with TLT, so the short CALLs were stopped out while selling higher strike PUTs got profitable.  Given where we are today, the likely direction for interest rates is to go up, pushing TLT down.  The Nov 2008 spike is unlikely to repeat itself for a while.  If it does repeat, we know what to do I’m sure.

  130. tradansh

    Phil – Thoughts on the weakness in the market for the last 2-3 days? Every time, a ridiculous  "stick" was able to save the market. How long can they keep this up until we see some real movement, up or down?

  131. colberg

    Thanks Phil I was going to do ther 25′s but I like your idea on the put + 30′s

  132. DB

    Good Morning Everyone
     
    We are definitely in the new .com boom. Yesterday’s stick was just robery after the durable goods and "green shootless" beige book. This morning Shells quarterly income down 67%, shares up. Sony $390 billion loss, shares up, BASF profit down 74% (no recovery seen) Renault 2.7 billion euro loss. Siemens profit down 8%. Mitsubitshi motors 26.4 billion yen loss and lots more beside.
     
    I’m sure the media will spin all these as better than expected and I’m sure Phil will also tell me not to be bearish on some "not so bad" earnings. None of it looks good to me.

  133. neverworkagain

    DB… something from Morgan Stanley’s US economist that you might appreciate. I guess we’ll find out later today if he’s right…
    We look for a large jump in initial claims this week — + 96,000 to 650,000 (vs a Bloomberg consensus of 575,000).  In our view, a very sharp advance this week would merely represent an offset to the artificially low readings seen in recent weeks. Indeed, we believe that both initial and continuing claims are probably trending lower at this point but that the latest readings have dramatically overstated the degree of underlying improvement. The problem is related to an overcompensation for seasonal gyrations in the auto sector and related industries.  To put it simply, the car industry has shrunk and many plants were shut down in 2008 and early-2009 — on either a temporary or permanent basis. As a result, there were fewer than usual temporary layoffs around the time of the July 4 holiday. For example, as seen in the table below, the unadjusted volume of filers actually jumped 90,000 in the week ended July 11. However, this was far fewer than usual so the seasonally adjusted series plunged by 45,000. Because the raw number of filers didn’t rise as much as assumed by the adjustment factors in recent weeks there is limited capacity for a big unadjusted decline this week. In fact, we actually assume another modest dip in the raw number of first time filers in this week’s report — it’s just that the drop is far smaller than is built into the seasonal adjustment factor.  Note that the same sort of pattern is likely to be evident for continuing claims. We should start to get cleaner readings for both initial and continuing beginning with next week’s report. 

  134. DB

    Thnx Never. I await those numbers with interest. Not sure this market will even react to a small change.

  135. DB

    - small ??? meant large

  136. spider

    Morning!
     
    Well. i have seen reports and many are UGLY… VALE is one of them. But  its all "green". Must br that investor confidence was speaking Phil yesterday.  My bear part in mi inside is frustrated :-)
     
    Dam.. And I was fighting late in night and in morning   my short ES  to improve the position,  moved from 975 to 980. Really amazing the pump in the night… we’ll  see those numbers Never TNX for info. 
     
    And still we have to "hope" a correct market interpretation if that report is true. And i say hope because last days.. "all is green"

  137. neverworkagain

    I find it fascinating how much flak Goldman is taking for ‘manipulating’ the markets with both their trading, and commentary (see some of Tyler’s comments on Zerohedge over night). I really think we’re giving them too much credit. Blankfein isn’t calling his US economist or prop trader into his office and saying, "we’re going to use stick saves to juice the market and then we’re going to tell everyone things are great, and then we’re going to dump all these losers with all our positions". It is more GS taking advantage of the trillions of slow, lazy, stupid, late long-only money that is always chasing performance. Portfolio managers will underperform with or without Goldman Sachs. The analysts at GS are just as culpable as any other Wall Street analysts and actually are rarely the top analysts in their sectors or areas, as internally, Goldman doesn’t even listen to equity analysts.
    So, yes the conspiracy theories are nice. And just like everyone else, I would smile if GS gets taken down by regulators. But don’t think that is actually how it works inside GS.

  138. spider

    Never: For what I understand, analyst can’t tell the true. If those analyst speaks with the true when things are in bad shape will be like shooting in their foot.  Imagine this:
     
    1) Analyst foresee a big recession and a market sell off.  (but they can be incorrect)
    2)They all agree on recommend we have to sell our stocks and switch to cash  and treasuries.
    3) markets goes to hell.
     
    Was a great call? or the analyst will be blamed for panic spreading with the later consequence?
     
    I agree with you, Blankfein probably isn’t ordering nothing, and those programs they run will make money in up, down or flat direction. But well, they probably program they computers to bias the side they move. Who? dunno. Why? dunno. Maybe nobody, the programs just move into investors confidence direction, Who knows

  139. spider

    WEEEEEEEE   SPX Futures just touched 985

  140. merkhava

     Morning Phil & all,
     
    Futures point to a gap up opening above Monday’s intraday high.
     
    But 8:30am is the unemployment number… I’ll bet if the number is worse than expected, then this bizarro market will find an excuse somewhere else to go UP 200 points anyway… stupid market
     
    Anyone notice the chart on GOOG? Looks like a loaded spring for a stupid launch to $500…  I guess I’ll have to turn my brain off and make stupid plays if I wanna make money these days.
     
    Everybody have a beer today and celebrate stupidity… chuckle

  141. spider

    Lol merk. Yes i noticed the GOOG chart… its "VERY BULLISH" 
    And yes, I see VALE in premarket  $19.21 (+1.16%) 1800 shares. Lets celebrate:
     
    UPDATE 2-Brazil’s Vale Q2 profit tumbles
    84 pct on ore price

  142. Phil

    Good morning!

    It’s lookinng like we are repeating the pattern of the last BBook, where we retested our highs in a big blow-off top that capitulated our bears (you guys really should read those posts around June 10th-15th).  This will be very interesting but the futures seem thrilled (in absence of Jobs news, of course).

    TLT/Peter – That’s cool, that spike and the quickness of it just makes me nervous with that kind of trade.  Obviously it can happen anywhere but interest rates and commodities are the kind of things that can go very crazy overnight on you.

    Reality/Trad – Keep in mind the saying "The market can remain irrational longer than you can remain solvent."  As I said yesterday, I don’t mind the bearish plays because we have 3 weeks, if we only had two weeks I would have been more inclined to cash out here and wait to see what happens, which is what we did in June.  It’s also different now because 8,650 is the middle of our range and we were at 8,800 then (up 2.5%).  Now we are up at the 5% rule at 9,100 so it SHOULD be a little harder to break higher.

    The other positive difference between this rally and that one is that this time we are not being led by commodities.  That makes it much easier to build a real base at a higher levels and now the stage is set for commodities to snap back up and push us to a breakout, after which they can take the lead and send us to stupid levels (5% more is 9,500).  So, if we spike up today but fall back below 9,100 and our other breakout levels then we’re just repeating the June 10-15 pattern but if we break and hold 9,100, we could be very close to another leg up.

    Obama said the recession is ending or something like that yesterday and I doubt he would have said it if the GDP was going to be a bummer (or jobs for that matter).  The futures are taking him at his word and we’d better too so make sure you are at least hedged to the upside, even if you are very bearish!

    Jobs/DB – So is MS saying this report will still be light due to seasonal adjustments or is 650K the number they are projecting? 

    GS/Never – I have seen many very quesitionably-timed market calls by them and you can’t dispute the numbers (GS conducts something like 40% of all programmed trading in the global market and then makes a ton of money off that trading – what an objective observer would have to say is an unnatural amount compared to the hundreds of other firms who attempt to make money the same way.  So some would say it’s cheating but GS will tell you it’s just good science and – to make sure the public swallows that BS cover story, they arrange a very public theft of their "magic box" program which ends up doing nothing at all to their stock price or the markets.  Why?  Because it’s total BS.  The whole story is a PR spin to throw people off the manipulation track by making believe they have a REALLY REALLY REALLY special trading program that makes them special. 

    There’s a whole psychology behind that kind of story.  People dislike a monarch who keeps a throne by force and manipulation.  Did GS have a hand in "assassinating" BSC and LEH (not to mention hundreds of smaller, nameless competitors) and did GS (through Paulson) maniupulate the government into paying them off in full from AIG when others got 13 cents on the dollar?  It’s much easier for the public to identify with the kid who pulls the sword out of the stone or the spy with the cool gadgets because they can think "if only I had that, I could win too" and that’s what GS PR folks seek to accomplish with this crap about their magical program being stolen.  It makes them ordinary and, most importantly, makes it seem like they are not evil market manipulators but the brave inventors and wielders of a market-beating program…. 

    By the way:  Great article on WAY too big to fail.  5 companies (JPM, BAC, C, MS and GS) have over $300Tn in derivative contracts outstanding and 99.7% of ALL $600Tn in derivatives contracts are held by financial companies (kind of puts your 4 SRS Aug $16 calls in perspective, doesn’t it?). 

    985/Spider – Whee is right!  Qick rejection there but holy cow, they are going nuts on those futures. 

    All beware the blow-off top!!!

  143. where

    Morning everyone!
    I sure hope sanity returns at some point.  This reminds me of a month or so ago while trying to ride out the oil shorts from $69 – 73.  Painful, but worth it in the end.

  144. DB

    Jobs – I think 650K is the projection

  145. tradansh

    XOM misses. .81c vs consensus of 1.02.

  146. tradansh

    MA up 7% premarket on earnings beat.

  147. tradansh

    Wheeeee .. up we go!!!

  148. merkhava

     Horrible miss by XOM and the futures ignore it… this market wants to go up so stubbornly stupid
     
    Speaking of stupid… what an example of how stupid the cops in the US are becoming… Obama is right how stupid the police have become… "Wheel of Justice" my arse     
     
    http://rawstory.com/blog/2009/07/mississippi-cops-spin-wheel-of-fortune-to-decide-who-to-arrest/

  149. merkhava

     Uh-oh…. the bulls gotta be spanking the money after the ejaculation of that "impressive"  jobless claim number

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