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Tempting Tuesday – You Call that a Sell-Off???

And the nonsense continues

I don’t even have to write today’s column, I wrote all about how silly the market move was last Tuesday and, if you look at a 10-day chart, you’ll notice that they are running the same bull-trap pattern they ran last Monday and Tuesday which allowed me to predict in yesterday’s 9:21 Alert to Members that a positive move in gold, oil and copper (we got all 3) would take us up to Dow 9,535, S&P 1,032, Nas 2,070, NYSE 6,768 and RUT 586.  At the day’s end, we found ourselves at Dow 9,599, S&P 1,040, Nas 2,068, NYSE 6,795 and Russell 591 so past our bounce zones, except on the Nasdaq, who used to be our leader.

After going wisely neutral into the weekend, we may have gone a little too bearish yesterday as we don’t have the same catalyst today (Consumer Confidence) to take down the market that we had last week.  We have another Consumer Confidence report this evening at 5pm but that doesn’t stop the pump-monkeys from attacking the dollar this morning as they float rumors that the dollar will be replaced by OPEC as an exchange currency, which sent the dollar down to 89 Yen and $1.475 to the Euro and $1.605 to the Pound – all based on nothing but a rumor.

Aside from making someone sensible wonder why oil-producing nations, who hold $1.5Tn in reserves, would want to devalue their holdings, it also would boggle the mind of people who can do math (and the market manipulators count on the fact that you can’t) who might wonder where the extra $2Tn worth of Euros is going to come from to pay for a year’s worth of global oil at $70.  I know $2Tn doesn’t sound like a lot of money these days but there are only $727Bn Euros in circulation on the planet Earth.  The entire M3 supply of Euros (all of them) ever created is, as of April, 9.5Tn so is the plan to divert 20% of all the Euros on Earth to the oil trade or are they just going to print 20% more?  Heck, why not?  The M1 supply of Euros is already up 13.6% for the year and are trending to be up 21.9% at the rate of growth in Q3.  

 

There is already a supply of 14Tn Dollars in the world and $2Tn worth of them are exchanged for oil during the year and $3.5Tn is sitting in bank accounts and Trillions more in various safes around the world (Saddam had a Billion hidden in his walls) and, if I understand this correctly, the plan is to print enough Euros to replace the dollar without devaluing the Euro AND get all of the people who hold dollars to trade them in — when?  Next year, two years… 10 years??? 

Notice on the above chart, the dollar supply has actually been CONTRACTING this year, not expanding, as $500Bn worth of US credit has been paid down – that’s 23% in the OPPOSITE direction of the Euro’s runaway currency growth but the myth of the weak dollar persists, promoted by commodity pushers and their media lackeys.  The reason money is flying into US treasuries from overseas is NOT because people want to take advantage of the 3% interest rates – it’s because investors are buying DOLLARS at what they know to be ridiculous lows and those 3% notes will appreciate another 20% if the dollar gets back just to this year’s high. 

Let’s also keep things in perspective.  At the end of Clinton’s Presidency, the dollar was .85 to the Euro, by the end of Bush’s Presidency, it cost $1.80 for a Euro – that’s a 100% decline in the buying power of the dollar vs. the Euro in just 8 years so the people buying 10-year notes now for 3% interest are expecting that the dollars those notes are denominated in will rise fast enough to offset the very poor rates of interest that are offered.  And who is buying all these notes?  The same people (China, Russia and OPEC) who are talking down the dollar!  They sell their goods and commodities for lots of cheap dollars and then put their money into treasuries where they’ll make a quick 10% on the smallest of dollar bounces and they can convert their notes at will in the World’s most liquid currency.  That’s all this is!

Now it’s all lots of fun to talk about silly things that aren’t real like the Dollar being replaced as a global currency but how about something that is real like 5,438,000 unemployed people who haven’t worked in 6 months or more?  As you can see from Barry Ritholtz’s chart below, it’s not just a lot – it’s the most ever by a country mile and, as we saw last week, it’s not getting better at all.   

Are these 5.4M people going to be rusing out to buy gold, silver and oil this Christmas?  They aren’t renting apartments, apartment vacancies are now 7.8%, a 23-year high and that’s with rents already down 2.7% so figure a 10.5% drop in revenues for landlords so maybe they are going to be buying big gold and silver rings that have been dipped in oil for their sweethearts this holiday season?  According to the ICSC Same-Store Sales numbers, those 5.4M people surprisingly aren’t shopping at them mall either as Retail Sales for September are down 2% from last year (which wasn’t very good either).  We get Redbook Chain Store Sales at 8:55 so we’ll see how that goes. 

Perhaps it’s not the 5.4M people who have officially been loafing about for 6 months or longer on unemployment…  Perhaps it’s the 4M people who are newly unemployed or perhaps it’s the 10M people who have left the workforce entirely since Jan 2008 and are no longer counted or perhaps it’s the 10% drop in the average workweek for those who are lucky enough to have jobs or perhaps it’s the 6% reduction in take-home pay since just last year for the average worker.  With 75 shopping days until Christmas, they’d better figure out what it is and do something about it pretty soon or there will be many lumps of coal in investors’ stockings this year

Earlier this year I picked Australia as the World’s strongest economy and the Aussie Dollar as the best currency to hold onto (it’s already up 25% against the dollar this year) and today the ACB did me proud as the first Central Bank to raise their rates, up a quarter-point to 3.25%, miles ahead of the rest of the G20.  "The risk of serious economic contraction in Australia now having passed, the Board’s view is that it is now prudent to begin gradually lessening the stimulus provided by monetary policy," ACB Governor Stevens said.

Meanwhile, weaker Asian economies who depend on exports are scrambling to curb the rise of their own currencies against the dollar as Asian currencies rose this morning to a 12-month high against the Dollar. Kim Ik-joo, Director General of the International Finance bureau in South Korea’s Ministry of Strategy and Finance, blamed "foreign players" for the rapid rise of the won, which has climbed 8.2% against the dollar over the last three months. Korean traders said the central bank appeared to step in since early trade to buy the dollar, possibly with the intention of keeping it above 1,170 won. 

This is what makes currency trading such a fun game, you can manipulate the markets to the point where the Central Banks have to step in to support the dollar and then you have a bottomless buyer to dump your trading profits into while you pick up dollars in safety as a floor becomes set for them.  I’m not saying we’ll turn around right here, the bottom of the dollar trade usually comes in a panic sale and we’re not there yet

Asian markets rose for the first time in 4 days, reacting to our own great day yesterday and headlines in Asia played up our "strong" ISM number.  Shanghai was closed but the Hang Seng gained 382 points today with 230 of them coming in the last 40 minutes of trading.  Despite a big bounce in the Auto sector, the Nikkei gained just 17 points and is laying around the 9,700 mark (10,200 was our breakdown watch).  With 75 shipping days until Christmas, the Baltic Dry Index is also not looking very peppy and will be in trouble if they can’t retake the 2,400 mark this month

Europe is flying ahead of the US open, up about 1.5% led by the commodity sector despite the fact that UK Manufacturing fell to the lowest level in 17 years in August.  Please folks – commodities don’t have to be USED to be valuable, they just have to be stored somewhere by idiot investors or ordered for delivery by speculators who have no use for them whatsoever and would be mortified if they were actually forced to take delivery. 

Steel is a commodity that does actually have to be used to keep it’s value and Russian speculators like Severstal, who bought $4Bn worth of US Steel plants a few years ago are now near bankruptcy and having trouble finding buyers at less than 1/3 of what they paid.  “Russian steelmakers’ acquisitions in the U.S. were all unsuccessful,” said Dan Yakub, a Citigroup Inc. analyst in Moscow who recommends investors sell Evraz and who has a “hold” rating on Severstal. “The management wanted a global business, to get more flags on the map. They overestimated the potential of the U.S. market and underestimated the depth of the price collapse.”  

Don’t worry though, I’m sure copper is a COMPLETELY different story (end sarcasm font). 

Maybe we are too bearish but we’ll be rolling up our puts and doubling down on our entried BEFORE we capitulate and pick up long positions this morning as, so far, it’s the same old song with a few new lines

 


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  1. ssdirk

    Speaking of full disclosure, why would anyone trust what Pickens has to say about the price of oil.  He has a vested interest in it going up, and he was way off on his call last year.

  2. craigzooka

     I am predicting a sell-off today between 10:00 and 11:30.  I just wanted to get my pick down on the books.  I will explain why at 11:30.

  3. aclend

    Notes from the G-men:
    We are adding TJX to the Americas Conviction Buy List with a $43 price target, implying 15.5% upside potential. In our view, TJX sits in the enviable camp of being a defensive discretionary retailer which means its valuation aligns with defensive retailers (13.5x 2010); however, its earnings upside potential is more like a discretionary retailer (13% FY2010 EPS growth). We believe this offers investors a compelling risk/reward at current levels, and coupled with two upcoming positive catalysts (strong September sales and an investor day), should drive shares higher through year end.

    IGT reaffirmed Buy but removed from Conviction List.

  4. oldgoat

     Phil, Should we stay away USO and its options because of what the regulators may do?

  5. EricL

    Massive breakout in gold. Futures have now cleared the ’1033′ overhead line. This level is major resistance for spot gold, so if spot prices follow, it will look very bullish. GLD also at new highs premarket.

  6. EricL

    Quick dollar recovery in premarket — maybe someone got worried about a disorderly sell-off there, lol.

  7. Zuko775

    Eric  | Phil.  Can some please break down the best data sources please.  HOW do you keep up with all of this data so effectively?  Im currently installing a 3 monitor setup.  Bloomberg wants $1700 a month for a data pipe.  Cost prohibitive for my rookie investment scenario.  The Learning Curve here is pretty steep.  Please advise and thanks in advance. 

  8. EricL

    Zuko, I just use the ToS platform. I have futures symbols on my watchlist, and you can watch dollar moves on their forex screen.

  9. ssdirk

    Phil, are you getting out of the GLD puts or dd?  I know the stop was at 101.

  10. Zuko775

    Wow..  You get all of your info from TOS?  I need a training class.  Thanks.

  11. Pharmboy

    Here you go….Oil State Refute Talk on Replacing the Dollar

  12. matt1966

    Craig, you tease!
     
    Phil, no hurry but when you get the chance.. so a ‘basket’ of currencies doesn’t help in replacing the dollar?  Surely if you put the euro and others together there would be enough capacity to do something… right?

  13. Phil

    I’m still not buying this move but it is being sold hard. 

    Don’t forget to roll up or add to any short position you want to stick with if you are at an early point in your scale but we’ll have to wait out a test of Sept upper consolidation areas most likely, which are:

    Dow 9,700, S&P 1,060, Nas 2,120, NYSE 6,950 and Russell 610.

    Those are approximate, not 5% levels.  On the other side, we have our 4% bounce levels of Dow 9,535, S&P 1,032, Nas 2,070, NYSE 6,768 and RUT 586, which don’t seem to be in any danger but those are now breakdown points. 

    If we keep heading up, the QQQQ $41/$42 call spread is just .57 with a .43 upside (75%) and that can be exited with a dime loss if things turn back down.  This is a good cover if you think you are too bearish.   

    On the DIA play, make sure you roll the Jan puts up $1 for .50 if you can and the Oct $98 puts at $1.88 can be 1/2 sold against the longer puts using 9,700 as a stop line.  If the S&P heads over 1,060, we add 1/2 the Oct $99 puts, now $2.50 and then use S&P 1,060 as a stop on that cover.

    Hard as it is, I’m sitting with my arms crossed and waiting for a real sign of strength.  Right now we have a commodity led rally with SOX pulling the Nasdaq but not the horsemen and the volume is still low so not something that’s easy to get excited about. 

  14. chakra108

    Phil
    YOu have not commented on the GLD position of yesterday? Do we get out or DD?

  15. boonie

    Phil,
    did you stop out the GLD puts @ 101? or DD or wait?

  16. EricL

    Exiting EDZ short straddles while I’m still ahead. May re-enter at the close if it goes really crazy. Also out of yesterdays SPY short strangles with a small loss. Could be a trend day higher and not worth the risk on these.

  17. yodi

    Good morning guys any one has any comments on trade station and their platform?

  18. EricL

    Bidding 7.10 on SPG April/Oct 65 put calendars — still 1.00 on the Oct. 65s, so enough cover if we run higher today.

  19. ssdirk

    Craig, what time zone are you in?  I am waiting on the big pullback.

  20. dmankoff

    Phil, at which point do we stop fighting the uptrend and just go with it?  seems like every 3-5% pullback, has been  met with a lot of cash being thrown into almost every sector.  Don’t understand why gold and silver are up, as a hedge against what?  Copper, palladium etc, are industrial metals to go along with the global growth, but gold/silver, usually go up when all hell breaks loose with the dollar going down.  Of course, dollar down helps the U.s. stocks a lot, since so much of the earnings of the S&P 500 (more than 50%) happens out of the U.s., globally….  dollar weak, US stocks up, finally bond market going downa little bit.  Maybe we won’t have this big pullback that everyone is so afraid of.  Of course, jobs down is the scariest part of everything.  Too much liquidity around…for stocks to go down.  Banks go up, up, up….In the gut, seems like we have to go way down, but it ain’t happening, so why fight the tape?

  21. Phil

    TBoone/SS – He’s just the obvious one.  All these guys go on CNBC and talk their book.  What’s really bad about TBoon is he bought $3Bn worth of wind turbines from GE and, with that, he seems to have bought unlimited access to having his ass kissed whenever he wants. 

    TJX/Ac – Now that’s a strange pick but MOS is up 6% this morning so what do I know?  I’m just waiting for earnings to back up this super-powerful market this week. 

    Whole Ag sector making a strong move on MOS missing by 25% with profits down 92% because the "feel" optimistic that things will get better.

    USO/OldG – I think a lot of what we’re seeing is a major push on the commodities as speculators try to get bagholders to take their positions before it all hits the fan.  There is no demand for any of this stuff and the ISM report that everyone is so excited about showed prices paid down 2% so I still look at USO as a good one to short but we have to let this rally run first. 

    GLD Nov $98 puts down to $1.70 and rather than stop (since we are down way less than I thought) I like the roll to the $100 puts for .80.   That puts us in the GLD Nov $100 puts (now $2.50) at net $2.90.  Next cover would be taking a long short-term position in gold, maybe an ultra long. 

    Data/Zuko – Too much data can be distracting.   I’m happy with Yahoo and Google Finance for most of my quick look-ups and then there are tons of research reports available through your brokerage for free.  It’s very hard to cost-justify a Bloomberg terminal ($20K/yr) unless you are making over $200K in trading profits and, even then, that’s a big chunk of change.  TOS, by the way, has on-line classes all the time to help you get more out of the system and they also have seminars in different cities on a regular basis.   TOS owns Investools, which I do subscribe too as I like their option graphs and I can’t get those anywhere else. 

    Basket/Matt – It’s not just can you scrape together enough of some other currencies to replace the dollar, it’s a question of what does Saudi Arabia do with the $700Bn they have in the bank?  Do you really think they want to see them drop 20% in value and cost them $150Bn?  That’s the GDP of their whole country!  Not only that but the reason the dollar is the World’s reserve currency is because there has never been a crisis since the great depression in which everyone on Earth didn’t fly into the dollar for safety. 

    If you are atificially manufacturing your new reserve and trading you $550Bn (was $700Bn) in dollars for the new Globies, which jump 40% on the strong artificial demand and now you have a Trillion Globies with the dollar down at 60 on the index and THEN something bad happens and there’s a Globie panic and people rush back to dollars – suddenly your 1Tn Globies only buy you $400Bn and you’ve lost 1/2 the money you spent a lifetime accumulating by playing the currency market. 

    Do you know who WANTs this to happen?  GS of course as they handle Trillions of dollars of currency transactions as do the other G12 players.  They don’t care which way things go as long as they get their transaction fees as people exchange Trillions back and forth. 

  22. matt1966

    Phil, can you layout some of  ‘their’ motivation for collapsing the dollar now if you think this is only temporary?  thnx

  23. jromeha

    WHat is with the REITs!? Im going to second dmankoff, Im about done fighting the tape…

  24. chakra108

    Phil
    I have NOv 37 DXD Calls, what is the best roll up for this ?

  25. Cap

    What complete BS … Again !   Go junk stocks … go AIG.
     
    I did buy SRS today; and sold a few WYNN 80 Oct calls for 55 cents.

  26. mrmocha

    Craig, I closed my DIA covers and switched to puts, so pull the lever on your big sell-off please.

  27. mrmocha

    RTI – closed half of my calls from yesterday, tight stop on the rest.  Nice little commodity pump today…

  28. JRW III

    Phil,
    I took your advice yesterday afternoon and went long TNA, just sold at a nice profit. I’m thinking of going long TZA here hoping Craig is on to something !

  29. dmankoff

    Phil,
    any new trade ideas to initiate on EDZ or SRS?

  30. Phil

    U.S. holiday retail sales will likely fall 1%, an ‘unprecedented’ second straight year of contraction after a 3.4% decline last year, according a report today by NFR, though many were looking for an even glummer forecast. Group says uncertainties over job security and home values will keep shoppers focused on practical gifts and budget shopping.

    Drugmakers, hospitals and laboratories are emerging as the winners in the latest version of the Obama administration’s healthcare program, being voted on in the Senate this week. Potential losers include device makers, who will be forced to pay $4B/year under Rep. Bacus’s plan.

    EDZ getting very attractive again (thanks Eric).   Hard not to like the ETF at $6.59, selling the Jan $6 puts and calls for $2.70 for net $3.89/4.95.  That’s a 54% gain if called away 10% lower than here and a b/e 33% below here so it will take a 10% gain in emerging markets to put this position under water.

    Going with it/Dman – For me, it’s when I see some actual data that’s good rather than all this happy talk.   Right now the logic is that things are good because the dollar is diving (not that we export anything) and commodities are flying.  How exactly is this going to help us recover?    If your investing horizon is short-term then you can play the trend up but, as we saw last week, a week of gains can be wiped out in hours so you’d better be quick on your feet.  You may want to follow the logic that you are going to stick your neck out and go bullish because "everyone is doing it" and I will continue to play the role of your mother and ask you if everyone was jumping off the Brooklyn Bridge, would you jump too?    Be an adult, make your own decisions.  How many successful market investors do you know who say "Well, I just wait to see what everyone else is doing and then I do that too"?

    Dollar/Matt – I think it’s a matter of commodity pushers attempting to unload their positions ahead of regulatory changes.  Low dollar boosts prices and rising prices bring in the suckers so it’s a win/win to hammer the dollar if you are holding commodities long. 

    REITs/Jrom – Just let me know when you capitulate.  Usually on a day when 4 or 5 of our guys capitulate it’s a great time to bet the turn!

    DXD/Chakra – DXD has bottomed out at $33 so far.  You can sell the $35 calls for $2.10 and roll down to the $32 calls at $3.70 for about net .10-20 and that’s a $3 spread that’s in the money vs your $1.45 of premium that’s $2 out of the money. 

    TZA/JRW – You love those don’t you?  Huge money for selling the Jan $10 calls for $3.60 and the Jan $12.50 puts at $2.70 for net $5.92/9.21 as a bet against the RUT gaining 10% by Jan.  Otherwise, it’s not a bad long-term hedge anyway.

    SRS/Dman – Nope, I’ll wait for $9 on them. 

  31. mrmocha

    PharmBoyCTIC is shaping up to be a real dog; cut and run or DD?

  32. mrmocha

    Sorry Craig, I bought those DIA puts a few minutes ago so it look like nothing but stick from here…

  33. blair

    Tiffany & Co. (TIF) up 4.5% as Citigroup initiates coverage at Buy, on expectations of a return to positive same-store sales and added market share.
     
    Because unemployed people buy lots of expensive jewelry. Or maybe they mean the return to positive same-store sales is coming in 2018.

  34. Phil

    QQQQ spread at .64 already, up 13% – plays like that are nice to take the edge off a loss when the market moves against you as you are taking advantage of selling premium into the excitement and effectively entering a low net premium play on your own calls as a momentum move

    RIMM is still my favorite bullish stock pick.  Nov $65 puts can still be sold for $3.30

    Selling MOS $50 calls naked for $1.10 is great if you have portfolio margining but too much margin otherwise.

    WFR still nice and cheap.  Nov $16 puts can be sold naked for $1.35

    Why is V down if everything is so great?

    TIF/Blair – That’s C playing on Wall Street bonuses, which drive TIF sales (and Porsche and BMW and ELY).

    Copper broke over $2.80 again after a harsh sell-off to $2.64 on Friday so huge bounce for them in 2 days.  $2.80 is the 50 dma so can’t get too bearish if they hold it.  Selling FCX $70 calls for $2.50 with a stop at $3, looking for $1.50

  35. thatway

    Is Visa on Government Sachs power nap? They must be holding it back for the firework show.

  36. RMM

    Phil: POT, sell oct 95 calls, 1/2 cover against my nov 90 calls ??

  37. mrmocha

    Hey, fellow tech geeks, my LVS stock that I bought at $1.62 is hovering at a 999.99% gain right now, that’s five-nines of uptime!

  38. Phil

    Wow, what a move up!  Volume 60M at 11 so better than usual but usual is pretty low.  Feels like a blow-off top but I’m scared to call them the way things are going

    Recent stock market gains are "irrationally exuberant," economist Joseph Stiglitz says, urging government to focus on unemployment. Economic growth through 2011 will "fall well short" of what’s needed to stop unemployment growth, he says, while the likelihood that the economy will be out of the woods before most of the U.S. stimulus measures expire in 2011 is "very small."

    OIH coming back to where we like to short them and XLF back over $15, which becomes the watch level and Qs broke $42 so looking really good on that spread now, almost at .70 already!

    MCO doing well finally, MHP having another nice day. 

    Oil testing $72 again, that’s a big deal and gold is over $1,040.  Big test is S&P 1,060 of course. 

    V/That – I think they give you a pretty honest read on retail overall.  Funny to see them go down against the retail sector (and everything else) today. 

    POT/RMM – If you are ahead, I would just take the Nov calls off the table.   MOS missed by a mile, POT will too.   Speaking of which, MOS short sale paying off already!

    LVS/Mr. M – Nice one!

  39. boonie

    Phil,
    Things aren’t great as you say, but you’re being punished for holding cash.  The FED is "all in" with the banksters, and Treasury has no interest in strong dollar as it increases the cost of servicing the massive and ever increasing debt.  Politicians are incapable of restraining spending (even if they wanted to).  In this environment, "they" may be able to keep the commodities (and stocks) high for quite a while…the sideline money has to go somewhere….Its a terrible investing premise but what are you going to do but try to play along …and stay hedged

  40. matt1966

    boonie, I’ve been considering just buying Aussie dollars.  Then, I heard the news about the rate hike today and I’m like shoot, it’s too late.  Everyone and their brother will be jumping on.  But not really…  I think there is more room to go..  at least until somepoint in Q1 of ’10. 

  41. Phil

    Cash/Boonie – Oh I’m not advocating cash, cash sucks.  But I do advocate being very well balanced and playing the range of the market.  That means buying short positions on the way up (like today) and long positions on the way down (like last week).  We didn’t buy too many longs because we thought we had further to fall but I still think we’re toppy here and in need of a proper correction before we can break up to new levels. 

    Even as billions of dollars pour into bond ETFs, cracks are starting to show, with share prices in many cases drifting far from the value of their underlying indexes. The moral of the story, Felix Salmon says, is that ETFs based on non-exchange-traded instruments don’t work.

    Done with the Q spread at .70 (up .13, 22%), will find a new spread if we break 3 of our 5 levels, now being tested:  Dow 9,700, S&P 1,060, Nas 2,120, NYSE 6,950 and Russell 610

  42. JRW III

    Phil / Yahoo Finance
    Chris Whalin article called BLOODBATH.

  43. EricL

    That bond ETF comment reminds me that HYG is another one to watch for a short position. Very extended; is the risk of holding these HY now really that low???

  44. stevenparker

    Hi folks, Phil
    Am quite long here and need to add some shorts. Financials are a long area for me. We recently had a recommendation for SKF Jan Calls long 23 short 27.
    Does this work today if I knock the whole spread down 2 dollars, buying the 21s and sell the 25s?

  45. craigzooka

     Ouch, I was completely wrong.  I had no good reason to expect a sell-off, except that I have a class from 10:00-11:30 every tuesday and thursday.  Every time I come back from class the market has done something violent!! So if the market was going to correct they would make sure to do it when I have to be away from the computer!!  
     
    I am in the eastern timezone by the way.  But thats a good idea, if I don’t specify what timezone I am in it gives me 24hrs to be correct!!

  46. stevenparker

    Nice Mr M!!
    Reminds me I have a position that needs protecting or removing as well. Am Long Jan 2010 AAPL 150 Calls (net entry for $8). Does this qualify as a take the money and run position or is there a smart way to protect it please?

  47. Pharmboy

    MrM – CTIC very interesting move here and no support to 50c.  Fast money is out, data is fine on the release.  They have a long way to fall (aka SYNA) and not for the faint of heart.  Options are still a viable way to make some up, otherwise, one can re-enter lower.  The only thing I can see for the move is the withdrawl of the EU application due to concerns on a trial design (classic small company problem – c Neurocrine, along with manufacturing – c SVNT). 

  48. javaben

    zuko, I live near you and use TOS.  Maybe I can help you some with it.  Drop me an email at boathouseblues at gmail dot com.

  49. cwan120

    DIA Mattress: Hi, Phil, two questions:
    (A) I understand the general rule of rolling up $1 for $0.50 or less.  But what’s the general rule for rolling out a month, eg, from Dec $99 to Jan $99?  How much do I pay for a horizontal roll, in general?
    (B) How do I decide to roll vertically vs horizontally vs diagonally?  Eg, I have Dec $99.  I can roll vertically to Dec $100.  Or, I can roll horizontally to Jan $99.  Or, I can roll diagonally.  What’s your rule of thumb?
    This is a question on strategy, rather than on a specific position.
    Thanks!

  50. RMM

    Phil: you mentioned EDZ and you would buy the stock, its far down, so you are bullish, when you have the stock,you sell jan 6 puts for 1$, why would you sell the bearish jan 6 calls also ?

  51. kustomz

    Market looks confused, so what do we do now :-)

  52. mrmocha

    Pharm - thanks.

  53. mrmocha

    DPTR at $1.75 and you can sell the MAR 2 puts and calls for $1.40.

  54. gel1

    One of by favorite Health Care stocks NTRI is up 19% today on news they will be selling their products in Wall Mart. The shopaholics will soon be nice and trim. Need to roll up my covered calls.

  55. JRW III

    kuz
    We are right on the trend line, so if we break out, BUY BUY BUY….. or if we fail, SELL SELL SELL !!!    TNA /TZA

  56. mrmocha

    DPTR – I just checked today’s news before buying it and they have a shareholder meeting today so wait and see how that plays out before doing anything.

  57. Phil

    Whalen/JRW – Wow, that is depressing!   He’s a smart guy too.  He must be a reader as he’s picking my HCBK from yesterday:

    "Investors should think about this because the fourth quarter in the banking industry is going to be a bloodbath," says Whalen, who believes smaller and regional banks like Hudson City Bancorp may come into favor vs. larger peers, which have dramatically outperformed since the March lows.  When you see the markets rallying when the real economy is shrinking that tells you this [recovery] is not going to be very enduring," Whalen says.

    Interesting study of PA hospitals, where they measure care the way Obama wants to:

    An August 2008 study in the American Journal of Medical Quality reported that Pennsylvania in-hospital odds of death were 21% to 41% lower than those in other states. The research focused on heart attacks, congestive heart failure, brain hemorrhage, stroke, pneumonia and septic infections.

    For example, Pennsylvania three years ago published its first report on hospitals’ infection rates that arise largely from intravenous catheters and tubes left in too long. Infection numbers the following year fell 7.8%, as hospitals responded with steps designed to lower infections.  The average payment in 2006 for hospitalization where a patient acquired an infection was $53,915; with no infection, the average payment was $8,311, according to state reports.  By simply getting rid of preventable infections, Pennsylvania estimates its hospitals could lower expenses by nearly $1 billion. The agency estimates the cost to the state’s 172 acute-care hospitals of collecting the data annually is $7 million. The state’s hospital association says it is $10 million or more.

    HYG/Eric – I think the big move will be in the financials, we’re bound to get some shockers there and that makes SKF a nice way to play for problems.

    SKF/Steve – The Apr $22/27 calls spread is $2 so I like that one a lot with a 150% upside and currently $2.50 in the money and 2 earnings periods to go.

    Here’s what we need to watch on the S&P.  We just gapped over the line at 1,055 and now we need to hold it but keep in mind those are closes so we have all day to erase that move over the line with the S&P up 17 at the moment

    S&P Downtrend1006

    CNBC still pushing that currency rumor out of England even though it has now been denied by everyone involved – AMAZING!

    24 Hours/Craig – That’s a nice plan.  Does your broker let you trade under those rules too?  8-)

    AAPL/Steve – Depends what you want to do with them.  I like AAPL long-term so I’d roll the Jan $150s ($42.50) to the 2011 $170s (44.20) and sell the Oct $185s for $6.82 since they expire before earnings and you’ll still get a good roll to Nov calls, like the $190s which are $9.78 but for now you get good protection and hopefully they expire worthless on a dip. 

    Rolling/Cwan – You mostly want to have over 60  days between you and the caller and once it gets to 45 days you REALLY need to roll.  Where you roll to is the same as where you enter any new long put, whichever one CAN’T be rolled up for .50.  In your case, Dec $100 puts are $5.30 and Jan $99 puts are $5.40 and Jan $100 puts are $5.95 so you roll to the Jan $99 puts and offer .50 to roll up to the $100 puts.  It’s all about maintaining a .50 delta which should give you about $3 on a 500-point drop (5%) and that makes it very easy to manage your front-month puts sold so you know, for example, that if you sell 1/2 the Oct $98 puts for $1.60 with a .56 delta that you are cutting back roughly 1/2 of your downside gains.   This is why, by the way, I didn’t want to cover but this morning we had no choice. 

    EDZ/RMM – It’s a buy/write with a huge upside, you sell the calls to offset the possiblility you may be wrong on the rest.

  58. Zuko775

    Hey Java,  Im gald you posted.  Saw your post a couple of weeks ago and then got hit by the FLOOD.  We got hammered by water AND lightening. What a mess.  Life is starting to get back to normal.  I’ll drop you a line. 

  59. Phil

    New York Fed President William Dudley takes a position apart from the bank’s inflation hawks, saying jobless rates will mean that interest rates will remain low for a long time. "We would not need much of a decline in inflation to run the risk of outright deflation."

    British Airways (BAIRY.PK) bypasses unions to cut 1,000 flight attendant jobs, and another 3,000 will go part-time. Crews on its 747s will be cut slightly.

    Selling OIH $120 calls naked for $2.30.  Scale in and not for the feint of heart!

  60. morxlntway

    SKF – for those of us in the Jan $29/$33 call spread, do you suggest and adjustments?

  61. dmankoff

    Phi., what about doing something with SRS down here again
    buying the stock and selling the Oct. 10 calls against it, and the 10 puts too for net of $9.92 – 1.10  =  $8.82
    and if get called away then make 10% in 8 trading days?

  62. Phil

    Private banks, which usually target wealthy investors, are redefining rich down – looking for the not-as-wealthy in order to pick up market share. Many private banks lost money in the past year, and the population of people with $1M to invest shrank 14.9% (and their wealth shrank 19.5%).

    SKF/Morx – I’d take out the $33 caller and play for a bounce.  If no bounce then sell the $25 calls, now $3.50 and use that money to roll down, which would currently put you in the $22s about even (not counting profits from the $33s).

    TIF Jan $45/43 bear put spread is $1.20 with a 66% payoff if TIF doesn’t go up another 10% thanks to Goldman’t upgrade. Scale in for sure!

  63. Rich_

    SRS climbing.  Is the real estate bailout encore losing support?

  64. Phil

    SRS/DMan – Way too volatile and scary to play here since we’ve seen them hit $8.50 already for no reason whatsovever.  I was watching them all day and would have taken a play at $9.40 or less but they didn’t hit my target so I move on to other things. 

    Many of the world’s biggest jet-leasing companies — top customers for Boeing (BA) and Airbus — are sinking in debt and scrambling for cash. Those who survive will face higher borrowing costs, which could increase the cost of flying for airlines and passengers.

    3-year note auction ($39Bn) went of with 2.76 bid to cover ratio (dropping) at 1.445%.  Steve Leaseman says the Fed is $8Bn away from their $300Bn cap on buying Treasuries so we’re on our own as soon as next week! 

    SRS/Rich – Based on that 30-minute move I’d have to say:  I have no idea…  8-)

  65. Rich_

    SRS – Chuck Schumer and a republican senator agreed on TV that the $8000 real estate gift should be increased to $15,000 and extended to include all buyers, not just 1st timers.  I figured that since we had a republican and democrat agreeing on this, that it might be a real possibility.  It would probably pump up real estate and kill SRS.
    It seems the opposite is happening.  Typical !!!

  66. jromeha

    What happened, the magic REIT fairy decided to stop pumping them up?

  67. gel1

    Phil
    Good Bye to Crocs and Hello to Aeropostale (ARO) The company specializes in teen retail with 900 stores in 48 states. The teens are crazy about their stuff (cool as they say). ROE is 54% and earnings are up 84%. I just did a Buy/Write with a short Nov strangle.

  68. mrmocha

    What a wonderful day for selling OCT calls, with a mere 8 days left to burn them I got $1 for ATM calls on stocks like HK, RTI, LVS, MGM

  69. Cap

    shorting 100 shares of BIDU up $16.  enough is enough !

  70. Phil

    SRS/Rich – By the time you hear that stuff it’s often baked into the cake.  That’s why they say "buy on the rumor, sell on the news."  When something is publically announced, you need to look back and say "Oh, that explains the silly run-up they’ve been having."

    If REITs were really worth anything, don’t you think one of them would have been bought by someone in the past year?  BXP, for example, has an $8.8Bn market cap and was a low as $3Bn in March.  At no point between $3 and $8.8Bn has any buyer from Europe or Asia or Russia or China or any of the US funds or Blackstone or ANYONE offered them a penny.  To me, there is no real value to stocks unless you see M&A activity supporting the prices.  On any given day, 2-3% of BXPs shares may be traded back and forth for the same price with virtually no money pouring in. 

    If a stock trades 3% of it’s total and goes up 3% then, for arguement’s sake you can say that 0.09% cash came in (about $8M out of $8.8Bn) and that’s how much cash was "committed" to BXP to drive them up 3%.   That’s meaningless.  Only when a cash (not a BS stock/swap) offer is on the table can you even pretend to believe that a company is "worth" something and only when you can comp several of those transactions in a sector do the values begin to hold up.  Of course, that doesn’t stop them from being wrong, as we saw from the M&A frenzy of 2006/7 but at least it’s SOMETHING – what we have here is NOTHING!

    ARO/Gel – They have been performing well but I have a hard time getting behind retailers trading at all-time highs right now as I really think XMass will suck. 

    Despite a bleak back-to-school season, retailers saw good news in notebook PC sales, which were flat compared with a 12.5% drop in consumer technology revenue overall. Thin and light netbooks accounted for 14% of back-to-school notebooks compared with a year-ago 2%.

    BIDU/Cap – Good call!

  71. Cap

    Sold OIH 125/135 spread for 0.65 credit  (a wimpier play than the 120′s naked !)

  72. mrmocha

    BIDU – another way to play Cap’s BIDU short is the 400/390 put spread, I got it for 4.40.

  73. matt1966

    Phil, is this a setup for a stick save or did 1060 act as an inflection point?

  74. Phil

    The next subprime crisis could be in reverse mortgages, warns the National Consumer Law Center. The same lenders who drove the boom are targeting seniors who want to draw equity from their homes using the relatively complex loans.

    OIH/Cap – Wimpy is good in this market!

    1,060/Matt – It is usually the S&P that gives them trouble on the pumps.  On the whole, everything was just up for no reason and you need a proper catalyst to get through those resistance levels.  Yesterday they could bull things through because volume was 50% lower than today so far.   We’re up to 110M at 2PM, if we pick up volume to the downside now it may not even be saveable.  Also, don’t forget I’m not convinces there is a stick anymore, or at least not the same stick we got to know and love since early July.  If GS, JPM and HBC (who maded negative comments too) are out, that means stick Jr is being run by say CS and BCS and maybe C and BAC and their TradeBots may not match the ones we’re used to.  What we’re seeing the past couple of weeks is morning moves and no afternoon sticks so it’s possible that the junior Gang of 12 members favor the futures pumps since they probably don’t have the power to push a closing move.

    As I said this morning, it’s just the same old song with a few new lines…

  75. EricL

    Credit Suisse bullish on AA earnings:
     
    http://www.bloomberg.com/apps/news?pid=20601087&sid=a7H6rwNp5ooA
     
    "So-called call spreads are the best way to profit from an advance because they are attractively priced given that Alcoa calls are more expensive than puts."
    Contrary to what the article claims, these options aren’t cheap at all, even given earnings tomorrow. And whatever put-call imbalance there might have been is gone now. Moreover, such an imbalance seems like a terrible reason to suggest buying call options in the first place — if the options are overpriced, it doesn’t matter if the calls are ‘less overpriced’.
    Maybe we should figure out a way to sell to these guys.

  76. Phil

    By the way, who is America’s single largest exporter that benefits from a low dollar? 

    GE!

  77. chakra108

    Phil
    Being new here I was catching up on your old write ups. On June 6th you talk of the USO scam and recc buying SCO JAN 19/20 for $0.20 for a 500% upside.
    The spread went up all the way to $0.75 and is back down to $0.20. However, how are these versticals priced. The Jan 19′s are $2.40 and the 20′s can be sold for $1.80 for a $0.40 spread. How do we end up seeing a $0.20 debit on this one?
    BTW are you in favor of these trades now that OIL is $70 +?

  78. Cap

    covered BIDU …. although it probably has a lot to drop now …

  79. Phil

    SCO/Chakra – Hey good find, I forgot about them!  See, it really does pay to go back and read the old stuff as the same situations come around again and again.  On June 6th those Jans were 6 months out and oil was flying up so there was a huge volatility premium so you can’t look at the same two contracts now and expect the same thing, that spread cashed out in July, when oil went back to $60.  Now SCO is back to $16.42, down a buck from June and you’d want to look at the Apr $18/19 spread, which is .20 with all of the same logic but I prefer the Apr $14/15 spread for .30 as it still pays back $1 (330%) and it’s already in the money so better off buying 1.5x of those than 1x of the ones that need a 20% gain.  Of course, just because you CAN get 330% back doesn’t mean you shouldn’t be thrilled with 150%, unless it’s a hedge you plan to hold. 

    Meanwhile, with 10 mins to NYMEX close, oil is bouncing between $70.50 and $71 (now $70.87), well off the $72 HOD.   Gold is at $1,037 and closed and copper failed to hold $2.80 and closed at $2.766.  Japan is going to be very unhappy with 88 Yen to the dollar as well.

    FXP is always a fun play to make.  The Jan $10s are $1.35.

  80. where

    Went flat on a 22 point ride down on  5 /NQ’s.  That made the trade $$$ for the day.

  81. jromeha

    Speaking of FXP, do you like the 9$ oct calls for .65? Seems like little risk, high reward. With jobless #’s thursday should be a down day, right?

  82. spider

    hello folks.
     
    Im some disconnected from markets, but …  isn’t  silver too shiny?
    Thinking about selling some ZSL $5 oct puts for $.30  Whats your thoughts about this?
    -Spider

  83. Pharmboy

    Wow!  JAVA down to 8.9….why are people spooked about them?  if the EU rejects the deal, the US DoJ will throw fits into the deals the EU companies make on the US (pharma especially).  Selling 7.5 Jan10 P for .18c.

  84. Cap

    short BIDU again …

  85. jomama

    XOM Call still working well.  70 XOM Oct and Nov Calls up huge today.  Cashed out looking to reload.  My ghetto hedgefund trade is to buy these calls and fund it by selling otm uso puts.  (yes, it does require margin)

  86. Phil

    WHR suddenly went way out of favor. 

    Does this count as a paid pump by bloggers?:

    GE Receives Boost on Positive News at TheStreet.com (Mon, Sep 28)

    Speaking of Cramer.  He’s on CNBC pushing his theory saying that if we can bounce off really bad numbers on Friday, this must be a good market.  I guess that means if his kid keeps getting the wrong answers on a test – he must be a good student…  What’s scary is people listen to this BS and just not their heads.

    IMF says ECB has no reason to raise rates over the next 12 months because of muted inflation outlook. 

    ROFL – Now Poland is holding up the Lisbon Treaty!  "Kaczynski can hardly complain that the Lisbon Treaty goes too far in creating a United States of Europe. he and his brother proposed a single energy policy for the bloc and an EU army, which go much further in integration than the EU itself is prepared to accept. So Kaczynski is not witholding his signature out of contempt for European integration, which is what’s motivating the other holdout, Czech President Vaclav Klaus. But the Czech president’s refusal to ratify may encourage the Polish president to wait if he finds the domestic benefits of holding are worth the withering criticism that’ll come his way from other EU capitals."

    BlackRock (BLK) offers a slightly more bullish take than Bill Gross’ expectation of 5% equity returns, saying the next several years will bring returns of 6-8% – but to get ready for a correction that could bring the S&P 500 to 950.

    FXP/Jrom – Too risky with 2 weeks left, could easily go either way and the Jan $10s can be rolled or DD’d to get even but with the Oct $9s you’re just screwed.

    Silver/Spider – Yes it’s high but much easier to play gold as silver is much thinner trade and can go crazy for no reason. 

    Goldman Sachs’ (GS) upgrade of bank stocks has gotten a lot of credit for this week’s gains in financials – but those who listened to Goldman calling banks the "new utilities" in January missed out on big returns. Maybe Goldman’s smart money isn’t so smart? (see chart)

    Ghetto Hedge Fund/Jo – LOL!  That’s a good strategy …

    Somehow we’ve skipped right over to last Wednesday’s pattern (after the morning drop), missing Tuesday’s flaline day entirely and we’re pretty much hitting the same low, same high, same pullback and maybe same finish (Dow 9,712).  It was GS’s negative REIT call and job losses that tanked us on Thursday – not expecting anything that negative tomorrow

  87. Cap

    Phil, for the life of me, I don’t know why you think the Lisbon Treaty is a good thing.
     
    Good for the Poles.  And the British if the conservatives win … they’ ll put it to a vote as well.

  88. Cap

    oh, Stick Boy is here !    FU Stick !

  89. gel1

    Spider
    Relative to gold prices (historically) silver has a lot of  ("catch-up") to its big brother. Check out the charts going back 10 years comparing the typical % difference. I think silver is still undervalued and I look for it to rise. IMHO

  90. cwan120

    DIA Mattress: I sold Oct $99 puts as 1/2 cover @ $2.16.  Now it’s $2.33.  Do I hold the 1/2 cover overnight?
    Forgive me for all the questions.  I’m new on DIAs as I just began the play a few weeks ago.

  91. JRW III

    Cap
    Remember whether it’s the gang of 12, or the gang of 9, they can still borrow your future tax dollars at 0% and do whatever they want with it !

  92. Phil

    Lisbon/Cap – Well, for one thing there is no competition from the Euro whatsoever without it.  They need Lisbon to have an effective Central Bank (although they do better than us without it).  Failure to ratify these changes puts the entire EU in jeopardy and that’s not a good thing with the economy so fragile.  They’ve been effectively operating since 2001 without a constitution and there are people in Germany who are already suing to have it overturned and would love a chance to kill it if it gets tied up now.

    Silver/Gel – Well silver is 25% off the 2008 highs and copper is 35% off the highs and oil is 50% off the highs and Gold is at an all-time high so your conclusion is silver is underpriced?  My conclusion is people buying gold are insane…  Long-term, I think it’s a good hedge against a currency collapse but, while I don’t think we’ve turned the corner on the economy just yet, I do think we’ve avoided the kind of economic meltdown that would justify $1,000 gold this year. 

    Gold Euros

    DIA/Cwan – No problem.  It’s just a half cover and you can roll them to 2x the $97 puts and those can be rolled to the Nov $92 puts so no problem for the next 500 points down

  93. morxlntway

    Jomama – surely you didn’t buy them at $1 last week if you are collecting on the OCTs today? How did you know to stay out of that trade before they dropped?

  94. Phil

    Free money/JRW – Maybe we should pay more attention to that factor.  They gave out $75Bn on Monday and the markets started taking off again.  I wonder if we run the pattern backwards if we’d find a strong correlation between discount window days and renewed market rallies…

    GOOG and BIDU runing up, AMZN on the march, RIMM doing well, AAPL always looking good these days…

    I’m not at all sure what this action is about so 1/2 covers on DIA puts is prudent.  There was no particular move in the dollar but gold and oil shot back up in futures trading and that’s jamming their sectors back up.  XLF did fail $15 and Qs didn’t hold 42 though so not all roses

  95. JRW III

    Phil
    If you don’t expect a tank tomorrow, do you expect a premarket pump followed by a fade ?

  96. Grant

    Phil – Just catching up.  E*Trade Pro charts options (Use space instead of period in symbol).  You can also plot underlying stock and option on same chart.  Neat to see how they diverge/correlate.

  97. Grant

    You can also change the colors of the second set of bars to make it easier to read the two overlapping plots.

  98. cwan120

    DIA / Phil: Thanks for explaining the logic behind the DIA play all over again.  You must have explained it 1000 times!  I finally got it into my brain, which has a pretty thick skull to get through.
    For me, I have to play it with real money.  With real money on the line, I pay attention and ask the right questions.  Any amount of reading or paper trading just doesn’t do it.
    Thanks, again.

  99. jomama

    Morx, i bought the Octs for about .4 and Nov’s for about 1$.   The October’s dropped pretty fast so that’s how the timing worked.  If XOM runs up i will buy the Nov 70 puts for a 1$  ($1.10) if i’m really impatient.  I’m no longer interested in the Oct’s.   With all of the big boys pumping oil, XOM  tends to get back to 70.  Of course, this is a pretty bogus kind of trade that isn’t based on fundies  (so, i’m pretty much playing a trend)

  100. matt1966

    Phil, I suspect the market’s rise is EXACTLY correlated to the discount window and to other gov’t infusions.  But what I read, can’t remember exactly what it was now.., the Fed will stop exchanging as much $ for crap in the next couple of weeks as it has in the past.  I suspect that’s when we’ll get our correction.  And as I’ve said before, earnings should provide a boost in volume so that they can sell into it. 
     
    Is GS the first to report in the financial sector again?  When would that be..

  101. gel1

    Phil
    Re Silver – If you believe in gold, for whatever reason, then silver is a better relative position than gold at themoment because the percentage difference is out if sinq when you compare the two metals on a historical basis. I have both metals in all  forms, ie stocks, options, miners and metal ETF’s. My reason is strictly a hedge agaist inflation which like winter will arive eventually, but don’t know when. The out of whack federal spending, deficits, quantitative easing and mind set in the assylem, in my mind, assures inflation as the USD continues to be de-based. Deflation is also a possibility, but my bet is inflation, big time, when the shit hits the fan.

  102. gel1

    Phil/Eric
    Thanks for the EDZ Buy/Write – very nice play!

  103. Phil

    Tomorrow/JRW – I don’t know.   I’m baffled by today’s action but I’m still thinking we’re just too high so I’m not ready to shift just yet.  My current premise is that we’re mathing last week’s action but we seem to have skipped over Turesday and are no in Wednesday mode, which means we either get a sell-off into this close (not much time) or tomorrow am.  If that doesn’t happen, then the pattern is useless, which is no big deal but I do enjoy it when the patterns match up…

    ETrade/Grant – Thanks, that is kick-ass!   That second thing is too complex for me, I just like to see how the trades are going and this is a huge help. 

    No problem Cwan! 

    Remember I was talking about the market looking like it was run by mobsters:

    Gangsters taking exams is an unlikely bad omen for Japan, William Pesek writes. Evidence that the yakuza are testing on the equivalent of stockbrokers’ Series 7 exam shows how quickly the underworld hasinfiltrated finance, and how it’s struggling to keep up – a bellwether for the entire Japanese economy.

    GS/Matt – 10/15.

    Inflation/Gel – Oh that I agree with.  I still like all the leap spreads we did on gold way back at $850, I just think this run is overdone at the moment but down the road, I’d say $1,500 is much more likely than $750.

  104. Phil

    Analysts come out surprisingly mindful of The Independent’s report of a plot to topple the dollar, despite emphatic denials from the central banks named. "The author (Robert Fisk) is a long-standing and well-known Middle East correspondent," Barcap says. "This is not The Sun, nor the NY Post," Dennis Gartman adds.

  105. Grant

    Phil – Recently you mentioned watching DJIA volume at the top of Pro screen, how? 
     
    To get second overlapping chart just enter a symbol into Symbol 2:.  If you wish to change colors go into Chart Settings.  Once in awhile, I like looking at the stock vs. the options prices (or 2 diff. options) using daily bars.  A good way to visualize deltas.

  106. Highlander

    ok, good day day trading aapl. boy that stock is strong, it just wont stay down, perfect for long/short/long that i like to play it for

  107. Cap

    Robert Fisk is a loon … bad guy….

  108. morxlntway

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    "Where you roll to is the same as where you enter any new long put, whichever one CAN’T be rolled up for .50. "
    Trying to get this straight… If i am buying more DIA puts so i will be better covered, it looks to me like the first one that can’t be rolled up for .50 is the Jan 96′s? (at the moment) But the delta is 4 and the 98′s are 5.  Would i then buy the 96 and start the roll process?
    thanks

  109. Phil

    Big move but not quite there.  Our uside levels were:  Dow 9,700, S&P 1,060, Nas 2,120, NYSE 6,950 and Russell 610 and we’re finished at 9,731, 1,055, 2,103, 6,899 and 601 so fail, fail, fail, fail, fail…. 

    We’ll be back to watching the same levels tomorrow.

    With all the denials on moving away from the dollar there could be a lot of dollar bear covering and that could knock us down in the futures and if they can’t gap us over our levels in the futures, I’m not sure they can manage it once the market it open. 

    Oil inventories are the big story tomorrow as $70 oil is always hard to justify with 10% of our workforce sitting at home (and globally it’s more). 

    Volume jammed up to 205M at the close so that’s 2 days in a row that 1/3 of the day’s trades came within 5 mins of the close and did not move the market at all – this is a new trick that we’ll have to figure out. 

    QQQQs are below 42 and XLF is below 15 – those are keys to watch tomorrow.  SRS is over $10, another sign that things aren’t as good as they were last week. 

    YUM has earnings tonight and they should do well with China stimulus and a weak dollar.  COST, FDO, HELE, MON and WWW tomorrow morning and AA is the first one that counts tomorrow pm along with RT. 

  110. morxlntway

    I had a feeling that might happen. Pasted from word.

  111. Cap

    BIDU up $20 … sure, why not ?
     
    2 successful shorts;  3rd short underwater $2.

  112. ssdirk

    SUN cuts dividend.

  113. stevenparker

    Yay a nice green candle for RIMM with good volume!!!
    Lisbon is a significant blow for democratic accountability in Europe. Only the Irish got to vote on a piece of legislation which devolves significant power to EU institutions with which most citizenry have zero connection.
    The mandate of the EU is too large to be treated as a footnote in national elections of member states as it is today, and the EU elections themselves are largely irrelevant in determining policy.
    I sincerely hope they start to tackle this before this really does "put the EU in jeopardy".

  114. Phil

    Volume/Grant – I put $DJI in my symbols list and use the Tot. Vol tab.  Oh I know how to get the chart and stuff, I just have no time to mess around with it.  I change my views so often I just like my charts not too fancy. 

    AAPL/High – Just keep in mind that one day Jobs will get sick or die.  Doesn’t matter if you can ride it out long-term but bound to hit the stock hard. 

    DIA/Morx – Logically, if the Delta is .50 than that should be the first one you can’t roll up for more than .50.  Good way to figure out if your broker sucks or not.  The last prices traded on the Jan DIA puts were $4.17 for the $96s, $4.62 for the $97s, $5.10 for the $98s, $5.62 for the $99s, $6.12 for the $100s and $6.75 for the $101s.   So I would go for the $100 puts since a 100-point drop in the Dow would pay me .63 vs a 100-point drop from the $99s paying me .51 – pretty much common sense isn’t it?

  115. chakra108

    Phil
    I still own the SKF NOV 24/26 CALLS. Do you have any input on this one? Thanks.

  116. Phil

    Bad news bears:  I’ve been mulling over what rational explanation there could be for a huge run in commodities despite the fact that 15% of the global population is not working (so clearly 10% less commodities being used) and the only logical rationale is "they" are anticipating a massive stimulus program, one that will tank the dollar and spike commodities and boost stocks despite the fundamental economy. 

    Whether it’s true or not is another thing but it’s the only way you can justify oil up 75% from last October with 4M more job losses since then.  Last year, when oil was $40, no one even expected 10% unemployment but here we are.   Only a completely worthless currency can justify people buying oil, gold and copper at these prices and, even then, you’d run out of room in storage (we already are with oil and nat gas) and crash the market anyway so there has to be an end game on demand and that can only be a stimulus project. 

    Notice CAT and DE are on the move too, that’s a stimulus sign.  It would have to be something with infrastructure that makes a lot of jobs…

    BA took a $1Bn charge-off and finished up for the day – how is that rational? 

    ABC Consumer Confidence Poll: -45, up from -46. Still a mere 11% rate the national economy positively; 27% say it’s a good time to buy things, and 44% rate their personal finances positively.   73 percent call it a bad time to spend money and 56 percent say their own finances are hurting, all well above their long-term averages.

  117. matt1966

    Phil, Larry Fink from Blackrock said it himself, ‘with 0% interest rates.. it’s only responsible to put some money in the market’.  He said a 20% increase in the markets ‘should be in doubt’. But that leaves upto 19% in play.  We are simply experiencing more asset bubbles as a result of cheap money while they recapitalize the banks using the yield curve. 
     
    While I don’t dispute people will call for more stimulus.. they are also people now saying that the Fed will need to raise interest rates BEFORE the job market comes back and that inflation should be the Fed’s #1 priority, not job creation.  So, their are people all over the place calling for everything.  But Larry Fink controls more money then everyone but God so I would be inclined to believe him.

  118. Phil

    SKF/Chakra – I’d stand pat unless we break over last week’s highs unless you are even and worried, in which case just get out and find something else to trade. 

    Meanwhile, bearish oil article in the journal:

    Russia said Friday its oil output crossed 10 million barrels a day in September, 25% more than Saudi Arabia. Over the weekend, militants in Nigeria, producer of some of the world’s most sought-after grades of crude, appeared to accept an amnesty.

    U.S. energy officials released their winter fuel outlook Tuesday. Demand for heating oil in the Northeast, which accounts for 80% of consumption, is projected to drop 2% from a year ago on a relatively mild winter.  There is already too much distillate, a category of refined products that includes diesel and heating oil. Inventories, at 171 million barrels, stand at a 27-year high, according to JBC Energy, a research and consulting firm.

    If the buffer of distillate inventories still doesn’t seem big enough, consider that low natural gas prices will mean those who can switch away from heating oil will do so. The pressure put on incomes by rising unemployment — another piece of bad news from the past week — should also spur conservation efforts. Across the Atlantic, European distillate inventories are also very high.

    When there’s too much inventory, profits drop and producers, refiners in this case, slow output and dump product. Valero Energy, the largest independent refiner in the U.S., shut down a unit at its Delaware City refinery over the weekend due to thin margins. As refiners are oil producers’ main customer, weak demand for refined products feeds up eventually to weak demand for crude, where there is spare capacity already.

    Inventories of gasoline and crude oil are also above their five-year averages. And that doesn’t capture fuel stored at sea. JBC estimates there are between 71 million and 92 million barrels of crude and refined products sitting in tankers in the Atlantic basin. Barring a rapid recovery for demand in the industrialized world — 53% of consumption against China’s 10% — there is little prospect of clearing that quickly. As energy economist Phil Verleger puts it: "Anyone got a match (or a torpedo)?"

  119. Phil

    Fink/Matt – 20% upside from here?  That would be one hell of a bubble….

    Meanwhile, I live this chart:

    four-bears-large

  120. stevenparker

    How can they say there will be a mild winder? Chinese moon festival evening was cloudy and overcast. Over a billion people will tell you this is a very clear signal to expect a cold winter….

  121. Phil

    The problem with the above chart, as I pointed out last time we looked at it, is we should really line up our October crash with the 1929 crash and that would give us a VERY different picture as we’re be in about month 14, not 24 and closer to matching the bounce off 47.9% down that happened early on in the crisis, while unemployment was still under 10% and that makes our bounce LESS impressive than the bounce from -47.9% to -23% as we gained less over a longer period than they did in the Great Depression…

  122. gel1

    Bubbles ???? Yes, we have many more in our future. I remember well the creation of past bubbles (always small at the outset)  Just picture Chris Dodd in a bubble bath, of course rubber duck in hand, while Barney Frank, of course in a grass skirt, serenading his buddy Chris to the tune of Don Ho’s very popular Hawaiian melody "Tiny Bubbles". Well the tiny bubbles these guys created, with help from their buddy Alan Greenspan, damn near put the whole world into a financial depression. Bubbles are manageable at the early stages, but left to mestasize  in their own natural progression, then we have another disaster at our doorstop.The tiny bubbles are with us today, and the same idiots that created them are still doing the same so – look out. The USD is in the process of being destroyed, and the ones who brought us the latest catastrophe are working on the next one that is not far off in the future. IMHO

  123. Cap

    Re:  Ireland / Lisbon:  Phil & Stevenparker may find this interesting.   (sorry, no link Phil, so I had to cut & paste)
    The Great Irish Surrender    [Nile Gardiner]
     
     
    The Irish ratification of the Treaty of Lisbon will pave the way for the biggest erosion of national sovereignty in Europe since the Second World War. After rejecting the Treaty in June last year, Ireland was forced to vote again. Lisbon, also known as the European Union Reform Treaty, is a rehash of the old European Constitution, which was emphatically rejected by voters in both France and Holland in 2005. It is in essence a blueprint for a European superstate, paving the way for the creation of a European Union president, foreign minister, foreign service, and diplomatic corps.

    No doubt Euro-federalists in the White House and State Department are celebrating the Irish “yes” vote. Hillary Clinton already gave her backing to the Lisbon Treaty in an interview with the Irish Times back in March, and the Obama administration has sent strong signals that it supports of further European integration.

    This enthusiasm is highly misplaced. The centralization of political power in Europe is not in the interests of the United States, and it will threaten both the Anglo-American special relationship and the broader transatlantic alliance. The Treaty is all about building a vast supranational political entity that will increasingly challenge and oppose American leadership on the world stage. It is inherently undemocratic, and it will ultimately strip away the ability of individual nation-states within Europe to shape their own destinies.

    It is now highly likely that the last two countries that have failed to ratify the Reform Treaty — Poland and the Czech Republic — will do so under intense pressure from the European Union. A British referendum is the last remaining hope for Lisbon to be derailed. Under the Labour government of Gordon Brown, Britain has already ratified the Treaty, but a new Conservative administration — likely to seize power next May — could hold a popular vote on the issue. The polls show that a large majority of Britons oppose Lisbon and would put the Treaty to the sword if they had a chance to do so.

    Conservative leader David Cameron has not yet committed to a referendum if the Czechs and the Poles decide to ratify the new EU Constitution, arguing instead that Britain could negotiate key opt-outs. But when he becomes prime minister, he should give the British people the final say over the Lisbon Treaty, as well as over the UK’s broader relationship with the European Union, and hand them the opportunity to halt the European Project. If Great Britain does derail the European train as it advances toward “ever closer union,” she will have struck a huge blow for the cause of liberty, freedom, sovereignty, and democracy in Europe.

    — Nile Gardiner is the director of the Margaret Thatcher Center for Freedom at the Heritage Foundation

  124. Phil

    Oh Cap, you would have been blogging against the Continental Congress in 1776 on the same grounds and we’d still be a colony!

  125. Phil

    ETFs started out as a good idea: convenient, affordable. And then the financial rocket scientists came in to try to beef up the returns. Now the more ETFs become like mortgage-backed securities, the more likely we’ll see "an avalanche of physical gold, live hogs and cocoa being heavily sold into often thin markets, causing sharp price declines."
    With records falling and precious-metal fund managers sketching visions of $5,000/ounce, now might be a good time to beware gold fever.

  126. Cap

    Phil / Larry Fink.  Consder that the man is simply talking his book.  As perhaps the biggest asset manager, he needs to convince the sheeple that their money must stay in the market; meanwhile, all the statistics point to money flow continuing to exit the market, despite the market’s rise.
     
    People were so burned last year, that they have left the casino; and they ain’t coming back, no matter how many money managers parade on to CNBC to claim that after a 60% rally, you MUST GET IN NOW or you will MISS the last 5% or 10% move even though the economy sucks and will suck for a long time,and where else are you gonna stick that money with such low rates ?  Under the mattress ?  Guffaw guffaw.

  127. Cap

    Actually, Phil, that would probably be you arguing for the benevolence of old King George ….    :grin:
     
    Somehow I am not quite getting your equating the undemocratic EU transnational "gov’t" with the USA in any time period.

  128. Cap

    Oct. 6 (Bloomberg) — Shares of the following companies may have unusual moves in U.S. trading tomorrow. Stock symbols are in parentheses, and prices are as of 5:30 p.m. in New York.
    Standard & Poor’s 500 Index futures expiring in December added 0.20 point to 1,048.80.
    AirTran Holdings Inc. (AAI US) dropped 12 percent to $5.40. The low-fare airline that flies mostly in the eastern U.S. said it plans to sell $75 million of convertible notes and 9 million shares, raising money for “general corporate purposes.”
    Avis Budget Group Inc. (CAR US) declined 9.1 percent to $12.07. The rental-car company said it plans to sell $250 million in convertible notes to institutional investors.
    Linn Energy LLC (LINE US) fell 5.8 percent to $21.80. The U.S. oil and gas partnership said it plans to sell 6 million units of its limited liability company interests, raising money to repay debt.
    Sunoco Inc. (SUN US) lost 1.2 percent to $27.55. The largest refiner the U.S. northeast cut its quarterly dividend by half to 15 cents a share and said it’s indefinitely idling all process units at its Eagle Point refinery in Westville, New Jersey, because of weak demand for refined products.
    Yum! Brands Inc. (YUM US) rose 1.3 percent to $35.30. The owner of the Taco Bell and KFC restaurant chains raised its full-year earnings forecast and posted third-quarter profit that advanced more than analysts estimated.
     
    4 of 5 show share price losses … guess which one CNBC will run with manana ?

  129. Pharmboy

    Phil – UR above theory is interesting, but there is still 300B or so in stimulus left from the first round.  Below is the article:
    http://marketplace.publicradio.org/display/web/2009/10/06/pm-stimulus/

  130. lflantheman

     AAPL……Earnings Oct. 19th.  I’ve researched AAPL’s response to earnings over the past 4 quarters.  3 out of 4 times it trended downward within 1 to 2 weeks of reporting.   4 out of 4 times it was up within 2 weeks afterward.   Phil is right on with his comments above on how he would play it.  Here’s my take on it, incorporating what Phil points out, and my own ideas:
    If you don’t own AAPL:  Don’t buy it yet.  Buy mid next week (the stock), and wait for the post-earnings pop to sell.  This should be the first week in November.
    If you do own AAPL (the stock) or long-term in-the-money calls (my choice):  Sell October at-the-money covered calls (1/2) on it now, prepared to roll up to slightly out of the money October calls (2/2)  or to November atm calls if necessary.  Most likely though, you’ll see your Oct calls deteriorate significantly or expire worthless before expiration.
    AAPL tends to follow the general market fairly closely, as far as I can tell, so a pullback to a better pre-earnings entry point is very likely within the next 10 days, as a pullback in the market overall is very likely in that time period.
    Just for fun….I’ll say AAPL will be at 190 at October expiration and will hit 205 before the second week of November .

  131. Phil

    You know, I put on the TV and I see Asia up another point and I go to my computer to see what the good news is and all I can find is high commodity prices boosting commodity stocks as if that by itself should drive a global rally.  RTP is up 5% even though copper is still below $2.80 and Japan is up 1.5% despite the dollar laying around at 88 Yen. 

    Gold is back over $1,040 and oil is $71.45.  I’m digging for green shoots and this is what I find instead:

    Asian stock markets were mostly higher on Wednesday, supported by Wall Street’s rally. Gold, energy and resource stocks were sparkling after spot gold prices hit a record high, while base metals and oil prices rose on Tuesday.  Investors were looking forward to U.S. third quarter earnings, which kick off later on Wednesday with aluminum giant Alcoa reporting. "There are few negatives seen, with increasing optimism about profit margin expansion and not necessarily top line revenue growth driving the market," said Bell Potter Senior Client Adviser Stuart Smith in Sydney.  Top line revenue growth?  We’re not even back to 2003 levels of earnings yet

    Rent for office space is falling at the fastest pace in more than a decade as vacancies create a glut and landlords slash prices to attract tenants.  Nationwide, effective office rents fell 8.5% in the third quarter compared with the same period a year ago, the steepest year-over-year decline since 1995, according to Reis Inc., a New York real-estate research firm.  The decline came as companies returned a net 19.6 million square feet of space to landlords in the third quarter, slightly more than in the second quarter. For the first three quarters of this year, the net decline in occupied space totaled a record 64.2 million square feet, the highest so-called negative absorption recorded since Reis began tracking the data in 1980.  The vacancy rate, meanwhile, hit 16.5%, a five-year high, according to Reis.

    [federal reserve and commercial real estate]Banks in the U.S. "are slow" to take losses on their commercial real-estate loans being battered by slumping property values and rental payments, according to a Federal Reserve presentation to banking regulators last month.  The remarks suggest that banking regulators are girding for a rerun of the housing-related losses now slamming thousands of banks that failed to set aside enough capital during the boom to cushion themselves when the bubble burst. "Banks will be slow to recognize the severity of the loss — just as they were in residential," according to the Fed presentation, which was reviewed by The Wall Street Journal.  The Journal’s analysis includes more than 800 banks that reported having more half of their loans tied up in commercial real-estate, ranging from apartments to office buildings to warehouses.  Commercial real-estate loans are the second-largest loan type after home mortgages. More than half of the $3.4 trillion in outstanding commercial real-estate debt is held by banks.

    Mr. Conway’s presentation painted a bleak picture of the sliding real-estate values and enormous debt that will need to be refinanced in the next few years. Vacancy rates in the apartment, retail and warehouse sectors already have exceeded those seen during the real-estate collapse of the early 1990s, Mr. Conway noted. His report also predicted that commercial real-estate losses would reach roughly 45% next year. Valuing real estate has always been tricky for banks, and the problem is particularly acute now because sales activity is practically nonexistent.  Some of the banks with especially low levels of loan-loss reserves are teetering. Capmark Bank, based in Midvale, Utah, and owned by commercial real-estate finance firm Capmark Financial Group Inc., had 11 cents in reserves for every $1 in bad loans it reported in the quarter ended June 30, the Journal analysis shows.

    Maybe I’m nuts for thinking this kind of stuff matters.  I really intended to find some upside plays but this is just like last week where I can’t, in good conscience, make a bunch of bullish plays that I simply don’t believe in given the economic situation. 

    We’ll continue to find acceptable long plays like RIMM and WFR and earnings should give us lots of opportunites to pick up stocks that have bad quarters and sell off but I can’t go chasing things up here until we break out over our 33% levels across the board and we’re onlyh waiting for 6,959 on the NYSE so that’s not too much to ask (60 points) is it?  33% on the Transports is 2,086 and they were a good top indicator in Sept so we should take that seriously too.  SOX need 362 so they are pretty hopeless at 319 but also gave a clear top signal a couple of weeks ago so we’ll keep our eyes on them.

    The Hang Seng are just below their 33% mark (21,440) this evening so that will be interesting but the Nikkei is miles away at 9,806, needing 12,261 to get within 1/3 of their crazy highs.  The FTSE is within striking distance of 20% off and the DAX is just over 33% but the CAC is nowhere close, currently 8.5% below 33% off at 4,200 so Europe is, in short, all over the place and not a great indicator.

    So not much resolved this morning but at least we know what we’re looking at…

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