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Wrap-Up – Too Bearish or Just too Early?

Well, we’ve been here before.

Once again the market has staged a spectacular recovery on virtually no volume and mixed news.  While we went into last weekend just a little bit bearish (about 55%), this Friday the market topped out about 150 points higher than last Friday, closer to the top of our range so we went much more bearish on Friday, perhaps too bearish considering this was the best Friday finish since Nov 6th and we haven’t had a down Monday since October 26th.

Our plays this week turned very bearish to balance out the more bullish set we took in the first week of the month (see last week’s Wrap-Up).  Almost all of our bullish trade ideas have already made 20% and some are way over our goals as we were able to cash out a lot more winning bullish plays and press our bearish plays, turning the $100K Virtual Portfolio extremely bearish and twice as invested as last week.  Big winners from the last wrap-up included:

  • DIA $104 puts sold at $2.25, now $.55 – up 75%
  • DIA $103 puts sold at $1.65, now .30 – up 81% 
  • SONC Jan $10 puts sold for .85, now .55 – up 35%
  • DIA $104 puts sold at $2.55, now $55 – up 78%
  • BAX artificial buy/write (too complicated to summarize) – over goal already!
  • AMZN Dec $150 calls sold at $4, now .10 – up 98%
  • USO Dec $39 puts at .82, now $3.50 – up 326%
  • FXP Dec $8 puts sold for .70, up 64%
  • OIH Dec $120 calls sold at $3.25, now .27 – up 92%
  • AMZN Jan $140/135 bear put spread at $2, now $3.60 – up 80%
  • IWM $60 puts sold for $1.30, now .72 – up 44%
  • NSH June buy/write at $18/20.25, now $25.86 – ahead of goal  
  • AMZN Dec $145 puts sold at $5 (average), now .25  – up 85%
  • AMZN Dec $150 calls sold at $3, now .10 – up 96%
  • TBT June $42/26 bull call spread at $1.80, now $2.60 – up 44%
  • TBT June $42 puts sold for $2.15, now $1.30 – up 40% (pair trade)
  • SRS Dec $8 puts sold for .42, now .17 – up 60%
  • FXP Jan $6 calls at $1.40, now $2.10 – up 50%
  • IYR Dec $46 calls sold for .85, now .20 – up 76%
  • USD Dec $30 calls sold for $1.80, still $1.80 - up 43%
  • DIA Dec $104 puts sold at $1.60, now .55 – up 65%

Of course we had a few trades from that week that went bad too as well as many that are still in progress.  Our big misses were:

  • SRS at $8.50, now $8.14 – down 4%
  • X Dec $45 calls sold for $1.86, now $2.50 – up 34%
  • AGU Dec $60 calls sold at $1.85, now $3.40 - down  83%
  • VIX Dec $22.50/24 bull call spread at .45, now .25 - down 44%
  • UGL Dec $49/50 bull call spread at .45, now .20 – down 55%

So, what did we do right and what did we do wrong?  Keep in mind we’re ignoring the use of sensible stops when we do these reviews to simply track the performance of the pick.  The key is having balance and we try to keep a variety of bullish and bearish trade ideas so we don’t get blown out one side or the other.  Shorting AMZN multiple times was our play of that week as we took advantage of a Cramer pump, something we did again this week, shorting RTH but no big payoff yet

I wouldn’t call SRS a loser but we only had a few so I listed them.  It was one of our few stock plays and we do like them long-term so we wait patiently.  X really took off on us despite (or maybe becuase of) the tarrif war with China and the collapse of other commodities.  AGU was bad to us last week but much better behaved this week, where we shorted them again at $65.  UGL was, of course, a counter to our very gold-bearish GLL plays, which worked out  just fine. 

This week, we onced again mixed it up nicely but had far fewer trades than the 80 of the previous two weeks, as we got less and less confident with what the market is doing and more and more interested in sticking with cash in this very silly market:

Monday Market Movement

We started this week off in confusion as I said, right at the top of Monday’s post, that we could go either way from the middle of our range.  As it turns out, we went both ways – down to or 10,250 target for the Dow (25% up from the July base) and back to the top of our range at 10,500 at Friday’s peak.  The other 25% watch levels I set up in Monday’s post were S&P 1,100, Nas 2,187, NYSE 7,200 and Russell 600 were all broken on Wednesday and all but the NYSE have recovered on Friday.  This Monday will be easy as we can just reuse all of last week’s levels

What we expected for the week is pretty much what happened, as I said at the close of Monday’s morning post: "Volume should be light so anything can happen but we’ll be watching copper at the $3.20 line and oil at $75 to see if things are really breaking down from a demand perspective.  As discussed in the Wrap-Up, we went into the weekend still loaded for bear but, if the levels do hold – we’re going to have to respect that and we’ll add some more upside plays, mainly to cover as we’re not flipping until we have clear break-outs."  Obviously, not much has changed.

  • IYT Dec $73 puts at .80, now .45 – down 44%
  • ABX Jan $37.50 puts sold short at $1.15, now $1.45 – down 26%
  • PWR 2011 $12.50/Feb $17.50 (1/2 cover) at net $6, now $6.30 – up 5%
  • POT Dec $125/120 bear puts spread at $2.50, now $3.70 – up 48%
  • DIA $103 puts at .70, closed at .95 - up 36%
  • CEPH 2011 $60/Jan $60 (2/3 cover) at net $6.35, now $7.10 – up 12%
  • BAC 2011 $10/17.50 bull call spread at net $4.30, now $3.35 – up 22%

It was a flat day for the markets, the worst Monday we had had in some time but still green.  We went into the close fairly neutral and missed some of the fun of the next day’s drop but we had so many bearish positions already, it wasn’t time to get too daring.  Based on the stick-save into the close, we expected a boost in the futures but my 3:44 comment to Members was: "not expecting a major global meltdown tomorrow (but, then again, we never actually expect them do we?)."

Test Tuesday – Things Start To Go Wrong

100 people in Baghdad were killed in a car bombing and German Industrial Production numbers missed and fears of Dubai ran rampant while Moody’s said both the US and the UK were in danger of losing their Aaa ratings on the same day Fitch dropped Greece to BBB+.  All this Bernanke summarized in his speech at the Washington Economic Club as "formidable headwinds." 

I predicted we’d open at 10,320 and we did but we bounced right of 10,250 so we couldn’t get too bearish despite MCD reporting a 0.6% drop in sales in November and the ICSC Retail Sales Report shoing a 1.3% drop for the prior week. 

  • SRS at $8, now $8.14 – up 2%
  • NYX 2012 $25/Mar $25 at net $3.30, still $3.30 – even
  • BA 2012 $50/65 bull call spread at $6, now $5.85 – down 3%
  • BA 2012 $40 puts sold for $5, now $5.20 – down 4% (pair trade)
  • DIA $103 puts sold at $1.30, now .30 – up 77%
  • ABX Jan $37.50s sold at $1.20, now $1.45, down 20%
  • DIA Dec $103 calls at $1.12, now $2.25 – up 100%
  • SRS Jan $8 puts sold at .62, now .57 – up 8%
  • TIVO artificial buy/write (too complicated to summarize) – on target
  • USU Apr buy/write at $2.75/3.38 – on track
  • UGL Jan $44/47 bull call spread at $1.40, now $1.20 – down 14%

Here’s where we made our big mistake for the week.  We expected a bounce off the 2.5% market drop to Dow 10,285, S&P 1,090, Nas 2,158, NYSE 7,095 and RUT 590 and at 2:30 I said to Members "I think this is the blow-off bottom of the W that takes us higher" and at 3:09 I said "It’s really just a percentage game.  We’ve held these levels since early November and I’m not convinced that we have enough bad news to make today the day we break it.   Today makes 4 out of 5 down days (and yesterday was hardly an up one) and that hasn’t happened since 10/30 (where we gapped up the next day) and before that 10/1 – also the bottom of a sell-off  Between that, the 2.5% rule and the 25% lines, the odds are very much in Mr Stick’s favor – if not today then tomorrow."  So we should have played it perfectly but we didn’t.  

Which Way Wednesday – Hedging for Disaster

While we did expect a bounce for the day it was starting to feel like it was time to start hedging for some real downside.  I pointed out that last time we felt the need for disaster hedges (last October) our levels were: Dow 10,650, S&P 1,135, Nasdaq 2,000, NYSE 7,400 and Russell 700 and our hedges worked out very well then, this time we went for 4 new ones to start with:

  • DXD Apr $26/33 bull call spread at $2.40, now $2.50 – up 4%
  • FAZ July $20/35 bull call spread at $2.90, now $2.90 - even
  • SDS March $38/50 bull call spread at $2.10, now $1.75 – down 17%
  • SMN Apr $11 calls at $1, now $1.15 – up 15%

We identified SDS as the riskiest trade at the time but it also has the biggest pay-off at 6:1 if we hit it.  Notice that the DXD and FAZ are both doing their job, holding onto their value despite an almost 300-point run off Wednesday’s open.  Oddly enough, setting up disaster protection like this is step one in preparing us to go a bit more bullish IF we finally break over our levels but, at the moment, we are watching this chart of investor sentiment as my theory is we are currenly in the spot marked "Denial," where it will take very little to change that 87% bullish sentiment to "Fear," which may be followed by "Desperation, Panic, Capitulation and Depression." 

Others may insist we are only in the early stages of coming out of "Depression" since March and that the better than 60% gains in the past 9 months are the beginning of a rally, not the top of one.  I figure if we are really only half-way to the top, then we won’t miss too much by being a little cautious here, at what just MIGHT be a top.  As I said in the morning post: "Keep in mind that this morning we are playing for our bounces but by no means bullish overall.  Goldman’s market goose of the day is to announce that there will be no Fed hike until 2012 so all aboard the free money express.  Of course, someone should tell GS that the money train left the station a long time ago and, unless the Fed is going to start paying us to borrow money, rates aren’t going any lower."

  • DIA Dec $103 calls at $1, stopped at $1.15 – up 15%
  • AGU Dec $65 calls sold at $1, now .65 – up 35%
  • ORCL artificial buy/write (too complicated to summarize) – on target
  • BAC/2012 $10/Jan $16 spread at $6.49, now $6.45 – down 1%
  • FTR artificial buy/write (too complicated to summarize) – on target
  • AGU Dec 65 calls sold at $1.70, now .65, up 62%

That was it for the day.  We had a big stick save into the close which seemed fake and we didn’t top our bounce levels so, although our official stance was to 1/2 cover into the close (just 55% bearish), I went more aggressive on the $100K Virtual Portfolio and left it very bearish, which was a shame becuase we got the gap up we expected Wednesday morning the next day…

Foreclosure Thursday – The Stealth Stimulus

This is what threw me for the week.  Jobless claims were UP 17,000 to 474,000, completely defying the supposed -11,000 NFP number for November we heard last week.  Jobless claims have not gone below 450,000 for an entire year yet we are supposed to believe that 2M people must be GETTING jobs to offset the declines.  I’ve spoken to a lot of people and I’ve read the ADP reports and not one person has talked about all the new people that they are training at work but that doesn’t stop the market from going up on nothing in particular.

Aside from that, we were once again back up on a huge futures spike, and the Dow would be up 200 points over Wednesday’s lows by by 9:35.  I said to members at 10:55: "So I’m looking over positions and I’m not so bearish as I want to cash in short puts I’ve sold so I guess I’m thinking we do hold around 10,200 through next week – just hopefully at the lower end of the 10,200 to 10,500 range.  We may not get a proper breakdown until January unless there is a huge catalyst.  Look how JPM negates oil, Soros negates UK and Greece in one press release and Pimco negates Dubai buy spending 0.001% of their funds on some bonds.  With 83% bullish sentiment, any idiocy is treated like great news."  I decided to go for it (very bearish) in the $100KP but, of course, the regular member picks were more sensibly mixed: 

  • DIA Dec $103 puts at .50, now .30 – down 40%
  • AGU Dec $65 puts sold at $1.70, now .65 – up 62% (can’t say I didn’t mention them enough!)
  • FCX $75 puts at .90, gave up at .90 – even
  • VZ 2012 $30/40 bull call spread at $3.50, still $3.50 – even
  • C 2011 $5 calls at .48, now .50 – up 4%
  • RTH Jan $90 puts sold for $1, now .80 – down 20%
  • OIH Dec $115 calls sold at $2.05, now $1.60 – up 22%
  • RIMM artificial buy/write (too complicated to summarize) – on target
  • USO Dec $36 puts at $1.10, now .95 – down 16%
  • IWM Dec $59 calls at $1.40, now $1.55 – up 11%
  • FCX Dec $75 puts at .70, done at .90 – up 29%
  • TBT 2011 $45/55 bull call spread at $3.30, now $3.95 – up 21%
  • TBT June $44 puts sold at $2.10, now $1.95 – up 7% (pair trade)

So, not a terrible day but more downs than usual as we thought we’d get a turn down that didn’t come.  The 30-year note auction at 1pm went terribly, with rates flying up to 4.52%, a huge move from the previous week and interest was very light.  Once upon a time, this by itself would have sent the market down 300 points but we barely dipped below 10,400 before going back up and then again we were saved from that line into the close.  

Familiar Friday Morning – Deja Vu All Over Again!

We’ve certainly been here before – the relentless toppy market, looking like it may break out any moment and maybe one day it will but there just wasn’t enough volume in the market thrust to give us confidence they can keep it up.  As I said above, it’s scary to short the market over the weekend but, faced with a poorly constructed rally, it seemed worth the chance.   

Maybe it is possible to cobble together a breakout with nothing but pre-market pumps in the futures, stick saves in the afternoon and MSM hucksterism, celebraing every mediocre data-point as if it was as important as Marco Polo opening a new spice route or Posh Spice playing polo on a Segway (which isn’t actually important but does make for fun word-play).  So we layered on the bearish plays and hoped for sanity to return over the weekend but, if not, we’ll be adding some bullish plays (we’re certainly well covered to the downside now!).

  • RTH Jan $90 puts at .75, now .80 – up 7%
  • IYT Jan $71 puts at $1.35, now $1.20 – down 11%
  • ADCT artificial buy/write (too complicated to summarize) – on target
  • FDX Jan $85 calls at $5.50, now $5.25 – down 5%

We didn’t hit our target on selling the DIA put put covers and that put us into a very bearish stance into the weekend.  I’m more worried this weekend than last as we’re more committed to the downside than we were before and the market is closer to a break-out than it was before. Bullish sentiment is at a frenzy but it’s all going to be about the Retail numbers over the next couple of weeks, which is where we really think there’s going to be a weak spot. 

We’ll be watching our levels, as usual, for the signal to switch of our brains and BUYBUYBUY on the breakout but we haven’t gotten it yet in a month’s worth of attempts so we’ll just have to wait and see.  On Tuesday we get PPI data along with the Empire Manufacturing Survey and Industrial Production.  Wednesday we see Building Permits and Housing Starts along with the CPI Report and a Fed decision.  Thursday gives us the usual Jobless Claims, Leading Economic Indicators and the Philly Fed Report so no shortage of data but how the market will react is anyone’s guess these days. 

Just 14 shopping days to Christmas!

 


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  1. 1020

    Cramer and Greenspan, sitting together on Meet the Press. Talk about weird…….

  2. judahbenhur

    Phil, You asked for a reminder to update the post on Mattresses from 2007.  I don’t think there is any particular urgency to it, though I’ve noticed that you sure get a lot of repeat questions.

  3. shlomoso

    Hi Phil,
    Not sure where you get your quote of SRS Jan $8 puts at .17 (I also own ‘em independently of you, but I hope we’re right!). Yahoo puts closing price at .69, which is also what my broker shows

  4. Phil

    Cramer & Greenspan/1020 – I hope I can find that video, sounds fun.

    Mattress/Judah – I do need to update that and remember where that post from Chaps was with all the links.  No happening today as my weekend got much crazier than I had planned but hopefully during the week.   These holidays are really coming on fast! 

    SRS/Shlomoso – That was wrong and fixed, thanks.  I’m seeing .57 for the Jan $8 puts in TOS with the last sale at .56 – never trust Yahoo on options prices.  We had also sold Dec $8s so I got confused.

  5. jomama

    Phil, can you start a thread where members can post anecdotal retail experiences, traffic etc.  I found this very helpful in years past.
    In that regard, went to COSTCO yesterday in scottsdale – packed to the gills.  people were filling their carts with all kinds of crap. 

  6. craigzooka

     Phil, I had to cancel my subscription for 2 months because I found that I was spending way to many hours during the day reading the live chat instead of doing important stuff,  like grading my students exams and such.  But the semester is over so I am back.  
     
    While I was gone I noticed several references to something called an artificial buy write.  But I couldn’t find where you defined the term.  What is this new artificial buy/write?
     
    My guess is buying a CALL as a substitute for the stock in a regular buy write.  However you wouldnt believe the exotic option constructions i was coming up with trying to figure out what an artificial buy/write might be :)

  7. chaps

    craig:
     
    I’ll try to answer. You’re right about the call substitution for the stock. The call substitution generally has an expiration at least a couple of months further out than the short puts/calls you sell and a lower strike than your caller. If you end up owing your caller, you exercise your call (with the lower strike) and make the spread. If you owe your putter, you take assignment and then close out your long call.

  8. diamond

    Phil – RE: "Cramer & Greenspan – I hope I can find that video, sounds fun" …
     
    http://tinyurl.com/ybaf3uc
     
    (Starting at 18:47 mark.)

  9. stevenparker

    Given our periodic discussions of energy and oil on this site I thought I would link the following as it gave me food for thought.
    http://seekingalpha.com/article/177937-the-natural-gas-bonanza-and-westport-innovations-will-profits-flare-up
    On electric cars I thought this very interesting
    http://www.investors.com/NewsAndAnalysis/Article.aspx?id=515075

  10. gel1

    Re trading balance of year  – Historically, the last two weeks of any trading year are generally bullish. The period between Christmas and New Year is typically dominated by buyers and not sellers, and this seasonally influenced bias will, in my opinion, be enhanced this year as there will be a smaller than normal amount of sellers taking tax losses.

  11. kustomz

    Diamond i watched the video thanks for the link, its pretty long people so I’ll give you the most important statement and it was given by Cramer, he says …listen if the worlds going to hell in a hand basket you want to hedge and buy AMZN its going 74 points higher…

    Housing is dead manufacturing is dead the Fed prints with no regard to the detriment of our currency.. States are broke, the Gov is broke…but wait China’s growing at a 9% clip all hail Mao…

    Greenspan is still a hoot, amazing the things he says and gets away with, best part of the show was MLK

  12. gel1

    kustomz… Did not realize AMZN sold baskets!

  13. ssdirk

    WTF is happening with the futures.  E-mini 500 up 12 points in 15 minutes.  Did someone cure cancer?

  14. ssdirk

    Oh now I see. Dubai got a reprieve.

  15. colberg

    Phil Just got back from East coast Did you catch up with your guy Re financing KAlos? Hope you guys ahd a good week, I was only able to chime in on Cephalon.
    GC

  16. Phil

    Good morning! 

    Hope everyone had a nice weekend, looks like we’re getting right back to shenanigans this morning with Abu Dhabi confirming they are bailing out Dubai (partially) with $10Bn and the market is acting like it’s news.  That turned around some ugly opens in Asia, reversing the Hang Seng by 500 points (net 183, still rejected at 22,200).  The Shanghai Composite went from Down 2.2% to up 1.7% on the Dubai news while the Nikkei also turned back to even, reversing a 100-point drop but they close earlier than China so maybe they have more to go tomorrow.

    They pulled out all the stops, driving the dollar way down (it’s back up now), the after lunch pump – everything. 

    Now, here’s what’s strange at 6am:  The Dow futures (/YM) are LOWER than Friday’s open at 10,458 while The S&P, Russell and Nas futures are all near Friday’s high.  That makes no sense at all.  CNBC and Bloomberg are both telling us how good the futures look but I’m not sure what’s going on here – I do know I wouldn’t trust what you see on TV at the moment. 

    Oil remains below $70 but is off the floor at $68.50 at 10:30 last night and that should be a good support spot for them.  Gold is still below $1,120 after testing $1,130 in the Asia pump.

    On the whole, if you are too bearish and want to protect yourself in the futures, you can play the Dow long from the 10,460, using Nas 1,800 (now 1,801.25) as a stop along with good old RUT 600.  If we are going to go up, the Dow needs to catch up the the other indexes so it’s the best futures horse to play but I’m generally dubious simply due to the very strange moves as well as the fact that gold and oil are still very weak

    Other than Dubai, the news is mixed this morning. 

    Plenty more coming in the post but I thought you might like a heads up this morning. 

  17. bord

    For Phil and everyone, Although still a new member, I am learning and reading a lot from the archives. One strategy I dont see mentioned much here is ratio spreads. I would like people’s opinion on them as a tool in the options toolkit. I know specific examples are preferred here, so I will give one. My thesis is that GLD in the next 1-2 months may still fall some or be steady, then it will resume its upward march. If I am correct, it would seem that opening a bull call ratio spread may work well. If GLD goes up quicker than I expect, I still profit (and not get burned if I used for example a calendar spread). If GLD does not move or goes down, I could close the ratio’s short calls to reduce cost basis, and then reset into a regular vertical spread. Reactions please.

  18. Phil

    Retail Thread/Jo – Great Idea!  I forgot this year because I myself have not gone to the mall this year as I wasn’t feeling good last weekend and this weekend I was catching up on all the stuff I didn’t get done at the beginning of the month.  I probably should go get something for Tina this week… 

    Welcome back Craig!  Yes, real jobs can be very annoying (or so I’ve heard).  The ABW is just usuing a call to replace the stock, always a leap or longer-term contract.  I do get so gung-ho bullish about things that I call a vertical call spread AND selling the put to drive down the cost.  In the weekend summary, I lump in the more aggressive plays of selling puts to reduce the cost of a bull call sprad but it’s not really the same strategy as there is no long-term plan, just a super-agressive entry. 

    For example, for sure I don’t mind owning SRS at $7 so I can buy the Apr $7 calls for $1.90 and sell the Apr $9s for $1.10 AND sell the Apr $7 puts for .80 which puts me in the $2 spread for net Zero with a $2 upside and the stock put to me at $7.  Margin would be $3.50 so compare that to simply selling the $7 puts for .80, which has $2.70 in margin so you make about twice as much per margin $ with a 15% higher b/e point

    As far as a proper artificial buy/write, let’s say I want to do a buy/write on AAPL but it’s friggin’ $200 a share and that costs me about $15,000 just to do a single set.  Do I NEED to own AAPL?  No, they don’t pay a dividend and the July $175s are $34 so that’s an effective purchase price of $209 vs. $194 for the stock.  I can sell the Jan $195 calls for $7.45 and the Apr $175 puts for $8.75 for net $17.80 on the $20 spread so I CAN’T be hurt to the upside but keep in mind that you do end up having AAPL put to you at $192.80 so what you have effectively done is eliminate the discounting function of the buy/write.  Of course, if you make it through Jan expiration OK, you now have control of 100 shares of AAPL for $1,780 + (according to TOS) $2,743 in margin vs the same put side margin in a regular buy/write plus the $9K for owning the stock.  These are VERY aggressive plays and a big drop can absolutely kill you so they should be used sparingly.

    Ah, Chaps brigs up a good point.  Another nice thing you’ll hear me mention in an artificial buy/write with a leap is that you have to assume you have residual value to the leap call even when the stock is put to you so it’s not like it’s going to be put to you at the net.  Let’s say I want to take advantage of volatility and go with FAZ, but more for the purpose of collecting premium so I buy the 2011 $23s for $6 and sell the Apr $24 calls for $3 and the Apr $18 puts for $3.  That puts me in for 0 on the $1 calendar spread with a put-to price of $18 but, it’s not really $18 as the Leap should retain a good bit of value, even if FAZ drops to $12 so my put-to price is probable around net $15 (assuming I have $3 left on the Leap). 

    Cramer/Diamon – Thanks!

    Nat gas/Steve – Vegas runs their taxis and buses on Nat gas and has for many years.  I don’t know why the rest of this country is so backwards. 

    Trading/Gel – I suppose it depends on people’s tax status.  A lot of people had huge gains this year.  In fact, it’s funny that Greenspan was saying that people "underestimate" the wealth that has been created in the stock market this year.  Gee,, Alan, does it really count as being created when it was destroyed the year before and has now been partially rebuilt?  We had 2 big Jan sell-offs in a row which burned a lot of people who let it ride into the new year and then had to scramble to get cash together to pay taxes.  Of course, if there’s ever been a group of people who could be burned 3 times in a row by the same trick, it’s US investors so we’re not going to count them out until the last minute.  8-)

    Also, I hate to say things like this but it is important to think about this time of year:  All it takes is one bomb blowing up in a shopping mall in the US or Europe and the market is down 500-1,000 points overnight so please do not be complacently bullish under any circumstances

    Funding/Colberg – Nothing is happening for the balance of the year (probably true with all VCs).  Email me later though and we can talk about some ideas.

  19. Phil

    Backspread/Bord – I do more of them when the VIX is higher or around earnings to take advantage of the front-month premium so we should get plenty next month.  It’s a very valid and useful tool but, as they need to be actively managed, I also don’t like to pick them too ofen as they are difficult to track and discuss.   Usually I like to play them for the short-term volatility crush only. 

    DIA problem has been resolved as it turns out I needed to reboot TOS so the Dow is not behaving as strangely as I thought.  The good news is the 10,460 line held perfectly and we’re now at 10,473 so a nice profit on the futures move (I didn’t do it).   Still strange that gold and oil are not participating – whole market is strange and it’s good to be in cash right now

  20. jpohl

     Alot of acronyms for newbies to absorb. What is TOS?  Maybe a glossary somewhere would be helpful.

  21. barfinger

    The fascinating thing about the sentiment chart posted above is that the last major low in the bearish sentiment measure was in the spring of 2003, which marked the beginning of the monster bull run as the bubbles inflated.
    I find it interesting because at the time, there had not been any convincing signs of a rally – yet there were relatively low bear counts apparently. I had not been aware of that at the time. Had I been aware, I would have been deeply reluctant to enter the market and would have missed out on a wonderful opportunity.
    I am leaning toward the belief that absent any geopolitical shock we will more or less ignore bad data unless it is truly horrible, and we will break out to the upside. I think we are somewhere near the "optimism" point on your chart.

  22. bord

    TOS= think or swim, a trading broker/website with loads of info. on options trading

  23. sthompson

    Phil, I’m wondering where you are getting your numbers for the disaster hedges. I’m using TD Ameritrade and paper trading all of those just to see how it works using options. However, above you state that SMN is up 15% to 1.15. The closing price I see is .90. All of those plays are down, which is fine as they are hedges, but I’m wondering where you are getting your figures from. Same issue with the rest, including DXD. None of them are up on my system. What are you looking at?

  24. Phil

    The number TmDecay came up with was 4,018.

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