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Monday Market Movement – My 2010 Technical Outlook

What’s going to happen next?

That’s the main question I get from people.  I find it interesting that so many people want to believe that I can see the future but I suppose that’s been the same for thousands of years – people want to know what’s going to happen and they are willing to put their faith in someone who’s just a little more insightful than they are.  This isn’t unique to stocks, my old consulting company was called Delphi Consulting – also taking advantage of my reputation as a business prognosticator.

While I do pride myself on my ability to spot trends early AND to figure out how to make a buck playing them (you can see how I did last year in our 2009 Review)  - I don’t like it when that part of my reputation distracts from my general message, which is that NO ONE, not me, not Cramer, not anyone, can tell you what is going to happen next in the markets and the best strategy you can follow is one of maintaining a balanced, sensibly hedged virtual portfolio that can make money in ANY market direction.

This weekend, in member chat, we were discussing an excellent presentation by James Montier, now of GMO, who listed "Ten Lessons (Not?) Learnt," which is a must read for all my Members, as it lists and expands on 10 themes that echo what we discuss every day at PSW – things every investor needs to hear and understand before they go chasing off after the next guru who promises to give them a peek at the future (emphasis on my 5 favorites):

  • Markets Aren’t Efficient
  • Relative Performance is a Dangerous Game
  • This Time is Never Different
  • Valuation Matters (in the Long Run)
  • Wait for the “Fat” Pitch
  • Sentiment Matters
  • Leverage Can’t Turn a Bad Investment Good
  • Beware of Over Quantification
  • There is No Substitute for Skepticism
  • The Benefits of Cheap Insurance

In short (since this is not supposed to be a philosophical article) neither James Montier or I can predict the future.  I can’t speak for the thousand other bozos who tell you they can but we’re telling you, for a fact, that we cannot.  So, bearing that in mind, let’s look at a few trends that we’ll be watching in 2010 and examining the possibilities of their outcome

Let’s begin with something relatively easy to predict – the short-term.  This morning we have a huge bump in the futures, with the Nasdaq (at 7am) back to it’s Friday futures high and up 20 points from the low on Friday.  The Dow and S&P are also strong but not as pumped up as the Nasdaq.  I’m not sure what’s up with the Nas yet but the Dow and S&P are clearly up as oil has flown to $81 and gold to $1,120 (copper $3.43) as the dollar was savaged into the EU open, falling to $1.625 to the Pound and $1.44 to the Euro while somehow maintaining 93 Yen. 

This magical move by the dollar has sent commodities flying and the Dow, which is now heavily weighted to follow oil with the addition of CVX, is getting a nice run out of it.  Last year,  Israeli jets attacked Hamas targets in the Gaza sending oil flying up to $48 a barrel to start the new year.  This year, we have Al Qaeda activity and (surprise!) cold weather being blamed for boosting crude along with, of course, CHINESE DEMAND.  Combine all that with a suddenly weak dollar and the oil pushers can pocket an extra $180M on today’s global barrel sales.  Here’s what happened to the Dow last year around this time:

Our top concern with this December’s rally has been the low-volume moves up, especially as 90% of our gains have been coming in pre-markets with the majority of actual trading coming to the downside as all the new suckers coming into the tent miraculously find plenty of willing sellers, even in this "hot" market.  Notice how the return of volume in January (5.2Bn per day vs 3.2Bn per day in the prior 8 sessions) became the market’s undoing.  Sticking to our targets last year saved us from making a mistake in January so let’s take our levels VERY seriously as we begin again in 2010.

We don’t like a commodity rally anyway as it only serves to further impoverish an already on-the-ropes population so we’re going to remain skeptical until our upside target levels get broken.  Those levels we discussed last Wednesday, when I posted our "Last Charts of the Decade" and we refined them in Thursday’s Level Alert to Members as:  Dow 10,549, S&P 1,135, Nasdaq 2,314, NYSE 7,389 and Russell 638.  The bullish support levels we’ll be looking to hold this week are Dow 10,457, S&P 1,127, Nasdaq 2,242, NYSE 7,380 and Russell 630, all of which are already blown other than the Nasdaq, who are off in their own special place at the moment.  

  

What’s it going to take for the Nasdaq to regain it’s former glory of 2,800 (which, we should keep in mind, is still 45% off the March 2000 highs)?  Well, in 2007, when the Nasdaq hit 2,800, we thought tech sales were going to the moon, we thought everyone in China and India would have an IPhone or a Blackberry and we thought they’d all go home to work on their laptops while watching high-definition plasma televisions and that was the basis of those very bullish tech multiples we were seeing. 

As you can see from the chart on the left, our little spike in the Nasdaq this past month has put the capitalization to GDP ratio of the NYSE and Nasdaq back over 100% – well above historical highs.  As a fundamental investor, this just rubs me the wrong way and I have very serious concerns that the earnings numbers we see this month will not be able to support what is already becoming bubble-like market behavior as expectations have far outpaced the actual improvements in corporate earnings.

Last year we had low (make that NO) expectations going for us – setting the bar so low that not even GM was able to disappoint investors with their actual numbers.  Any CEO who’s outlook managed to avoid the term "Seventh Circle of Hell" was showered with praise (and bonuses) for brilliantly cutting costs (and jobs) low enough to show a profit, despite the weaker sales.  Can we skate by for another year on that BS?  Maybe, but is that BS enough to give us another 20-25% up year in the markets?  Probably not…

Turning to the much broader NYSE chart (also weekly) we see that the picture is nowhere near as exciting as the Nasdaq looks (and I have often pointed out how a dozen stocks account for over 1/3 of the Nasdaq’s movement) although they have equally stressed RSI and MACD lines – indicating a pullback is far more likely than a breakout:

If the market move is true then there is literally nothing (resistance-wise) preventing the NYSE from driving up to its 200 dma at about  8,000.  The S&P (another broad index) has virtually the same chart with a breakout around 1,130 but if we call 850 the non-spike low, then we need 1,190 just to get a 40% bounce.  Either way, that 200 dma is 100 points of air away if we’re going to confirm the tech move.  The Russell works out amazingly well, with 630 being 40% up from the 450 line we use as the nominal low and that also intersects with our 5% rule marks so we’ll be keeping a very close eye on the Russell, which has been playing with that line since Christmas

The SOX are running parallel with the Nasdaq and our other major point of contention is going to be the Transports, with the Nasdaq Transportation Index ($TRANQ) not looking impressive at all as it has continuing trouble with the 2,000 mark. 

So that’s pretty much what we’ll be looking for this month as the volume returns (we hope!) to the markets and gives us a better indication of what is real and what was just fluff for the end of the year.  The Fundamental Analysts had a nice overview of the continuing market concerns so far be it for me to beat a dead horse and he also had this nice chart, which puts the last two years very much in perspective as we all could have pretty much taken a long vacation except for one pesky mathematical fact:  When you fall from 100% to 50% in 2008, a 50% recovery in 2009 only brings you back to 75%.  This is why Warren Buffett’s Rule #1 to investing is "Don’t lose money" – it can be really hard to get it back…

So, from 75%, we need another 33% move up just to get back where we started 2008 – a pretty tall order for 2010, especially as we start the year with the handicap of 10% unemployment and no new President to get all enthusiastic about.  This morning the markets are enthusiastic about a 56.1 reading on Chinese PMI (anything above 50 is expansion) and that is fueling speculation that the Yuan may rise against the dollar and is pushing the dollar lower this morning.  Since Wen Jiaboa just said recently that they will NOT float the Yuan – I’ll have to go against the speculators on this one

Neither the Hang Seng (down 0.23%) nor the Shanghai (down 0.4%) were all that excited about the news but Europe was loving it this morning and markets there are up a point, just ahead of a US open that’s looking to give us about the same.  We don’t care where we open this week, we just want to see what sticks.  We get our own look at Construction Spending at 10am, along with our own ISM index with Factory Orders, Pending Home Sales and Auto Sales coming in tomorrow. 

Wednesday we get the ADP Report, Challenger Job Cuts, ISM Services and, of course, Crude Inventories.  Thursday brings us Jobless Claims and Friday is the Big Kahuna, with Non-Farm Payrolls (maybe a positive number?), Wholesale Inventories and Consumer Credit.  With Job expectations running hot, Wednesday’s ADP Report will be critical but hope may spring eternal all the way into Friday’s jobs numbers, which will make or break January I imagine.

Strap in – it’s going to be a wild ride – THAT I can predict!


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  1. biodieselchris

    I’m in the philippines. It’s fun to watch the first trading day of 2010 open at 10:30 PM (if I stay up that late). Maybe the 80 degree evening will put me out. too much diving to do tomorrow to trade … go UUP, TBT … yawn … going to bed ….

  2. samz3700

    Phil -
    With the vix so low – should we  be thinking of rolling our covers out to June strikes – currently in March?
    Also any plays on this pump or are we just going to watch and see what happens?

  3. Cap

    Nice pump job this am !   …. c’mon !
     
    Gotta dump shares on the 401k buyers !

  4. Phil

    Good morning!

    Levels we need to see held today are: Dow 10,457, S&P 1,127, Nasdaq 2,242, NYSE 7,380 and Russell 630.  3 of 5 over os good, 3 of 5 under is bad.

    Higher breakout levels are: Dow 10,549, S&P 1,135, Nasdaq 2,314, NYSE 7,389 and Russell 638 and we REALLY want to watch how the Nas performs up there.

    Transports are lagging but up .90 while SOX are leading us, up 2% already sso we’ll watch them at the 2.5% rule, which is 369.50 to see if there’s any resistance. 

    VLO up 5% already, WFR up 2%.  XOM is surprisingly subdued, up just 1% so far.

    We don’t have any volume yet but we’ll see what happens when we get the ISM report at 10.

    On the whole, there’s not much to do but watch and wait today and see how the levels are handled.

  5. Pharmboy

    CAL coming down nicely.  Those P should be just fine if anyone DD on them.

  6. ssdirk

    Pharm – My CAL puts are saving me from my WYNN puts.  Nice way to start the new year by pumping the casinos.

  7. Phil

    Bed/BDC – That’s a good idea for today, going to be a silly trading day most likely.

    Covers/Samz – I wouldn’t do anything that drastic just yet.  We have a lot of fund people buying back in simply because nothing blew up over the holidays (or at least nothing Americans care about).  That and a weak dollar and yet another tale of Chinese demand are giving us one MoFo of a commodity rally with OIH up 3%, XLE up 2.5% and XME up 4% – these are not sustainable moves.

    BIDU weak, RIMM weak, YRCW failing, FSLR weak…

    News moving the semis (and the Nas)Nov. global chip sales: +3.7% M/M to $2.6B, and +8.5% Y/Y. It was the ninth straight monthly gain, and the first time in 2009 that sales were positive compared to a year ago. The gain was driven by better than expected IT and consumer sales.

    And even more chip demand:  Move over, netbooks. Smartbooks, combining smartphones and netbooks into an even smaller laptop, debut this week and threaten to eat into netbook territory, spelling bad news for companies like Intel (INTC) and Microsoft (MSFT).

    The upgrade circle jerk continues: Morgan Stanley (MS) +3.75% premarket after Credit Suisse and UBS upgrade shares to Outperform and Buy, respectively. UBS says Morgan’s capital and liquidity positions remain strong, investment banking is on the mend, and believes it can post a solid 2010 if management can generate improvements in trading and asset management.

    Ignore this (everyone else is): Severe delinquencies on business loans rose to 0.91% in November vs. 0.87% in October, says PayNet, the 22nd consecutive monthly increase in loans unlikely to be paid. In slightly better news, the Small Business Lending Index fell just 11% Y/Y, the smallest decline in the index since the recession began.

    On Friday, CA Governor Schwarzenegger releases his initial budget proposal for 2010, and the Legislative Analyst’s Office is already calling on state leaders to "aggressively seek new federal assistance" to help close the projected deficit. Just don’t call it a bailout. "No one is looking for a bailout. We’re looking for an investment."

  8. Pharmboy

    All I can think of as I watch the DIAs this morning is my son throwing the rocks up in the air at the beach yesterday, and then….watching them fall back to the water with a SPLASH.  Happy New Year all!  Get ready for Biotech Punch Ball, cause this year they are gonna fly.  Alcon majority was just bought from Nestle by NVS.  So, is Nestle on the block, or are they gonna buy someone.  Don’t know enough there, but if KFT is looking at Cadbury, then Hersey has got to be thinking of expansion.

  9. tradansh

    TBT \ Phil - Looking to establish long term plays, given that it’s very likely the rates will go up sometime this year, or next. Now, might be a good chance to get in for a move up much higher.
    Can you recommend some plays? (Have been thinking about something with 2012 LEAPs – calendar or synthetic write instead of directly owning the stock)
    Might have missed if you have already recommended something similar earlier.

  10. Phil

    Woo-eee!  Dow ran right up to 10,549 there before being rejected.  Nas right on 2,300, S&P 1,127, NYSE touch 7,300 and RUT 635 so we have some real goals to shoot for this morning.

    Volume under 30M at just about 10am so yawn…

    We’ll see what ISM does in a few mins.

  11. Phil

    Dec ISM is 55.9 and 61.5 on prices paid so in-line on expansion but prices are racing ahead.

    Construction spending was terrible – down 0.6% vs flat last month but not unexpected after other hosing data the past two weeks. 

    So nothing here to derail a rally so the indexes are on their own with nothing to blame if they can’t pop it here

    TBT/Trad – I was hoping for a bit more of a pullback but I still like the risk/reward of the 2011 $45/55 spread at net $5 and, if TBT drops to $45, you can sell the $45 puts for $5+ (the current $50 puts are $5.40) to offset your bet and those can be rolled to 2012 $40s even so, as long as you’re willing to own TBT at net $40 in 2012 – it’s a nice play!

  12. jomama

    Pharm, are you still short MS?  Big boys seem to disagree.  What are your thoughts on GILD here?

  13. Phil

    AMZN tipping over.  GMCR and even AAPL losing steam but Nas over 2,300 so far and we have to respect that if it holds up.

    Those DIA Jan $103 puts are nice and cheap again at .45.

    Oil struggling at $81.50, gold can’t get over $1,125.  Silver $17.43, Copper $3.40, Nat gas $5.78.

    Dec. ISM Manufacturing Index: 55.9 vs. 54.8 consensus and 53.6 in November. Prices index 61.5 vs. 55 prior. Employment 52 vs. 50.8. Inventories 43.4 vs. 41.3. New orders 65.5 vs. 59.9. It marks the fifth straight month of expansion in U.S. manufacturing.  Inflation, what inflation?

    November Construction Spending (.pdf): -0.6% to $900.1B/year vs. consensus of -0.5%, and 13.2% below the year-ago estimate. The October figure was revised down to $905.6B from $910.8B. For the 11 months, spending was $868.9B, 12.7% below the same period in 2008.

    Peter Goodman says the government’s $75B program to protect homeowners from foreclosure is worse than a failure – it’s actually making things worse. "Desperate homeowners have sent payments to banks in often-futile efforts to keep their homes… wasting dollars they could have saved in preparation for moving to cheaper rental residences."

  14. tradansh

    Thanks Phil. What do you think about buying the 2012 $40 calls for $13ish and then selling the Mar 55 call / 45 put for $1.50 or more? 45 seems to be a very solid base for TBT. That way you can collect over 10% every 3 months to cover costs.
    Also, you can actually do the 2012 $45/$55 spread for $5 or less. So, one more year :D .

  15. Pharmboy

    MS/jo – yes, and the big boys will play with eachother’s ratings ’til the cows come home.  I will be rolling up and out (in29 Jan now), selling a Jan straddle around them to make them push it higher.  High is 35.78, but my premise is their books suck, and no one will admit it yet.  Chart looks weak, as they cannot even hold the high thus far. Upgrade schmuckgrade.
     
    GILD – AIDs drugs are doing very well, and I still like them to $50.  Just have to wait to see where they take things in the sector.  GENZ and CEPH are in the 50-60, GILD should be there as well based upon P/E (currently 16).

  16. tradansh

    HK – Spiking up nicely today. Anyone knows why?

  17. stockbern

    HK up because CHK sold interest in Barnett shale to Total.  

  18. dmankoff

    Phil, if you had all cash, which i do right now, what would you buy this minute?
    I’m stalking BGZ  EDZ  TZA  SRS  TBT
    thanks
    David

  19. jcmcn5

    phil — what kind of stop would you put on the dia jan 103 puts that i bought at $0.43?

  20. JRW III

    David
    I’ve got bull call spreads in all but BGZ, check out Phils Hedge Post from last week.

  21. jcmcn5

    fyi — i bought a half position at $0.43.  I was thinking of dding if they got to $0.40, but wondering if that should be the stopout price instead.

  22. mrmocha

    Pharmboy – painful smackdown on VIAP today, know why?

  23. Pharmboy

    jcmcn – stop out at 10%, DD at 20-25%.  It is all in the risk and willing to ‘play’.

  24. Pharmboy

    MrM – NASDQ delisting.  I think i noted it last week. 

  25. Phil

    Sector ETF strength: Coal– KOL +4.3%. Steel– SLX +3.9%. Silver– SLV +3.6%. Gold Miners– GDX +3.6%. Oil Services– OIH +3.4%. Solar– KWT +3.1%. Heating Oil– UHN +3.1%. Basic Materials– IYM +3%. Basic Materials– XLB +2.8%. Energy– XLE +2.7%. Energy– IYE +2.6%. Semis– SMH +2.4%. Gold– GLD +2.4%.

    Weakness: none.

    Dow leaders after one hour: AA +4.2%. PFE +3%. BA +2.9%. BAC +2.8%. INTC +2.7%. CVX +2.6%. CAT +2.5%. DD +2.5%. CSCO +2.4%. UTX +2.2%.

    Laggard: HD -0.2%.

    Eerie similarities between the 1929 Dow Jones Industrial Average chart and today’s Nasdaq.

    On the other hand: Briefing.com’s Patrick O’Hare predicts a strong first half, fueled by more strong earnings. Massive cost-cutting in late-2008 and 2009 will offer companies "a good deal of operating leverage that can lead to double-digit profit growth with only modest increases in sales. By way of example, S&P operating earnings for Q4 are projected to spike 203%, while revenue growth is expected to be up just 7%."

    TBT/Trad – Also a good way to go.  You don’t want to do longer bull call spreads as you won’t collect for longer unless you are very concerned you won’t make your mark in a year.  With TBT, I’m not very worried. 

    Cash/Dman – Best is TBT by far..  It protects you from inflation and is also a very solid fundamental bet and is also a bullish bet as a hotter economy should lead to rising rates.  The others are too speculative with all these levels currently broken, albeit on unimpressive volumes so far. 

    DIA/JCM – It’s not meant to be a day trade.  If the Dow runs up higher then they can be rolled to the $104 puts for .13 or less (the roll from $102 puts to $103 puts is .11) and we do have 2 weeks to expiration. 

    RUT hitting 2.5% rule at 640 and we’re still waiting for SOX to cross, no one else is over 2% yet.

    Now even cancer is good news for the market!  Irish Finance Minister Brian Lenihan says he’ll stay in office as he receives treatments for a cancerous blockage at the entrance to his pancreas, sending stocks higher. Allied Irish Banks (AIB) +11.7%. Bank of Ireland (IRE) +13%

  26. jcmcn5

    That’s the rub Pharm.  I can’t decide if this is high risk foolishiness or an educated, tactical play.

  27. samz3700

    Phil -
    Are you bother to roll dia covers up on this?

  28. Pharmboy

    VIAP is done with their clinical trial as well.  Gonna go for bust on them……1K shares is $150, start with 5K, if they move down a bit more, then will pick up another 5K.  If it works…OH MY.  Scientifically it should work, as the target is 5LO.  I did a write up on them last year, but will touch upon them in an upcoming article.

  29. oncmed

    Phil,
    Your thoughts on selling some OI puts here?  Thanks…

  30. tchayipov

    Phil
    EDZ is a killer today, the worth part naked Apr $3 Calls,
    what is your recommendation? DD here?

  31. raulsm

    Phil, not sure this was posted, from Dept of Treasury (http://www.occ.treas.gov/ftp/release/2009-161a.pdf) , derivatives held/controlled by US banks and goldings total $293T:

    JPMorgan: $79.397T
    Bank of America: $75.034T
    Goldman Sachs: $49.83T
    Morgan Stanley: $41.830T
    Citigroup: $34.473T

    Does this mean they own these $293T, or are they liabilities, or just chips to gamble, or what?
     
    There is now way any of these would go under it seems…

  32. samz3700

    TBT – 45/55 Jan Bull call just got filled for 4.50 – think I could have gotten it for even less – damn

  33. Pharmboy

    Can’t trade them….seems they have been halted….on the pink sheets on Yahoo….hummmm…..

  34. samz3700

    TBT – 45/55 filled at 4.25 – put in some low balls and see what happens

  35. oncmed

    Pharm,
    Have any insight on ITMN?  …saw something about pirdenidone and FDA review.  TIA

  36. Pharmboy

    ITMN/onc – they will get approval for their drug in IPF (interstitial pulmonary fibrosis) next year.  They have orphan status, meaning no one can enter the market through that path (however it works – as it is really unknown).  They are looking at other diseases for their drug as well – kidney, liver fibrosis, etc.  The drug is on sale in Japan.  They are range bound now, and have filled the gap.  Selling puts to get better entries is the way to go, but do it in increments, as a bit of bad news can send them down hard (ie, manufacturing delay).  Not implying that there will be one, just sayin’

  37. jomama

    Phil, thoughts on a DBA vertical – buy DBA Jan 11 25′s  calls and sell 30′s for a 2.1 debit?

  38. Pharmboy

    Sorry, they get priority review, so May is the date….on ITMN.  With that the case, look at entries in the July, possibly the 12.5/17.5 bull call spread for $2, selling a few puts on the way to reduce the basis.

  39. Pharmboy

    ITMN – II just got it for 1.7, so go lower to see if it fills….

  40. Cap

    Wow, what a BS FMD on no volume !

  41. jcmcn5

    Question about the Jan. DIA strategy.  If the 103 puts are not a day trade, but might instead be used to roll into the 104sin the event of a move up from here, doesn’t that conflict with what is implied by the breakout levels?  If the market moves up from here, aren’t we likely to become more bullish, thus making a move into the 104 puts the wrong play?

  42. Phil

    DIA/Samz – I’m not doing anything right now as it could go higher tomorrow and I’m already going to wait until Wednesday to see what holds so not worth it unless they get really cheap, like .11 for the roll (now .17).

    OI/Oncmed – I’d rather speculate on calls than puts because if they do head south, I wouldn’t want them.  Jan $30 calls are $8 and Feb $35 calls can be sold for $2 against them – that’s a nice start if you are bullish long-term.

    EDZ/Tcha – I am for watching and waiting today.  It may all reverse or we may get a major move up and the point of posting last year’s chart of Jan above was to let people know that we could easily get a huge spike up before a big crash.   The first 3 days of January last year went from 8,750 to just under 9,200, over 400 points up and it was all reversed on the 4th day.  We may be at the top of a spike, we may be in the middle of one or we may be at the bottom of a 10% run as the NYSE, S&P, RUT and Dow all try to catch up to the Nasdaq and break their 200 wmas.  The best way to stay unemotional about this is to just watch out levels and wait to get confirmation from the NYSE and S&P (assuming the others hold) that we really have a breakout here

    Derivatives/Raul – I theory, they generally balance each other out.  They are no different than someone saying you have an options portfolio of $34Tn with the associated obligations – if you are well balanced, then no big deal but if you are just a bit unbalanced and there’s a major move – then a Trillion here and a Trillion there and, before you know it, we can be talking real money…

    The worst of the recession is over, says new BofA (BAC +2.9%) chief Brian Moynihan: “As an industry, we overlent and customers overborrowed." Despite increasing calls for renewing Glass-Steagall (and with it scrutiny of BofA’s Merrill Lynch acquisition), Moynihan says the Merrill deal has turned out to be a good one for shareholders.

    Credit Suisse (CS) is targeted by a $24B lawsuit alleging fraud in four luxury resort communities in Montana, Idaho, Nevada and the Bahamas. The suit alleges the Swiss bank and CRE firm Cushman & Wakefield ran a "loan to own" scheme that inflated the value of the resorts with an eye to foreclosing on them

    Pimco shaves its exposure to interest rates. Paul McCulley: "We’re probably going to have a $1.4T deficit this year without the Fed on the buy side of the market for duration. There is major uncertainty about how the supply/demand equation for duration will resolve itself when the Fed is out of the picture."

    Big capitalization, high-quality U.S. stocks are very, very cheap compared to everything else" – Barton Biggs, who piled into stocks at the March bottom, and is going long on the biggest companies and shorting commodities ("an investment vehicle for maniacs").

    10,600 getting tested!  S&P at 1,133, NYSE 7,330, Nas 2,310 and RUT 639 so a big multiple look at high-water marks

    Meanwhile, this California thing is totally being ignored by whoever is buying the market today – very strange…

  43. Pharmboy

    DIA/jc – the delta is .17 on the 103 DIAs, so holding out for a bigger sell off should be fine for a DD.  Otherwise, most likely time to exit.

  44. magret

    Pharm NVS & ACL down 2% & 5% …time to sell some puts? 

  45. Phil

    DBA/Jomama – I’m not entirely convinced agriculture will keep going up if the dollar bounces but that’s a good way to play it.

    DIA/JCM – This is just a short-term positioning, not intended to be a low-risk trade.  Just like Friday, we get an opportunity to buy the DIA puts very cheaply (comared to the previous close) because of a massive pre-market spike and a low-volume run-up.  We are bettting that the Dow can snap back down or, if it doesn’t, at least that we don’t expect it to jump up 200 points and wipe us out before we can get out. 

    And what Pharm said!

  46. cwan120

    YRCW – If the following article has been discussed on this board, I apologize the repetition.
    http://www.bloomberg.com/apps/news?pid=newsarchive&sid=akW2fq12ZKOA
    Summary: The labor union forced (or coerced?) banks and hedge funds including GS to vote for the bond exchange.  GS, et. al., bought CDOs (credit default swaps) against YRCW and stood to win big profits if YRCW fails.  The labor union went an all-out war, including threatening to go to Congress to ask for more regulations on banks.  So far, it looks like the union won this round?
    Do we have the pleasure of seeing GS losing, just once?

  47. stevenparker

    jc – remember if we break our upside levels then there will be new, higher upside levels that we will need to break….I think the problem we have been having is the levels are being broken continously but unconvincingly leaving us bearish

  48. jlui_tx

    Hi Phil, Happy New Year!.
    I ‘m looking to sell near term UYG calls/puts since I have bought Jan 2011 $4 call for $2.25 and $4 puts for $0.8. a while back. Any suggestions?
    thanks

  49. jomama

    cwan120, their timing was pretty good (the unions) – antiGS sentiment, populist president/congress.  I have to admit, Hoffa seems to be doing a good job for the unions.

  50. stevenparker

    Anybody have any opinions why rimm is so weak?

  51. Phil

    Companies waited longer to receieve outstanding payments in 2009, a study finds, and economists say the cycle of slowness may be jamming the economy’s gears. A new book by John Lanchester, I.O.U.: Why Everyone Owes Everyone and No One Can Pay, echoes similar sentiment, but with much more elegant prose.

    YRCW/Cwan – I’m sure they simply flipped their bets. 

    Amen Steve – there’s awlays another level but once we get past 50% lines, we’ll be looking for 60%, 70% and 80% on the way up so we can afford to get much more bullish.

    Speaking of bullish, XLF finally making some moves!

    UYG/Jlui – I think just selling the Feb $6 puts and calls (now .70) and plan on rolling as you are in the money to the caller and .70 pretty much pays for your whole long put position. 

    Hoffa/Jo – Just saw that movie over the weekend.  Nicholson was great!

    Noon volume on the Dow was 75M, not at all out of the low ordinary of the past quarter so far.   Of course, no one who matters is back from vacation yet…

    RIMM/Steve – There are so many devices coming out and hiring will remain weak in corporations so RIMM is going to have a rough time.  I still like them but not for a moon shot.  MOT’s new phone looks nice and AAPL, of course, is going to be kicking ass and taking names this year…

    Americans spent more on movie tickets than DVDs in 2009, reversing a six-year trend (abstract). "For studios, which count on income from home entertainment to underwrite growing production costs, the trend represents a giant headache."  Boy, these guys are NEVER happy!

  52. Pharmboy

    The rocketship STEC is still moving to fill that gap…..gotta learn to follow my own advice….go with the trend.

  53. hunter5533

    Phil – what do you think of VLO at these levels?  - is today a break away gap on the daily? Not too much volume yet but certainly more than we have seen lately. 

  54. humvee4me

    Phil--
    TBT trade
    I would like to understand with more clarity why you prefer to do the vertical with 45/55 versus the 55/60.  Why would I prefer to buy a call already so much in the money.
     
    Cheers

  55. humvee4me

    Is it to take advantage of a higher delta?

  56. Pharmboy

    Saw MOT’s new phone….pretty impressive.  A bit thick for my liking, but should give AAPL a run.

  57. humvee4me

    Pharmboy; you speaking of the droid?  We got one, it does everything an iphone does and is running on the verizon network (much better nationwide coverage, which we need since we RV a lot).  It’s running the google android OS which is an open OS  (vs Apple).

  58. Pharmboy

    Hum – must have been the droid….friend bought it and it was with VZ.

  59. mSquare

    RDY – Indian generic drug maker. Going (more) long here. I think a good risk/reward long for 1Q-2010, with a stop nearby.
      http://finviz.com/publish/010410/RDYc1dl1230.png
      http://stockcharts.com/h-sc/ui?s=RDY&p=D&yr=0&mn=3&dy=0&id=p29889390313

  60. Pharmboy

    Speaking of VZ, looking weak….

  61. Pharmboy

    RDY just received interum data on a diabetes drug that will compete with LLY and GSK.  Don’t believe the hype until they show they are BETTER than what is currently on the market.  FDA is gonna make these companies jump through hoops for equivalents.

  62. mSquare

    RDY – I am buying more on the pullback on the chart and not the new Diabetes drug – that is actually just one more reason to own it. Even rumors of it being a success will make RDY fly – I mean fly higher.
    All I am looking for is it go back and re-test the 52-week highs of $26.54 it set a few weeks ago (about $2 higher than here) and my stop is near the 50 dMA about $1 lower.

  63. RMM

    Phil: my VLO mar 16 puts, base 1.37$, are now 47 cents, I have 2x .
     
    maybe cash in 1x.???

  64. Phil

    VLO/Hunter – $16.50 is our target entry on them so I’m not thrilled with chasing them on a crazy rally day but you can still sell naked March $17 puts for .82 as a nice net entry or quick 10% (of margin) profit.

    TBT/Humvee – Well if you buy the 2011 $45/55 for $4.50 you are already $5.17 in the money and need just a 10% move in TBT to make 100%+ profit.  If you buy the 2011 $55/60 spread for $1.35, you don’t even get even until there’s a 12.5% gain and you need a 20% move to make $3.65, which is 270% but I’m sure if someone ran a statistical analysis they’d find that you are far better off betting 2.7x more on the lower spread.  Also, if TBT does fly up to $60 early, the $45/55 spread will pay off almost fully while you will experience little change in value on your spread. 

    Droid/Humvee – I don’t have the droid but the Google Mobile App on my IPhone is very nice.  Voice searching and a very good design..

    SOX fell back, now up 1.8%.  Transports up 0.7%. 

    Goldman upgraded chemical sector, that has helped this morning too.  

    Volume just 90M at 1pm and indexes looking out of gas I think.

  65. kustomz

    Hey Pharm ARIA!! :-)

    …China one really big cancer cluster in the making
    A spill of up to 150,000 liters of diesel oil from a broken pipeline in northern China has reached the Yellow River, the drinking water source for millions of people.
    http://www1.voanews.com/english/news/environment/China-Oil-Spill-Water-Source-04Jan10--80621062.html

  66. kustomz

    Pharm any interest in ITMN?

  67. Phil

    VLO/RMM – If you REALLY don’t mind owing VLO at $15.53 and you don’t need the margin back, there’s no hurry.  .47 out of $1.37 is a lot of money.  If you want the margin back, the logic is different as you can only make .15 per month on what’s left so there’s really no point to keeping them at all unless you have nothing better to play for .15 a month…

    Yellow River/Kustomz – That’s the kind of thing that can change a country’s environmental policies:

    The public-health scare began when diesel started gushing into the Wei River, a tributary of the Yellow River, last Wednesday from a ruptured pipeline operated by China National Petroleum Corp.  Over the weekend, workers threw 17 floating dams across the Wei to block the toxic diesel and save the Yellow River. But scientists discovered diesel traces in a reservoir behind a dam in Sanmenxia, a city about 100 kilometers (62 miles) downstream from the point where the Wei meets the Yellow River, an official in the Henan provincial environmental protection bureau said on Monday.

    Also interesting:

    [pmi]

    Treasurys are mixed, with shorter-term issues showing gains: the 30-year yield +0.02 to 4.65%; 10-year +0.01 to 3.84%; 5-year -0.02 to 2.66%; 2-year -0.04 to 1.10%. The dollar still weak against most partners: -0.6% against euro, -0.4% against yen, -0.6% against Swiss franc, -0.6% against loonie, +0.1% against pound.

    FDX with an interesting dive.  UPS looking weak too. 

    V is back to where they make a fun short.  $90 puts are just $2.40.

  68. tchayipov

    Phil
    do you naked on mattress play now?

  69. Highlander

    phil,
    thx for the heads up on free goog mobile app for the iphone. my little girle just downloaded it. it is great! absolutely outstanding voice recognition. should make my driving much safer while searching for things and locations in the car.

  70. Pharmboy

    ITMN/Kust – C my 11:34 comment.  RDY still looks toppy to me. 

  71. mrmocha

    Pharmboy, did you get some VIAP at the bottom? My order for .15 didn’t fill before it popped.

  72. Highlander

    phil,
    btw another great (and free) voice app on the iphone is dragon dictation. also has great voice recognition and allows voice generated text that can be emailed , texted or clipboarded. the apps on iphone is just exploading with functionality.

  73. kustomz

    Thanks Pharm

    Need to find out which US companies can help China do some spring cleaning?

  74. craigzooka

     Wohoo, fall out of the sky V.  Daddy needs a new 27" imac.

  75. samz3700

    Phil – IYR Jan 48s puts – same thing here as covers – in holding pattern on selling the spread? A buck on the Jan 46s is looking tempting.

  76. ephmen85

    DIA Mattress    I’m currently at +6 Mar 107/- 3 Jan 103, -1 Jan 105.   About right or should I make an adjustment (I have a stop order on the 103s)?

  77. Highlander

    rut is coming down! good call phil.

  78. Pharmboy

    MrM – TOS will not let me trade it for some reason…..

  79. Pharmboy

    Meanwhile -the PODD shot off into space….wow oh wow.

  80. Phil

    Mattress/Tcha – If you are protecting bullish positions, then sure. 

    Goog/High – I also love the BeamitDown reader, I hope that one catches on.   Dragon I use all the time, thanks, that’s another great one (so amazing that stuff like that is free…).

    IYR/Samz – Tempting but too dangerous with levels holding up I think.  I’m busy looking for long positions – just in case.

    DIA/Eph – I think that’s fine but maybe done with the $103 puts as they can’t help you much at .38 and you can sell just 1 $105 put to make up for 2 $105s or even 1 Feb $103 put, which is bigger than all 3 Jans.

    Oil is punching back to highs into the close ($81.68).  Gold back to $1,118. 

    2pm volume 100M, now turning into a lame day but maybe the sellers will show up late.

    V coming down nicely.

  81. nolsrul

    SRS--acting strange in light of broader indices…Thoughts?

  82. dflam

    Hi Phil : I bought CAM at $38.66 (now $43.25) and sold Jan. $42.50 calls for $.99 (now $1.45) and Jan. $40 puts for $2.78 ( now $.15). I’m thinking of closing out the options and then selling the Feb.$45 calls for $1.35 and wait for a better price to sell the Feb. $40 puts ,now $.90 What do u think?
    DFlam

  83. samz3700

    SRS – NOL – IYR is rolling over – now down 1/2 percent

  84. ssdirk

    KONG – Anyone familiar with this Chinese Co.   The open interest in the Feb 12.50 calls is huge.

  85. Phil

    SRS/Nols -  VNO and BXP got weak along with others in the sector and that saved SRS.  I think it was this:

    Fed governor Elizabeth Duke: Loan volumes are on the way up later in the year, as financial markets continue to recover and housing market begins to emerge. Reduction in credit availability isn’t the whole story; demand for credit is lower as businesses build cash positions. CRE will still lag, but compared with the ’90s, the problem now is bad fundamentals rather than overbuilding – a good sign. 

    CAM/Dflam – Good plan.  I don’t think I’d be as aggressive with the calls but that’s becasue I still expect a pullback.

    Sector ETF strength: Coal– KOL +4.7%. Steel– SLX +4.2%. Oil Services– OIH +3.7%. Silver– SLV +3.7%. Solar– KWT +3.5%. Gold Miners– GDX +3.2%. Basic Materials– IYM +3%. Energy– XLE +3%.
    Weakness: none.

    Dow leaders: BA +3.7%. BAC +3.7%. AA +3.6%. PFE +3.4%.
    Dow laggards: DIS -0.4%. HD -0.4%.

    Ambrose Evans-Pritchard’s gloomy 2010 prediction: Japan will lead the way back to the economic cesspool. "Ben Bernanke will be caught off guard, just as he was in mid-2008 when the Fed drove straight through a red warning light with talk of imminent rate rises."

    Strange: Raymond James downgrades Exxon Mobil (XOM +1.4%) to market perform, expecting solid results, but "sometimes, being the ultimate energy ‘blue chip’ could be a disadavantage. We envision 2010 being one of those times." The firm also upgrades Hess (HES +4.6%) to strong buy.

    WSJ editorial recaps the "Christmas Eve taxpayer massacre" at Fannie Mae (FNM) and Freddie Mac (FRE), singling out the CEOs as the "world’s most overpaid bureaucrats," and saving special attention for the human resources chief at Freddie – the $2.7M-compensated Paul George: "It must require a rare set of skills to spot executives capable of losing billions of dollars."

    Dow 10,549, S&P 1,135, Nasdaq 2,314, NYSE 7,389 and Russell 638 – Wow, right down to the wire!

  86. Phil

    Oops, Nas should have been red!

  87. Phil

    That Erin is some journalist!  She puts her finger right on the true horrors of Communism in Russia:  "They only had one kind of bread."  Clearly there is no better example of the failure of a political system than that!  8-)

    So here’s a question:  How much of the year’s total gains have we burned through today?  10% would give us over 15% for the year.  If we are only going to go up 10% in 2010 – then 20% of those gains are already gone…  Talk about missing the train out of the station! 

    Strangest thing in the market today  – QQQX is FALLING 1.5%.

  88. tchayipov

    Phil
    question about EDZ: don’t understand why it moved down so much, China was down 3 points
    could you give symbols of international market which you watching

  89. Pharmboy

    TRMA – if we are playing recovery, then the oil services sector will do well.  TRMA’s insider’s had been buying at the $6 range. 

  90. stevenparker

    Well I am too short not least of which is too much RIMM. Not adjusting today. I refuse.

  91. ocelli7

    Phil/High/apps,
     
    Red Laser is another great app…..scans bar codes and searches for prices. Use it in Best Buy all the time. Works even with the iphone which cannot focus up close.

  92. humvee4me

    I did the TBT 45/55 spread 2011 for a debit of $4.50; but why did Ameritrade use some of my margin maintenance when its a net debit and there is no risk of loss on the 55 unless i sold the 45.  I am opening up an SOS account, how do they handle this. 
    Is that V put a day trade?

  93. stevenparker

    ocelli/red laser – oh man I wanted to write that app, but I couldn’t see how to get the camera to work. Good for them!!!

  94. RMM

    Phil: had little time for market for the last 3 weeks,
    now its moving up,
    what is your stance ?  where is this going ?
     
    I am looking for my strategy, for shorts and longs and look for your help.
     
    TXS

  95. yodi

    Hi Phil
    How does ZION look to you today sell Feb straddle 14 c/p for 2.15 or April same for 3.15

  96. tchayipov

    phil
    if market doesn’t go down at the end of day do you recommend 1/2 cover of DIA puts?

  97. jlui_tx

    Phil, do you recomend selling calls & puts on GNW?
    thanks

  98. JRW III

    Administration’s market strategy as quoted from Krugman: " Prolonged good news tends to silence the skeptics ".

  99. JRW III

    No Cap, the news doesn’t have to be true to accomplish the desired result !!

  100. samz3700

    Humvee – what was your limit price for the spread ?

  101. Phil

    EDZ/Tcha – They are a 3x ultra so that’s part of it and they are not just about China, they include Brazil, Russia, India and other very volatile emerging markets.

    TRMA/Pharm – That’s an interesting one!  At $5.03 you can sell the June $5 puts and calls for $2 for a net $3/4 entry and that’s pretty nice if called away (40%)

    Refuse/Steve – Yes, sadly, we have to.  This is exactly the sort of day where you can doom yourself by flip-flopping. 

    SPG picking up a lot of put action.  DHI too.  MTN with a big sell-off. 

    Laser/Ocelli – That sounds like fun.

    Margin/Humv – I have no idea why they would do that if you didn’t sell the naked put.  Maybe they have psychics now that guage your future intentions?  As to V – wasn’t intended to be a day trade but taking a quick 10% profit is never a bad plan.

    Market/RMM – I’m thinking we’re going to look like last Jan but we won’t know until Thursday or Maybe even Friday with the Jobs report.  Check the latest watch list – plenty of nice things to buy there – the kind of stuff we don’t mind scaling into on the way down.

    ZION/Yodi – I would just go for it with the 2011 $10/15 bull call spread for $2.50 and sell the Feb $14s for .70 against that.  You can either stop the caller at $1 or just add more 2011 $10s if they start to move higher.

    DIA/Tcha – I always recommend a 1/2 cover because there’s no way to know but I’m staying naked on a gamble that the market falls off a cliff this week. 

    GNW/Jlui – Hard to relate to them at $12 (up 10x from spring).    I’d sell the Jan $12.50s because earnings are probably after expiration so you’ll have plenty of nice Febs to roll to.

    "Prolonged good news tends to bankrupt the skeptics," JRW! 

  102. RMM

    Phil: what is name of latest watchlist: Q4 watchlist or what ?

  103. ocelli7

    Phil, I know we are lying low today to see how things develop, but what are your thoughts on oil? If Wed inventory is low, then can it really continue to rise much above 80/82. Also, I see that Mar, April, May futures are also up…..how does one view that data or is it too far out to be very useful about making decisions this week?

  104. BigPinot

     Phil…what are you thinking…should we get into bullish plays now looking for another 10% ?? LONG EWJ JAN 10s?? SHORT TLT?? AND HOW ABOUT GLD?

  105. RMM

    Phil: need to earn some cash on my FAZ stock: which FAZ calls to sell ? have sold jan 10 puts at 2.28$,

  106. emcginley

    Phil, if u think that the market will fall off a cliff then should I just wait and see on my short TYH 160/165 call vertical. I received $0.90 or do you have a better idea? I also sold the 170/175 call vertical but I am not as worried about those.

  107. ocelli7

    Steven/red laser,
    I have no idea how they did it because I cannot clearly see the bar code up close thru the camera, but if the bar code is flat and there are no reflections from plastic wrapping, it does work. After it was introduced, they pulled a fast one and ONLY allowed it to search Find.com, which had a very small database. People went ballistic and now it searches google and does an ok job. It finds books, food products, TVs, and you can type in the bar code number in cases where it cannot "focus" on the bar code to acquire the image.

  108. jcmcn5

    Strange day, isn’t it?  How many times have we seen the rocket blast off on the opening, jumping 1.5 % and then just staying there all day.  I mean, there hasn’t even been a half-hearted attempt to sell off the entire day, has there?  There is usually some attempt to bring it down if only for the opportunity to break out the stick save.  Not today though.   What should we make of this?  Is this bullish or bearish?  Hell if I know.

  109. Phil

    Over 100 of todays 158 points came before the open.  That is the very definition of nonsense.  All I can do is keep pointing it out.  It’s like you go to an auction and the painting you wanted that had a $100,000 tag on it in previews opens at $150,000 but there are no bidders.  Then you go to the bathroom and it’s up to $200,000 but still you see no bidders.  You go up to ask the manager what’s going on and he tells you there’s plenty of bidders and, when you go to sit back down, it’s up to $300,000 but still there are no bidders and the auctioneer looks at you and says "last chance at $300,000."  That’s pretty much what this market is like – you can either pay up or refuse to participate, two not fun choices…

    Watch List/RMM – http://www.philstockworld.com/2009/12/22/watch-list-q4-update-members-only/

    Oil/Ocelli – I see no evidence that the global economy can support $80 oil.  DB now agrees with me and targets $65 for the year.  I have always maintained that $60-$65 is a fair price for oil so I’m comfortable enough there although, with a poor economy, it should really be closer to $50.  Other than the very obvious massive manipulation attempt, I would be shorting here but I’m waiting until inventories on Wednesday at the moment.

    Bullish/Big – Not today thanks.  We’re going to have a very annoying week if the markets hang around these levels because I’m not doing anything until they can show me something real looking.

    FAZ/RMM – I think we could get a good move on a bank or two missing but you can get nice premium for the Feb $19s at $1.50 so that’s what I’d sell, maybe 2/3.

    TYH/Emc – I’d wait as this rally is very tough to support (mostly because it’s total BS).

  110. aclend

    Phil,
    When you have a moment please comment. I’m currently working with 100K but will soon get another 100K. First, I need to follow Buffet Rule #1 and not lose money while deploying this capital into some fairly safe investments for the next 3-6-12 months. Would you recommend primarily going with buy/writes? I’m already heavily exposed to financials that I hope will develop over the next year (GNW, C, BAC) as well as emerging markets (PGJ, EWZ) with good hedges on the emerging markets and the portfolio as a whole. Of the sectors that I think will do well that I would like to have more exposure are energy, technology, and healthcare. I’m trying to figure out how best to invest where I could generate monthly income but not take too bad of a hit if things fall apart. Obviously, I’m doing most of what I have learned here but I’m not sure the answer is to just do the same thing times 2. It seems that there might be certain things I could do with 200K that are not as feasible with 100K. Even though I have heard you and others recommend getting Portfolio Margin, I’m not sure I feel comfortable with that yet. I realize it can be beneficial but this is my first year trading full-time and I have now gotten comfortable with "finding balance" and don’t currently want to change the degrees of freedom that I now understand. I recall you saying that 75% of one’s portfolio should be "boring" so that is what I’m talking about. Buy writes on solid, money-making companies, possibly dividend-payers, that I could hold and sell calls against? Or LEAPs/artificial buy/writes on the same that I could sell calls against. Any thoughts or advice are appreciated.

  111. oncmed

    Phil,
    You like shorting GMCR at this level?  ….sell some callers?  Advice, trades? Thanks.

  112. EricL

    What’s up with all the ‘income’ mixed bond funds getting dumped: PCY, PCN, PHK, DPO.
     
    Any ideas?

  113. doro165

    Thanks Phil for starting 2010 out on the right foot! V a 16% winner in a couple of hours.

  114. EricL

    I meant "PTY" not "PCY".

  115. Phil

    Strange/JCM – Take a look at this time last year – also a "strange" rally on Jan 2nd on pretty low volume, followed by 2 flat days that didn’t really fully break over our levels (and if you read comments those days I’m saying "hold, hold, hold" to the shorts over and over again) and then dropped like a rock.  This is why these reviews are so valuable – sometimes they just run the same bots they ran last year.

    $100K/Ac – For sure with buy/writes if you want to be conservative.  You are effectively getting 10-15% downside protection every period you sell into and that’s no issue at all if you are scaling in.  Figure if you are good for 3 rounds of buys then you can handle a 30% drop in the market, down to 8,000 working that strategy and it still makes nice money on the way up or flat (which is most likely this year).   On the whole, the best thing you can do is wait out this week and see where things shake out.  We should either be getting much cheaper or establishing a new floor by the end of the week. 

    GMCR/Oncmed – Wouldn’t touch them.  They are a great company with great growth but just overpriced at the moment but there are better things to short.  Check these out:

    John Dorfman looks for value among 10 low P/E ratios, including BreitBurn Energy Partners (BBEP) – trading at about three times earnings – and a number of other energy companies.

    Funds/Eric – That is strange, maybe a tax thing?

    V/Doro – That’s the way to do it – take the money and run!

    Dow leaders: PFE +3.9%. BAC +3.9%. BA +3.8%. UTX +3.3%. CSCO +3.2%. JPM +3.2%.
    Dow laggards: HD -0.9%. DIS -0.7%. TRV -0.2%.

  116. samz3700

    On the positive side for the bears
    IYR – looks to close off over 4% for last 5 trading days!

  117. Pharmboy

    MS moves to 31.32 for the high of the day, and can’t close the deal.  All the other banks at least closed up above their 50% gain on the candlesticks.  Game on….

  118. Phil

    There’s some mechanism here that’s being exploited that I can’t quite put my finger on.  Something like the big open in the morning triggers forced buying by mutual funds during the day and they balance in during the afternoon which is why we’re getting volume selling into the close.  In other words, even retail traders aren’t dumb enough to fall for this nonsense but the poor suckers who put their money into 401Ks etc with managed funds that track indexes are just getting raped over and over again with this pump and dump system. 

    Oh well, that was a fun day wasn’t it?   Asia should like it in the morning and Europe would have gone higher today if they hadn’t run out of time so we’ll see if they can pop our levels in the futures tomorrow morning

    The weight of the financial sector – underperforming the overall market for a few months now – might not be the straw that breaks the equity rally.

    Closing volume on Dow was 178M so 78M since 2pm and pretty much all down volume. 

    Finishing levels were:  Dow 10,549, S&P 1,135, Nasdaq 2,314, NYSE 7,389 and Russell 638 – we’re not too far away from a breakout, damn shame if they blow it..

  119. bord

    I feel like all with us with shorts are like soldiers in a trench who are feeling they are about to be overrun, and Phil is the sergeant whacking us on the back with his saber keeping us from bolting the trench, shouting "steady boys, steady"…LOL

  120. Phil

    Steady/Bord – I prefer the classic "Hold, hold."  8-)

    Consumer and business bankruptcy filings in 2009 made it the seventh-worst year on record, with more than 1.4M petitions filed, up 32% from the year before. December saw 116K bankruptcies, up 22% Y/Y. One law firm has had to shift its business: "Bankruptcy is kind of swallowing the whole practice."

  121. humvee4me

    Bord, great analogy; let’s just hope the enemy doesn’t have a nuclear bomb

  122. jcmcn5

    Steady — well let’s just hope that we’re not like the Irish regiments in WW I, who, while holding steady in their trenches, were the first troops to be exposed to, and decimated by poison gas.  Whatever this phenomena is that’s occurring, is quickly going to result in we shorts being carried off in body bags.

  123. cwan120

    Over the weekend, Ilene posted the following and I got it in the email from PSW:
    http://globalresearch.ca/index.php?context=va&aid=16748
    Basically, it’s making a case that Fed is the guy manipulating the stock market.  What are you folks’ thoughts on this?  My thought is that, if it is true, we don’t want to stand in the wrong end of the tracks to be run over, as Fed is even bigger than GS, and, therefore, this train is HUGE.

  124. Pharmboy

    Hold hold……another more intriguing option.  Let’s hope not!

  125. cwan120

    Oh, by the way, if Fed is indeed the guy manipulating the market, GS might know about it, as they have friends over there.  So, maybe Fed is pumping up the market every morning, and GS then sells in the afternoon…

  126. kustomz

    cwan, i find it hard to believe that GS has a guy on the inside….they had one loss in 65 days of trading!! 8-)

    Good article by Krugman
    http://www.princeton.edu/~pkrugman/CRISES.pdf
     

  127. Pharmboy

    OPTR – gonna have to do a buy write on them.  Insiders buying like crazy at the end of the month (Dec) according to the link provided here.  Looking at the 10 Jun’s covering with a strangle on the 12.5/10 C/P.  Selling a few more puts, and 3/4 cover on the calls.  Small lot to get things started.
     
    The company is involved in antibiotics. 

  128. Peter D

    Hi folks – I’m back and hope you’ve had a nice holiday break!
     
    I did look at historical data while taking a rest last week (although my portfolios continue to gain as low volume reduces my over trading problems).  Last year, we had a -18.4% drop in SPY, from Jan 2009 Open to Feb 2009 Low.  This was nothing compare to the -35.5% drop from Sep 2008 Open to Nov 2008 low.   So for the Short Strangles, we can easily handle the -18.4% drop in any two months period as we usually start the Short PUT at -15% to -20%.
     
    On the upside, taking out the Mar/Apr/May 2009 surge, the next highest 2 months spike was 13% in Jul 2009.  We’ve been averaging 8.5% spikes from August to Nov (a spike = a high in any 2 months period compare to first month Open) as we tends to have a dip into every month open.  If January follows the same path, we can get to SPX 1,200 in the next few weeks.  That would be 80% of the 10% 2010 yearly gain depicted by many folks.  Back to the Short Strangles, we start out the short CALL with 8-10% Out Of the Money, which is cutting a bit close to our liking, but we accept the risks.  The low(ish) VIX doesn’t give us the high premium for selling CALLs that is more than 10% OTM, e.g. the 1210 CALL is only $2.65.
     
    The SPX crazy play is still most fashionable and preferred as it gives some protection and flexibility for adjustment on the downside.  One of the spreads that I have is: SPX 970 short PUT, 1210 short CALL and 1040/1030 long PUT vertical.  If you start a new spread, you can buy 1060/1050 PUT vertical for just $0.3 more.  If you worry about being blown out on the upside, then don’t sell the CALLs (I almost always sell them).  The total credit with the 970/1210 short strangle with the 1060/1050 vertical is $4.25.  For Portfolio Margin, If we reserve $200 margin ($20,000 per contract), then the return is 2.1% for 6.5 weeks, most of which would come in the next 3-4 weeks if the market stands still.  I think we are not likely to need a double down this month, so $150 for margin should be good enough (about 3% return for 6.5 weeks).
     
    Remember that we won’t be loosing until SPX reaches 1214 or drops to 966 in 6.5 weeks.  At the high end, the bears would have lost a bundle, or the bulls would have also lost a bundle at the low end.  We just want time to run out.  So anything PSW members can do to fast forward the clock would benefit us all.  Have a great year of trading!

  129. stevenparker

    Well I’ll be blowed, the UK has found a new way to plug the deficit. I haven’t lived there for years and have just received a very substantial tax bill for UK earnings that I simply don’t have. When I asked what earnings they think they are taxing their answer is "well, we know you’re not here and have no evidence that you owe us anything, but we decided how much you might have earned and are demanding the tax on that amount".
     
    Scandalous! Watch out for announcements of spectacular deficit reduction in the next few weeks….

  130. Phil

    Body bags and bombs/Humvee, JCM – That’s why you don’t commit your troops to a battle until you know you can win.  At the moment, we need to be sending out feelers and maybe they get lucky and pull in a victory but most likely they get killed but give us some better insight into the enemy and how to defeat him. 

    Fed/Cwan – That’s just a new way to spin the old Plunge Protection Team story.  We don’t need the Fed to step in anymore, now we have the IBanks who are given free money by the Fed to play with.  Probably the string attached is "We don’t care what you do with the money as long as the market is higher by the end of the month."  

    Welcome back Peter!

    Taxes/Steve – LOL, that’s funny.  Back to the 90% brackets next I think…

  131. gel1

    Stevenparker/UK taxes
    I know the feeling very well. The governments of the world will do anything to get revenue, even if the methods are insane. Over the years I have invested in foreign real estate, and have been screwed beyond belief when it can time to sell. My latest experience was in Canada last year. I sold one of my residences in W Vancouver and was taxed 25% off the top on the sale price.The funds go directly to them out of escrow. The government took over 1 mil for themselves, just because I was an American citizen. Had I been a Canadian, there would have been no tax. How is that for discrimination? The story continues… The US government then captured 300,000 for themselves, and finally the State of California snatched 48,000. Because of the situation of the investment being made in Canada, instead of making a profit on the sale, I lost big time, all because of government greed and discrimination.This sort of nonsence is hapining all over the world and takes place because of so many people willing to elect a government that takes from one and gives to another.( I think this could be called the law of Sherwood Forest ) When there are far more people riding in the wagon as opposed to helping pull it, then the parasite politicos design the laws to keep the free riders happy, and guarantees their reelection.

  132. judahbenhur

    Peter, Welcome back.  If the market keeps going up in coming weeks, at what point would you roll to a higher short call?  It seems relatively straightforward if, for example, the SPX moves up another 5%--buy back your 1210 call, sell another at 1225 or 1230, and sell a put at 990 or 1000 to cover the difference.  Is that how you’ve been playing it?

  133. Cap

    Strange day indeed, strange day indeed !
     
    Amazing / Frustrating to watch.  On the indexes, "they" kept a bid under the market at about 113.29 on the SPY virtually the entire day (+/- 1 point on SPY).
     
    I maintain this is just another fleecing of stupid mutual fund buyers putting their new money to work at the beginning of the year from 401k plans.  A zillion upgrades on the 1st trading day of the year helped ensure "success".
    All you have to do is look at a 2-day chart – Friday to today to see how ridiculous today was.
     
    Byron Wein’s silly predictions for 2010 out today.  Calling for 1300 S&P in 1st half of 2010; but a close of 1115.
     
    Of course, his 1200 for 2009 didn’t exactly pan out, despite his many smarmy TV appearances sticking by his prediction even in Dec., but no matter.  Publicity is publicity and you don’t get on TV by making non-newsworthy predictions.
     
    Gotta be a promoter….

  134. Cap

    oh yeah; today’s volume sucked as well; and most of it was robo volume.

  135. ssdirk

    Peter, I think I may be misunderstanding something about the SPX/RUT strangle and position sizing.  Let’s suppose you were going to do the above SPX strangle of 970/1210 along with the 1060/1050 vertical using a $500K portfolio margined account. How many contracts would you buy/sell to achieve your 3% or $15K profit?  Thanks for your support.

  136. cwan120

    SPX / ssdirk – Hi, ssdirk, I’ve done some calculations before.  Peter, if you don’t mind, let me answer the question.  Please correct me if I am wrong.
     
    (1) Assume that you reserve $20,000 per contract.  Then the max number of strangle pairs you sell is 25 (= $500K / $20K).  In order to achieve $15K profits, you look for put/calls pairs that you can sell for $6 per strangle (=$15,000 / 25 / 100).  Of course, this assumes that you let all contracts expire worthless.
     
    OR
     
    (2) The 970/1210 strangle was about $5.5 at close yesterday (Monday), then you have to sell about 27 contracts (= $15K / $5.5 / 100).  Again, this assumes that you let all contracts expire worthless.

  137. cwan120

    Hi, Peter, I have a different question:
    What are we going to do with the Jan 1040/1030 puts we bought?
    Thanks!
     
    BTW: Welcome back!  And Happy New Year!

  138. ssdirk

    cwan – Thanks!!  So is the $200 vs. $150 per contract in margin self imposed by him?  Meaning that at $150 margin reserve he will sell more strangles to increase his return, but take on more risk.

  139. 1020

    Gel/taxes  Holy Cow! A profit that turned into a loss due to taxes!? That statement along with Stevenparkers comments left my mouth open, allowing the coffee in it to dribble down my shirt……:)

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