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Testy Tuesday – AA Disappoints Ahead of Beige Book

We got AA’s earnings (or lack thereof) yesterday.

They were a disappointment at just a penny a share, less than the 5 cents officially expected and far less than expected by the endless stream of buyers who took AA from $13 in early December all the way to $17.50 yesterday (where we shorted them in Member Chat!).  Alcoa’s earnings were, in part, impacted by higher energy prices and unfavorable exchange rates – things that are likely to affect many of our industrial corporations this quarter.

Which brings us to the Beige Book – The last Beige Book was released on Dec 2nd and we thought it sucked.  The one before that was October 21st and that one sucked too.  As usual, on BBook days, I sent out an afternoon Alert to Members analyzing the report and it’s about 6 pages long so I won’t reprint it here but these are some of the highlights from the my last report (my comments are in bold):

You have to read into this report as it’s anecdotal and the Fed is very free to spin the report to get what they want.  The key words are the couching language like "SOME pickup in activity OR improvement" as well as "GENERALLY improved MODESTLY" – is some, or, generally, modestly a good reason to pay 20% more for stocks than we did at the last BBook.  Markets don’t go up 20% in 2 years in the real world  so for 20% in 2 months I expect to hear words like TOTALLY, INCREDIBLY IMPROVED IN ALL DISTRICTS.

Most Districts reported some pickup in home sales, though prices were generally said to be flat or declining modestly; residential construction was characterized as weak, but some Districts did note some pickup in activity. Commercial real estate markets and construction activity were depicted as very weak and, in many cases, deteriorating. – OK, it’s official.  Steve Leesman is a moron!  (CNBC was touting this as a "very bullish" Beige Book by 2:02 pm, 2 minutes after the release)

While some Districts reported upward pressure on commodity prices, they saw little or no indication of upward wage pressures or of any significant increase in prices of finished goods. – Rising commodity prices cannot be passed on.  That means profits are impacted.

Commercial real estate conditions were widely characterized as weak and, in many cases, deteriorating further. Market conditions were reported to have weakened in virtually all Districts, with rising vacancy rates, downward pressure on rents, and little, if any, new development. Expectations for 2010 were also quite low. Boston characterized the commercial real estate outlook as "bleak," Dallas noted that construction was at "historically low levels," and Kansas City described the sector as "distressed." – Holy crap!  Don’t you think that THIS should be the headline of the BBook report.  This is the worst I’ve heard CRE described yet…

Labor market conditions remained weak since the last report, with further layoffs, sluggish hiring, and high levels of unemployment in most Districts…  Districts generally reported little or no upward wage pressures, while some Districts noted upward pressure in commodity prices, and most Districts reported stable selling prices. Wages were largely reported to be holding steady in the Boston, Cleveland, Richmond, Chicago, Minneapolis, Kansas City, Dallas, and San Francisco Districts. Most Districts reported stable prices overall, although some reported higher input prices, largely for energy and other commodities used in production, with a limited ability to raise selling prices. Prices were reported as moderately lower in the Kansas City District, and downward price pressures were cited for some professional services and intermodal transportation firms in the Dallas District.

Man, Steve Leesman is now officially off my list of people I trust.  This is a terrible report and that means I now need to see ALL of the November highs broken before I would even consider going bullsh.  Volume is still very weak and I suspect that’s because those who planned to pump up the markets today are now in meetings trying to figure out how to get out of this thing. 

As you can see from the chart, we were right to go bearish off that report on the 2nd so the question, going into tomorrow afternoon’s release, is:  Should we expect another 2.5% correction as we get the state of the economy report from the Fed?  We are, of course, already cautious and Monday’s disaster hedges will be getting a workout this morning just based on AA’s little earnings report.  We’re still waiting to hear from GAP (price pressures?), INFY (good exchange rate), KBH (tax gains) and SVU this morning but the real excitement is on Thursday evening, when we hear from INTC and Friday morning as JPM let’s us know how much money they made

Next week is when it all hits the fan as we come back from a Monday holiday right into 200 reports in 4 days starting with C, COH, FAST, FHN, LMT, EDU, PETS, AMTD and UAUA first thing Tuesday morning.  Putting on your fund manager’s cap – how confident are you going to be on Friday heading long into this weekend?   Tuesday night is ADTN, CREE, CSX, HBHC, IBM, PNFP and WIT and the hits (or misses) just keep on coming all week long and, unlike last Q, we have very high expectations for Q4 earnings, don’t we?

Speaking of high expectations: Hedge fund and other investors have made record bets on higher crude and fuel prices as freezing weather boosts consumption. The total net number of long positions held by so-called large speculators in NY crude, heating oil and gasoline futures is at an all-time high. "The CFTC data is showing large speculators are behind the current oil rally from $70 a barrel," said Olivier Jakob, managing director of Petromatrix GmbH in Zug, Switzerland. "Large speculators are now holding all time record net length in WTI, record net length in gasoline, record net length in heating oil." 

We shorted USO and OIH last week and yesterday we took XOM long, but hedged, just in case they did manage to keep this nonsense going (and XOM makes money on low oil prices with refining and chemical operations so they are better balanced than most).  Our hopes were the oil bubble would pop hard but now we’ll be happy to just see sanity regained at around the low $70s otherwise I have very grave concerns about our economy’s ability to sustain a recovery. 

China took steps today to reign in inflation as the Central Bank sold bills at a higher yield for the second time in a week, increasing the likelihood that policy makers will raise the benchmark interest rate in the first half of the year.  In China, today’s yield increase of 8 basis points was the first since August for the one-year securities and exceeded the 4 basis point median forecast of 15 traders and analysts surveyed by Bloomberg News. On Jan. 7, the central bank allowed the yield on its three-month bills to climb 4 basis points to 1.3684 percent, the first increase in 19 weeks. 

Monetary policy is being gradually tightened as China faces very significant inflationary pressure and credit growth that is too fast,” said Isaac Meng, senior economist at BNP Paribas in Beijing. “By hiking this bill rate, the central bank is sending a clear tightening signal to the banks.” He said the central bank may initially raise interest rates by 27 basis points.  The central bank had kept the one-year bill rate steady since Aug. 11 in line with its “appropriately loose” monetary policy to help revive the economy but it got out of control last week as banks lent an average of $14.6Bn a day so, unlike our Fed, China’s PBOC immediately put a stop to the nonsense.  China also ordered baks to raise their reserve requirements as of Jan 18th.  

That last bit of news came out after the markets were closed so, despite the Shanghai Composite finishing up 1.9% this morning, the FXI will gap down (we are in FXP, which is ultra-short China).  The Hang Seng already dove 150 points in their final hour of trading on the news of the note sale, finishing down 84 points at 22,326 with 22,000 being the bullish line in the sand for the Hang Seng.  The Nikkei, on the other hand, finished way up at 10,900, up 80 on the day and up 18.5% since December 1st so that’s not too much at all, is it? 

We’re trying to be bullish, really we are but if the market isn’t going to hold our technicals (and it was the Nas that failed yesterday) then we will just have to wait.  We alternated short and long day-trades yesterday into the chop, getting a very nice trade on the QQQQ’s ahead of Mr. Stick in the afternoon but, wisely, out at the top as we didn’t trust that low-volume BS to hold.  Oil was clearly out of control at $84 as it was unlikely to stay cold forever (global warming and all that) and our Treasury needs to sell $76Bn in notes today and we’ll see how well that goes but with South America facing multiple currency crises – there may be a pretty strong demand for anything based in dollars (also bad for oil).

Speaking of currency crises: Beware of Greeks bearing bonds, which are collapsing after the EU said there have been “severe irregularities” in the nation’s statistical data, leaving the accuracy of the European Union’s largest budget deficit in doubt.  The declines drove the yield on Greece’s two-year note 16 basis points higher, the most in almost a month, after the commission said in a report today “the lack of reliability and the shortage of evidence supporting the deficit figure reported” in two revisions by the government in April and October left the data “in question.”  “Unless the institutional weaknesses identified in this report are addressed and proper checks and balances introduced, the reliability of Greek deficit and debt data will remain in question,” the EU said in its report today.

Along those lines, Pstas posted a great link from Stratfor Global Intelligence on the unreliability of Chinese data, which is not surprise to PSW Members, as we’ve been discussing it for years but it’s nice to see an official study letting you know that your suspicions are well-founded.  It’s a very important study for all to read!  

Europe is down more than a point ahead of the US open and don’t believe CNBC when they tell you it’s because AA had poor earnings – investors aren’t that silly, any catalyst would have spawned some profit taking after the crazy run we had.  We continue to watch our breakout levels of Dow 10,549, S&P 1,135, Nasdaq 2,314, NYSE 7,389 and Russell 638 to see what holds but we need ALL of them to hold in order to get motivated to make long-term bullish bets and 3 out of 5 below will be a signal for us to get bearish once again.

Let’s be careful out these, we’re going to have a wild couple of days into tomorrow afternoons BBook!  

  


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  1. samz3700

    Phil -
    Feb oil – any short possibilities – will people have to dump the contract into expiration

  2. Pharmboy

    Good morning all!  The 106 DIAs yesterday should be sweet!

  3. ssdirk

    Pharm – I am still holding BEAT.  Do you still like them or should I move on?

  4. ssdirk

    JRW – I didn’t look back far enough on the RUT historical chart to see that massive resistance at 650 which was tested 3 times to the down side in 2008.  Should provide quite a hurdle to get over.

  5. Pharmboy

    FWIW – SPPI upgraded to Buy buy Morgan Joseph.  Don’t know the Upgrade company, but that caused a pop on the stock……

  6. Phil

    This morning is going to be all about how the commodity producers react. 

    We can expect the dollar to rally back a bit with all the uncertainty and it’s currently way down at 91.14 Yen, $1.45 to the Euro and $1.613 to the Pound. 

    Copper is $3.38 and below $3.40 is a sell-off for FCX and other miners, silver is still $18.50 so watch $18 there and gold needs to retake $1,150 to show strength, now $1,148.  Oil touched $81 at the open but bounced there.  Inventory is tomorrow and which side of $82.50 we end up on today will indicate sentiment but nat gas is close to a big failure if they can’t hold $5.50 (now $5.535). 

    Watch these numbers closely because a failure in the commodity pits can quickly deflate the guys who led us higher this past month.  OIH already fell below $130 so $125 is critical there and XLE failed $60 and needs to get that back to show any strenght. 

    We’re still watching the same old levels at:  Dow 10,549, S&P 1,135, Nasdaq 2,314, NYSE 7,389 and Russell 638 to see what holds but we need ALL of them to hold in order to get motivated to make long-term bullish bets and 3 out of 5 below will be a signal for us to get bearish once again.

    Keep in mind that we’re trying to cultivate a more bullish attitude where we look for buying opportunities on these little dips but I’m not too keen on making major bets until we get past tomorrows Beige Book. 

    We’re getting mixed signals in a low-volume reversal back up at the moment (probably won’t last).

  7. Pharmboy

    BEAT/ss – still like them.  Not sure what you are in for, but if you are up, maybe sell half?  Otherwise, hold tight! 
     
    CYTX/pstas – yeah, and I think of stem cells as the gene chip of 10 yrs ago.  many companies were formed and Pharma bought in (MRK buying Rosetta in Seattle for 667M).  That didn’t work out so well.  There is a bunch of companies there, but they are 20-30 yrs away from making a splash.  Yes, some things work (leukemia – but that was without these companies), but regenerating an arm, leg, organ, well, we are many years away from that.  The liver regenerates on its own, so if you need a transplant, why not take a lob out now and deep freeze it for protection in years to come.  Wiggle your toes if you want to ride them, but I wouldn’t make a big investment in any.

  8. Phil

    Oil/Samz – I agree on the contracts but we’re down $4 from yesterday so I think wait for a test of $82.50 for a new short, the Jan USO puts have little premium left (the $41 puts are $1.06 – .19 premium) and can be played as a mo trade but I’m in the Feb $39 puts, now $1.01, patiently waiting to make .50

    DIA/Pharm – Don’t forget Rule #1 – You can always buy lower, cheaper puts as a mo play later. 

  9. ssdirk

    JRW – What train are you riding today?

  10. jcmcn5

    Phil — what do you think about erts after their miss?  sorry if you’ve already mentioned it…

  11. Phil

    In a note released today, Moody’s worries about Japan’s commitment to reining in its budget deficit. "The ongoing revolving door in the leadership of the Finance Ministry does not engender confidence that Japan will put together a credible fiscal strategy." (ETF: EWJ) (Hat tip: CurrencyTrader24)

    Japanese bank lending saw its first annual fall in four years, dropping 1% Y/Y as a sluggish economy dampened demand for borrowing. (ETF: EWJ)

    Nov. Trade Balance: -$36.4B vs. -$34.7B expected and -$32.9B prior. Exports rose 0.9% to $138.2B. Imports rose 2.6% to $174.6B.

    The U.K.’s trade deficit narrowed more than expected in November, dropping to £6.8B ($10.95B) from October’s £7B (revised). The weaker pound has helped increase exports while imports have fallen.

    According to calculations by The Washington Post, the Fed booked a record $45B profit last year, much of which came from bond purchases aimed at driving down interest rates. Not too shabby

    Redbook Chain Store Sales: +1.4% Y/Y vs. +1.6% last week. A lack of bargains, due to better inventory control, hurt the week’s sales. (also: ICSC sales)

    ICSC Retail Store Sales: -3% W/W, vs. +1.5% last week. +1.7% Y/Y, vs. +2.5% last week. The decline stemmed from limited clearance merchandise; given consumer thrift, "if it is not on sale and the consumer does not need it, they will not make the purchase."

    But not true for the top 10%:  Tiffany (TIF +0.4%) raises its FY’10 outlook, forecasting EPS of $2.07-2.12 vs. $1.88-1.98 prior, and revenue of $2.7B. Nov./Dec. sales were up 17% to $799M, with "growth across a wide range of jewelry categories and price points."

    KB Home (KBH): Q4 EPS of $1.31, may not be comparable to first call consensus of -$0.42. Revenue of $675M (-27%) vs. $578M. "There are indications that housing market conditions may be stabilizing in some regions," but this "could ultimately be undermined by persistent economic weakness… Further volatility and uncertain times may lie ahead." Shares -2.9% premarket. (PR$191M tax benefit – they would have lost $91M without it.

    SuperValu (SVU): FQ3 EPS of $0.51 beats by $0.11. Revenue of $9.2B (-9.4%) vs. $9.4B. Shares +6.1% premarket. (PRProfits up on lower sales, all cost cutting.

    I’m still liking the Qs as an upside play.  Tech doesn’t have AAs problems and the $45 calls are still the way to go at $1.03 with a stop at $1 or if they don’t break $46 on this run.

  12. tradansh

    RMBS / Phil – Some members were discussing RMBS yesterday, with the upcoming trial. Would you recommend any trades?

  13. JRW III

    ss
    Bought TNA at 9:45 but will probably be in TZA some time today.

  14. Phil

    ERTS/JCM – I like them long-term but you may want to wait for the downgrade police to have at them.  Selling the March $17 puts for $1.25 is a nice entry though if you want to scale in here.

    Speaking of bargains.  TBT is having a yard sale this morning and I love selling March $48 puts for $1.27 and I also like the Jan $49 calls for $1.05 as a mo trade here (stop at $1, looking for $1.15+) and I also like 2011 $46/53 bull call spread for $3.40.

  15. hanna5

     Well, so much for a down day. We seem to be heading up….

  16. jcedens

     Phil
    TBT is taking a hit today. Is it a buy on the dip?

  17. David Ristau

    I am available all day for answering questions. I can answer on my latest Oxen Report. Thanks.

  18. jcmcn5

    why did tbt sell off like that?

  19. jeffdoc2004

    Phil…what do you think of INTC calls ahead of earnings…debating between the Jan 22.50 vs Feb same strike to gain time for a longer run after earnings??  Thoughts…

  20. Phil

    This is one of those days when I say "What the hell is keeping the Dow up?"  Looks like AXP (so maybe V will turn back up), IBM, KO, MCD, PFE, PG and TRV (HIG had great guidance).  So safety stocks are ruling the Dow at the moment.

    This is a stunning 70-point move up in the Dow off the 6am futures.  The other indexes haven’t gotten anywhere near that yet but if the Dow gets over 10,650 then happy days can be here again for all

    SOX down 2.2%, not good if they can’t get it together before crossing 2.5% line.

    CNBC analysts says we should ignore AA earnings because they reflect "what was" and not "what is" – Is he freaking kidding?  That "was" was 2 weeks ago! 
     

    RMBS/Trad – The trial started, right?  There will be crazy up and down moves during the trail and, of course, settlement rumors.  I think the most fun with them is selling the Feb $22.50s for $3.40 as that is a silly amount of money and you can buy Aug $25s for $6 against them and sell some or all May $20 puts for $3.25 if you are more bullish and don’t mind owning them for $20, which isn’t a terrible price.

    TBT/JC – See above, I live TBT as what can be more obvious than higher rates in our future? 

    10:10 volume is pretty strong 43M on the Dow and we’re right on the line at 10,650 so watch out for a rejection here

  21. Pharmboy

    Phil – U betcha – except I sold ALL.  Thx.

  22. ssdirk

    JRW – IWM couldn’t make it over 5dma.

  23. hanna5

     Has anyone seen MGM today? Yikes! This one seems to be getting away from me….sad

  24. Phil

    TBT/JC – Flight to safety of the dollar on Greece, Argentina, Venezuela etc having big problems.  They are a drop in the bucket compared to US debt issues but the reflex is to buy dollars. 

    INTC/Jeff – I’d wait until the BBook tomorrow and hopefully we get a proper sell-off as INTC tests the 50 dma at $20.  I’m not very happy with the current spread pricing. 

    BIDU getting whacked daily since COO quit. 

    DIA/Pharm – at this point, I like a reload on the $106 puts at .56, out if Dow break 10,650 is easy stop.

  25. alsos

    Phil
    When you say:
    "ALL of them to hold in order to get motivated to make long-term bullish bets and 3 out of 5 below will be a signal for us to get bearish once again."
    …you mean on a closing basis, right?

  26. judahbenhur

    JRW/SS,  Seems like someone hit the replay button from last Tuesday.  I was in TNA, now out. 

  27. 1020

    Good Morning! Phil, is it possible that this earning season can be a "what was" is not "what is" to keep the market moving north?

  28. ssdirk

    RUT Pack – IWM traveling between 5dma(64.12) and 10dma(63.72).

  29. hanna5

    Anyone got an opinion on LLY? Pharmboy?

  30. llorens

    Phil – I know that you like WFR as a long term play but do you like the current price as an entry point?  $14.47. Wondering if you think there will be additional sell-off activity due to the strong early volume. Closed my short F position for a small profit and jumped over to TBT. Looking to add WFR this morning  -

  31. JRW III

    judah, ss
    If they can’t get over 64.16 this time, I’m out.

  32. gel1

    Phil
    The oil patch is about to change – http://moneymorning.com/2010/01/12/new-oil-investments/

  33. Pharmboy

    Hanna, I will write on LLY in a future post.  I think they are moving to an interesting business model, although they are a bit behind on the M&A activity, as much of what they have is home grown.  I have to dig into the pipeline to see what is there….although the div yield is tempting.

  34. llorens

    Would it be crazy to short AAPL (short term only) since it’s below the H&S neckline of $209?

  35. gel1

    This is a real fugly day… Will DD my TBT positions and take the day off. See you tomorrow.

  36. Phil

    MGM/Hanna – They are my favorite casino stock as they don’t have too much exposure to Macau, which I think is shakey but this run i s a bit much and you can sell Feb $12s for $1.05 and cover with a buy on the stock over $12 and stop out below $12, which is not a bad way to enter.  Most likely they pull back and you can buy back for .50 and then look for a better entry. 

    Indexes/Alsos – Closing of course but intrady is good to watch as well.  Everyone is holding up like a chanp so far except the Nas, which is why I keep playing the Qs up (the most behind) and the Dow down (the most ahead). 

    Earnings/1020 – Not if we get a string of misses.  We haven’t had misses since Q1 last year as expectations fell below what was possible to miss.  Now we’re not buying stocks at 50% discounts and perhaps investors won’t laugh off 35% lower revenues like they did last Q but we’ll have to see.  Our bullish premise is that companies that can make money selling to rich people will do well while companies that need to sell mass quantities, like AA, will not. 

    WFR/Llorens – I like them as they pull back.  I think $13.50 was our entry point so shorting the Feb $14 puts for .75 is a nice entry.

    Argus/Gel – That’s been long discussed.  It remains to be seen if it catches on.  ICE is strongly in favor of it which means it’s probably another collosal rip-off on the consumer.  I think they are just trying to get oil pricing away from the tightening noose of US regulators but we’ll have to see how it all shakes out. 

  37. bord

    llorens,
    AAPL has been down consistently that last 3-4 days…. I would be super careful shorting it…especially with all the tablet rumors on impending announcements.

  38. stevenparker

    llorens – I would hold off on AAPL imho I think predicting which way it goes next is hard, it’s slap in the middle of its medium term up channel and has a pivot above it around 210 and support below it at 208. If it can reclaim the pivot then maybe it is settting up to run up, if it fails it’s support then maybe it is going down. Flip a coin?

  39. ernest

    Phil/RMBS – The Feb 22.50 puts are $2.20, not $3.40.  Do you still think that’s a good trade?

  40. eben22

    Phil/RMBS – Phil I like your style of researching the company and then looking for the optimal option play.  Just to throw my opinion out there on RMBS as a stock, if the trial has any snags or hiccups to stock will get hurt badly IMO.  Trial starts tomorrow.  This is a very volatile situation and the stock price is likely to move violently one way or the other over the next few months.

  41. jcmcn5

    TBT.  The Jan 2011 Bull Call spread moved away from me, now at $3.75ish.  Would you pay up for it?

  42. stevenparker

    AAPL/llorens  – also notice the net buy of 152,800 shares around 207.70 at 09.57 this morning, way above the usual peak imbalance – someone really doesn’t want the price to go down?

  43. bord

    Anyone have an idea on why TBT is getting spanked but UUP is down as well?

  44. ssdirk

    JRW – What line are you looking for to catch TZA?

  45. hanna5

     Entered EXC today at 48.71

  46. TmDecay

    Bord,
    TBT wil usually go down when the market corrects due to a "flight-to-safety" mentality.   TBT is a no-brainer I think for longer term but short term, a market correction will drive TBT down.  I would rather sell the $47 FEB puts if I can be patient enough.

  47. bassdad

    ERTS is down big this morning to 16.95.  Does this make it even more appealing or do you wait & see a bit longer.

  48. eben22

    ernest/RMBS – I think Phil was saying to buy the RMBS AUG 25 call for 6 and sell the FEB 22.5 for 3.40.  Your net cost would then be 2.60 for the diagonal spread.  It looks to me like your lower breakeven point on that trade is 18.30 and upper breakeven is 28.  Above or below those prices you lose money.  In between those prices you profit with max profit being about 2 if RMBS closes at 22.50 at FEB expiration.

  49. EricL

    If X fails to put in a new high it may be set for a more serious sell off here. I’m cautiously short with a few put verticals, but out on a break over 66.50.

  50. judahbenhur

    TIVO.  Another day come and gone for TIVO’s Fed Circuit decision (they post decisions at 11:00).  One of these days, TIVO is either going to jump or drop 25% a few minutes after 11:00.  And SATS may make a move, too. 

  51. Phil

    AAPL/Llorens – Surely there are bad companies that can be shorted before you have to risk it on AAPL?

    Walking away/Gel – Sometimes that’s the best plan! 

    RMBS/Ernest – No, that was selling the CALLS, not the puts.  It’s selling those calls as part of a slightly bearish spread to the Aug calls but then covering with the other put sale. 

    TBT/JCM – I would just leave the offer GTC and hope to get lucky on one of their crazy moves.   .40 is 10%, nothing to sneeze at…

    TBT, UUP/Bord – The whole thing is wacky today.  Dollar is getting killed while commodities sell off and rates fall – something’s goiing to break but who knows what?

    Speaking of breaking – SOX failed 2.5% rule so good for the DIA puts as long as they are below that.  IBM really helping out the Dow at the moment.

    The square footage of space available for office rent in Manhattan is 38% higher than a year ago, as job cuts at financial firms leave plenty of elbow room. The 43.8M square feet for lease (11% of the city’s office space) comes to more than 15.5 Empire State Buildings.

    After noting that Itraxx’s Western European Sovereign index now trades at wider spreads than both its Main and Senior Financials gauge, RBS says mitigating sovereign risks may be the key to keeping the markets in check in 2010. Firm believes larger economies can navigate the turmoil, but warns that, "if yields start to rise, they could go a very, very long way."

    Better read the fine print, Nexus One (GOOG) users, or you could end up paying $550 in cancellation fees for a phone that cost $179.

    Nov. Job Openings and Labor Turnover: Job openings little changed at 2.4M. The hiring rate at 3% and the turnover rate at 3.3% were essentially unchanged from the month before.

    The trade deficit with China fell to $20.2B in November, from $22.7B last month, as exports to China jumped by $470M to a record $7.3B (.pdf), lending validity to the "China as a global growth engine" story line. But China’s exports rose in December, which may impact things going forward. - Yes, $470M in new trade will fix everything in our $14,000,000,000,000 economy!   

    Sector ETF weakness: Solar– KWT -3.2%. Base Metals– DBB -2.3%. Semis– IGW -2%. Semis– SMH -2%. Homebuilders– XHB -1.8%.
    Sector ETF strength: Insurance– KIE +0.8%.

    Dow laggards: AA -8.4%. CAT -3.1%. BAC -2.5%. INTC -1.9%. DIS -1.6%.
    Dow leaders: PG +1.3%. TRV +0.6%.

  52. EricL

    Same may be true of DECK; trying to re-take recent highs.

  53. EricL

    SPG on its fourth test of support at 76 in as many days. The more support is tested…..

  54. judahbenhur

    SS, I was wondering the same thing.  I’d been waiting for 64.20 to catch TZA, but I should have checked with the master first.  Now, it looks like we might drift until the Stick.

  55. llorens

    bord/steven/phil – thanks for your input. I’ll look for a good WFR entry today and wait to see if AAPL breaks back above $210 (then pick some up Long).

  56. EricL

    The Dow laggards/leaders is an almost perfect reversal of yesterday. What a joke.

  57. ssdirk

    juda – yeah, kinda in no-man’s land for either train.  I missed TNA while adding some RUT/SPX strangles, glad you got some.

  58. hanna5

     Anyone risking a play on JPM going into earnings?

  59. judahbenhur

    SS, By the way, I’m completely in agreement with your comment yesterday about the strangles and the TNA/TZA day trading. I tried to add more RUT/SPX strangles today, but I was apparently too greedy to get filled.  I thought the drop today would cause the price of the PUT to rise a lot more than the price of the CALL fell.  It did, but I was trying to squeeze too much out of it. Maybe later.

  60. JRW III

    ss / TZA
    From here, a break below 63.75, that would be if Hal provides NO support; but I;m playing for a pump to sell into

  61. yodi

    Hi Phil,
    Looking at the drop of AMZN 128.46 (1.88) and thinking to take advantage of jan 100p sell for 9.50s especially taking yesterdays comments from one member in to considereation. your thoughts  pls

  62. ssdirk

    judah – Exact same thing happened to me on being to greedy.  I have been waiting on a vix move up to initiate.  I was filled on SPX, but wanted to much on the RUT.  Thus far today, I have good profit on my current RUT strangles.  If we stay flatlined like this I may grab some TNA to protect the profits if we move further up for a day trade.  I never thought about that strategy before yesterday, but it seems to make sense.  I will analyze it further later.

  63. Phil

    ERTS/Bass – I don’t like chasing bad earnings (outlook in this case) unless I strongly disagree with them.  You have to give it a little time for downgrades to hit them and see how they hold up.  If they bounce up too fast, then we end up buying them where we thought they’d be anyway.  \

    TIVO/Judah – I would think a lot of the upside is baked in around $11, down would come really fast if they get a bad decision. 

    SOX down almost 3% while the major indexes do a fake bounce – how cute!

    GAP getting murdered today.  Shrinking margins as they can’t pass commodity price increases on to the masses is the common theme. 

    Joke/Eric – Yep, like I’m seeing against the SOX move.

    AMZN/Yodi -  Well I’d sure buy AMZN for net $90.50 so it’s a good sell and (on TOS) it only ties up about the same margin as you sell so a nice leverage gain.  Just keep in mind if AMZN does fall, the margin will jump up so make sure you have room but it’s a good use of cash in general. 

  64. Phil

    AEI scholar Desmond Lachman says Greece should get smart, stop fighting the inevitable, and leave the eurozone before – like Argentina a decade agoit descends into anarchy. "However, that is not the way that Greek tragedies play out."

    Did I forget to say – Wheeeee!

  65. samz3700

    CRE -
    Rather than shorting IYR – think we would be better with specific reits with exposure to nyc and other poorly performiing areas – I think Eric had a couple he was recommending – anyone have a take on Vornado? I need to do more research.
    Assume people saw article about property prices doing well in d.c. vs nyc – cannot remember if it was commercial or not – live in nyc – we live in a nice rental building – its like a revolving door with people moving in and out every week – usually multiple families - landlords refuse to negotiate – but cut nice deals for new renters – so people are literaly moving across the st. to comparable apts. for hundreds of dollars less – its not getting better as far as I can tell but guess bonuses for some might change that.

  66. judahbenhur

    Phil/TIVO.  I think down is the more likely outcome than up, but if the lower court decision is affirmed, I think TIVO goes over $12 in the excitement.  (Affirmed good for TIVO, anything else probably bad for TIVO, and vice versa for SATS.)  I figure I get less than a minute to look at the decision and make my trade before the stock begins to make a big move.  At least with the Fed Circuit decisions, no one gets hold of them before they are posted at about 11:00, so I only have to look once a day. 

  67. magret

    Phil,
    I have the RIMM Mar 65/55 call vertical (reccommended months ago) at practically breakeven bought for $6.22. Any suggestions as to play the last 2 day’s 3% fall to shave part of the vertical cost ….Thanks

  68. craigzooka

     anyone know of any news on AMAT today?  It normally has almost no volatility and today it dropped From 15 down to 14.

  69. chaps

    Phil:
    With most of the buying being done by the government and institutions, what’s the "end game?" for the prop desks and hedge funds that are doing the buying. Is there one besides luring the retail investor back into the market? Are they screwed if that doesn’t happen?

  70. jburgess

    Phil: I have a large long stock position in VZ. Opened it primarily for the large dividend of 6.5 when opened. Cost basis of 29.5. Any spread recommendations?

  71. gilmdjd

     Nobody mentioned YRCW up to $1.00.

  72. gilmdjd

     I am selling some puts on the previously mentioned YRCW.

  73. ssdirk

    JRW,judah – jumped in TZA train with a tight stop.  IWM testing 10dma, hard fall below.

  74. jeffdoc2004

    Phil:  I got into DIA Jan 106 puts earlier this morning at .53….think we sell at market close or hold till tomorrow’s BB release and capitalize on further move to the downside?

  75. cwan120

    SPX & RUT strangles / Judah & ss
    Hi, what strikes are you folks getting into or bidding on?
    Thanks!

  76. where

    One of the microcaps that I recommended in the Watch List thread (CHBT) is doing quite well today! +9.5%

  77. ssdirk

    cwan – Had from previous:  RUT Feb 530/680 with 590/600 wild play.  Added today:  SPX  Feb 970/1210 with 1040/1050 Trying to add RUT  Feb 540/690 with 580/590.  I am only adding .5x wild plays for now.

  78. Phil

    Dow volume 86M at noon, back in line for a program trading day but a lot of that volume was used up in the morning sell and the stick triggered early.  If we get another surge of volume now (more than 20M an hour) then I’m not sure they can save it. 

    VNO/Samz – I just short them at $70 for quick money, that sector is very tough to short otherwise even though it seems ridiculous as the fundamnetals can’t possibly support the valuations.  I think the logic is that the big fish will swallow up all the small fish at low cost and then prosper but it doesn’t seem to occur to CRE investors that big fish can die of starvation too…

    TIVO/Judah – Well let us know!

    RIMM/Magret – Damn, wasn’t that ahead a while ago?  There’s not much to do with a veritcal like that as your delta is .82 and your caller is .48 so buying them out doesn’t help but you can add another $55 call if you feel confident but, like all bullish plays – let’s wait and see what tomorrow’s report does for the market. 

    AMAT/Craig – The whole SOX got killed today (down 3.3% now).  I think it’s that and AMAT was up yesterday on  Needham and FBR upgrades and are just giving that back in the uncertainty of the sector.

    End Game/Chaps – I think they do plenty of selling along the way.  It’s more like reeling in a fish, they give the line a little slack by punching up the futures or stick saving and then they pull in the retail fish and sell everything to them the next day.  Then they go pay back the Fed what they borrowed, borrow some more money, buy some more shares, sell them to suckers, pay back the Fed, borrow some more and do it again.  So the end game comes when the retail bagholders decide they need to get out and the flood of share selling overwhelms the buying power of the IBanks.  So it’s attitude we need to watch more than anything.   Don’t forget I keep expecting doom because we see polls that show 90% of investors are bullish and I keep thinking it’s too many but, so far, there really are at least 8,640 new suckers born every day.

    VZ/JB – I think $1.65 (5%) for the Apr $31s is fair.  If they fall back to $30 or less you may want to sell some puts (the July $29 puts are $1.15 and the July $31 puts are $1.90 so if you can sell the $29 puts for $2, that would be nice) and that’s another 5%+ collected while you wait for your dividends. 

    YRCW/Gil – I missed them today.  It’s funny, they only seem to go up on days when the Transports are selling off. 

    DIA/Jeff – On all short positions this is still a take the money and run market.  Tempting though it may be, holding shorts overnight is too often suicide and those puts are already up 30% so way too greedy not to take it after making 25% yesterday on the same play.

  79. JRW III

    chaps / Grand Plan
    The Feds plan IMO was to get the market back to where the Pension Guarantee Fund ( you and me ) didn’t have to pick up a $3.5 Trillion obligation. In addition, the appearance of wealth and stability to Joe Lunchbucket ,through his 401(k) would help stop the acceleration of the slowdown and create a new floor for the economy.

  80. Phil

    Just a month after forecasting a 24% drop in mortgage originations in 2010, the Mortgage Bankers Association now sees a 40% drop coming, to $1.28T – the lowest level in a decade. Rates are widely expected to rise when the Fed wraps up MBS purchases.

    If you think that Abu Dhabi neatly wrapped up Dubai’s mess, you may want to look again, says Felix Salmon. From the whereabouts of incoming billions to legal structures that Dubai will have to import, the tangle could take years to unravel.

    Woops, back to test the day’s lows. 

    Levels failing fast:  Dow 10,549, S&P 1,135, Nasdaq 2,314, NYSE 7,389 and Russell 638 – now we need to take 3 of 5 back…

  81. ssdirk

    Phil – what do you think the windfall for the gov. would be if GS reversed Hal and caused people to sell before March triggering ordinary income gains vs. capital gains.  Just a thought.

  82. chaps

    JWR/Grand Plan: Right. The government’s incentive is pretty clear to me. It’s how the prop desks and hedge funds play this out that was more opaque.

  83. ssdirk

    JWR – Didn’t you say Tuesday? Nice!

  84. jcmcn5

    Have already bought and sold the DIA Jan 106 puts.  Doesn’t look like there;s much of a bounce coming does there?  Would you continue to play the downside, and if so, what’s the entry point?

  85. judahbenhur

    Cwan, I have RUT 530/680 with a 590/600 wild play. I’ve been trying to add a 550/700 strangle, but maybe 690 is a better number.  I also have 970/1210 SPX strangles with the 1060/1050 wild play.  Been trying to add 990/1210.

  86. Phil

    Taxes/SS – LOL, that would be devious!  Also devious could be tanking the market on a day they have to sell $74Bn in notes…   Maybe we reverse once this auction is done at 1pm.

    DIA/Jcm – I think if 10,580 doesn’t hold (7.350 on NYSE is the key level to watch and 2,275 on the Nas) then we can fall another 80 pretty fast and the $105 puts, now .40 should gain about 50% on a drop like that but only if all 3 of those levels break and using 10,580 as a stop line

    Speaking of auction – $40Bn in 3-year notes went out at 1.49% with bid to cover of 2.98 – very good results but so what? 

  87. Phil

    Now the dollar is coming back thanks to the note auction, adding injury to insult in the commodity markets.  Copper down to $3.35, silver $18.27, Gold way down at $1,137, oil testing $81 but nat gas holding up at $5.56 – go figure!

    Dow is still far outperforming the other indexes, down just 0.8% on a pretty much -1.5% day so another 80 is easily in the cards if we see other indexes failing that 1.5% line

  88. aclend

    PCS taking a serious hit on subscriber data. Does this change your outlook at all?  I entered yesterday per Buy List recommendation. I much prefer it when they go up the day after entry.  haha

  89. ernest

    I bought the Feb 107 DIA puts yesterday for 2.39 and sold today for 3.00.  That’s the first right move I have made in a week (except for making a few bucks off of some AAPL calls).  I felt safer with those given the higher delta and more time to be right.
    Phil, if the market stays down the rest of the day, then given recent behavior it will almost certainly bounce back up tomorrow, would you agree?  So I’m wondering if it would be prudent to buy some DIA calls at the end of the day for a quick profit tomorrow.

  90. RMM

    Phil: AMZN down more, what trade to put on as you expect good earnings  (when is that ?)  ??

  91. Phil

    Volume 113M at 1:15 so 27M since noon, not a lot but a little more than usual.

    Poor ZION – back to $16 today!

    A morning of sideways trading has given way to a lunchtime decline to session lows for stocks. Basic materials are acting as an anchor, with Alcoa (AA -10.4%) leading the way downward, followed by other aluminum and mining firms.

    The Treasury sells $40B in three-year notes at 1.490% (.pdf). Bid-to-cover ratio of 2.98 vs. a recent 3.02; indirect bidders take 38% vs. a recent 59.3%. But direct bidders took a record 23.4% for their own accounts, vs. a recent 7.1%. Treasurys moderated gains slightly but yields remained much lower: the 30-year yield -0.10 to 4.64%; 10-year -0.09 to 3.73%; 5-year -0.07 to 2.48%; 2-year -0.03 to 0.91%.

    Electronic Arts’ (ERTS -8.2%) lowered guidance from last night seems to be giving other videogame makers the bug today: TTWO -3.8%; THQI -5.8%; ATVI -1.1%

    Crude prices that averaged $62/barrel in 2009 will average about $80 this year and about $84 next year, says the EIA. The group’s forecast assumes overall 2% growth this year and 2.7% in 2011. The EIA also expects natural gas production to drop 3%.

    A spate of new reports show China leapfrogging other nations on its way to economic superpower status. Time to concede the global economic lead to the world’s most populous nation? Hardly.

    Sector ETF weakness: Solar– KWT -4.3%. Semis– SMH -4%. Semis– IGW -3.9%. Gold Miners– GDX -3.6%. Solar– TAN -3.5%. Steel– SLX -2.9%. Clean Energy– PBW -2.9%. Agribusiness– MOO -2.9%. No strength to be seen, though PPH (Pharma) is down just 0.3%.

    Oil $80.44 – that brings USO down to $36.62!  Target was $39 so we ned them to fail $80 to hit that but beggers can’t be choosers after almost getting killed on that trade..

    Gold dropped to $1,124 in seconds and now is back at $1,128 but gold bugs have got to be freaking out about a $30 drop since the open.

    ABX Feb $40 calls were $3.60 yesterday, now $2.23 and that’s a nice way to play a gold bounce if you are so inclined.  If gold goes lower you can sell the jan $39s, now $1.55 to cover and I’m for selling the Feb $38 puts for $2 (now $1.10) if they keep dropping.  We did this last month and it was scary but it worked – scaling in makes it less so.  

    Done with DIA puts at .80 – maybe reload later

  92. humvee4me

    I keep waiting for the dollar to rally from here, but no go yet.

  93. bord

    If they don’t dagger the dow (eg- down 100+) in the heart by 2:30, helmets on because they could very well stick save this thing, or pump it back up tomorrow.

  94. jromeha

    Anyone – When are the NG inventories reported this week? Tomorrow or Thursday?

  95. jromeha

    Anyone – When are the NG inventories reported this week? Tomorrow or Thursday? Cant

  96. judahbenhur

    JRW, Nice call on TZA. I missed that train, but jumped back on TNA at 64.30.  FIgure they’ll run it back up between now and the close. 

  97. JRW III

    judah
    Nice !!  I got out of TZA at 63.40 looking to get back into TNA

  98. Phil

    PCS/AC – "They showed a good rebound in the existing markets, which I think was important for this company after having negative net adds in that category last quarter," SunTrust Robinson Humphrey analyst Robert Dezego said.  On Nov. 5, when it reported third-quarter results, MetroPCS warned that holiday season promotions could hurt the revenue it gets from each subscriber.  --  So they are in a subscriber dogfight and margins are tight but I think they can play that game longer than S can.  Now with the stock at $6.42, you can sell the 2011 $7.50 puts and calls for $3.25 for net $3.17/5.33 and I like it even more.

    Bounce/Ernest – I do not agree.  We have the China syndrome to deal with tomorrow and FXI is down 3% so predicting a 500-point drop on the Hang Seng.  Europe had a pretty weak finish and may go lower when they open back up so I think the redder we close, the worse it will be tomorrow but we have just 126M Dow shares traded at 1:55 so we are very stickable so if you want to play bullish, play bullish between now and 4pm but not the overnights.

    AMZN/RMM – It depends when they have earnings.  Hopefully they get cheaper and then I’ll probably favor a slightly bullish backspread to cover the bases. 

    Dollar/Humvee – They came back against the Euro but not the mighty Pound or the Yen, where we fell below 91.   That’s something the Nikkei isn’t going to like one bit tonight.

    SYMC sneaking up to 52-week highs while everyone else is selling off.

    Nat Gas/Jrom – Thurs at 10:30.

    AET Feb $30 puts sold naked for $1.50 are a nice entry on them.  Oh wow, I’m actually buying on the dips (checking for horns).

  99. TmDecay

    JR…NG report Thursday at 10:30.
    Here’s a good calendar link for you. 
    http://mam.econoday.com/byweek.asp?cust=mam

  100. cwan120

    SPX RUT strangles / Judah & SS
    We are sure getting more venturesome.  Our buffer zone is something like +8% / -14%.  Like Judah, I am bidding on RUT Feb 540/690 but buying 600/590 put verticals.  I already have a bunch of SPX on various strikes.

  101. judahbenhur

    JRW.  Meant 63.30, but you knew that…watching to see if it can hold 63.50. 

  102. Jtiff

    Phil
    How do you feel about Bearish plays going into tomorrow?

  103. Phil

    LOL Ag speculatorsSurging grain inventories – and a slump in wheat demand – are driving a plunge in futures. The latest USDA report shows record corn and soybean crops that largely avoided cold-weather damage, and wheat stockpiles that rose 24%. Currently: Corn futures -7.1%. Soybeans -3.7%. Wheat -8%. – DO NOT buy things that require the masses to have money!

    Don’t forget this mood setter tomorrow: New Deal 2.0 says that without the "black boxes" that are the internal records of AIG, Fannie Mae (FNM) and Freddie Mac (FRE), the initial hearings of the Financial Crisis Inquiry Commission should be about info gathering. They’ve gathered 10 questions that should be put to the financial institutions.

    Chinese car and battery maker BYD is accelerating plans to bring an electric hatchback to the American market, planning it for sale in 2010 rather than next year. The company – backed by Berkshire Hathaway’s (BRK.A) 10% stake – says its five-passenger vehicle will go 200 miles per charge.

    Dow leaders: PG +1.3%. KO +0.9%. KFT +0.8%. IBM +0.5%. JNJ +0.4%.
    Dow laggards: AA -10.7%. CAT -4.1%. BAC -3.5%. JPM -3.3%. INTC -2.3%.

  104. ssdirk

    cwan, judah – are you bidding your strangles as a single spread or are you legging into calls and puts at seperate times?

  105. Phil

    Back in those DIA $105 puts at .35, happy with a nickel and out at 10,600.

  106. stevenparker

    yup – still declining

     
    Market Internals update at 2:00pmET – NYSE volume 610M shares, about 4% below its three-month average; decliners lead advancers by 5.1:1. – NASDAQ volume 1.53B shares, about 18% above its three-month average; decliners lead advancers by 2.6:1. – VIX index +10% to just under 19.5

  107. Phil

    Bearish/Jtiff – As I mentioned above, I couldn’t sleep on the overnights and, since we’re in expiration week, there are plenty of liquid, cheap momentum plays we can make in the morning so I’d rather hope for a stupid pump to short into tomorrow morning from a cash position than pay 3-day premium for overnight shorts that get sqashed if the market moves against us.

  108. judahbenhur

    Cwan, Yes, the low vix is causing us to tighten the strangle to make it worthwhile.  Still, I think the levels are prudent.  For example, the RUT has gone pretty steadily up since I sold my 680 calls just before Christmas, yet I am positive on the calls (as well as the puts), and it seems it would be easy now to roll them if we have to.

  109. ssdirk

    judah – I agree.

  110. hanna5

    Just as a note, i’ve been reading a ton of political commentary. It seems that after settling this Health care reform, Obama and the democrats will have to try (perhaps in the state of the union?) to emphasize job creation for the intermediate term. I have to imagine that his advisors (with an eye toward recent polls) will advise an aggressive pro-jobs creation bill. Whether or not they can do this remains to be seen (particularly if the super-majority in the senate is lost vis the MA seat). But, i would not bet against it, and it would prove to be a huge market catalyst in my opinion. Just a note to keep some long-er term perspective and consider adding slowly to longs on a day like today.
    Meanwhile, thanks phil. I started a PCS stake per recommendation today.
    I still have to believe that they stick the down into the close.

  111. judahbenhur

    SS, I’ve done it both ways, but the single spread has worked best for me.  I tried to leg into one of my RUT strangles by selling the call first, and the put just kept getting away from me as the RUT made its run.  Peter had told me the same thing about his approach (he prefers to buy the single spread), but I had to try and fail for myself.

  112. ssdirk

    Judah – getting in before Christmas was a nice bonus as you had two long 3 day weekends that provided free Theta, and another coming next weekend (at least I think the market is closed next Monday).

  113. RMM

    Phil
    which among the following would you pick for a trade:
    APC
    CAM
    EEM
    X
    PTM
    PPLT.

  114. Phil

    DIA – Above 10,600. as a bullish play, I like selling the naked Jan $107 puts, now $1.40 so about $1.35 as they have .25 in premium, which is a nice cushion but also a .77 delta so you get a lot of bang for your buck – 10,600 MUST be your stop line for plays in either direction!

    Volume/Steve – Notice the Nas has the most volume and is down the most.  Still all volume is down volume…

  115. jcmcn5

    The bid/ask spreads were all over the place on the TBT Jan ’11 46/53 bull call spread so I just put an order in for 3.40 or better and wouldn’t you know it, it was hit immediately.  That was the debit I was supposed to be looking for right?  I’m always suspicious when my orders go off right away.  Makes me thing I should have put in in at a $3.20 debit.

  116. morxlntway

    Phil – little help plz with CROX: I’m in the MAR 10 $4 call for $3.29 and the MAR 10 $5 put for $1.05 (both long).
    Double up on the call? Then what with the put? Wait til after Friday?
    Thanks for the help.

  117. Phil

    WM making new highs – interesting. 

    Quiz/RMM – I’d short EEM (long EDZ) and I’d cash the others if I was long but too scared to short them and no way I’d go long on any of them. 

    TBT/JCM – That’s the way to do it, the bid/asks are BS on spreads and if you come up with a realistic offer you get hit a surprisingly large amount of times.  If I get hit too fast, I lower my bid for the next set.  Another trick for those is to offer to buy say 5 at $3.20, then put in for 2 at $3.30 and see if you get a nibble and then 2 at $3.40 if you really want it.  Once you get a bite on the highest one, they sometimes go ahead and grab the next one too. 

    Listen to Cramer defending Goldman for putting their clients into things they were getting out of.  Of course he doesn’t think anything’s wrong with that – he does it to people every day…

  118. Phil

    CROX/Morx – I hope you were sellng stuff against those.  Well, you have $2.55 in positions and you are down about $1.75 so how about 2x the Jan $5/7.50 bull call spread at $1.10, which pays 2x $1.40 if they hit $7.50 and you can sell 1/2 March $7 calls for .40 as those can be rolled to 2x the June $9s so not unsafe and 4 sales like that is $1.60 back in your pocket or everything you are down and then anything over $6.10 is a bonus.

  119. samz3700

    Phil – nice call on POT -

  120. cwan120

    SPX RUT strangles / SS & Judah, I have the same experience RE spread vs legging in.  In December, I sold tons of calls, kept waiting for a dip to sell puts.  But SPX & RUT simply kept going up.  Now I learned the lesson.  If you are a good market timer, legging in might work.  But we really don’t know where the market is heading.  If you sell only one end, you likely miss the opportunity to make profits on the other end.

  121. yodi

    jcmcn5
     
    made the same deal this morning for 3.15 TBT

  122. JRW III

    In TNA at 45.28 ( 64.56 on IWM )

  123. Phil

    $107 puts down to $1.25 already – see how fast you can make a dime on these small breakouts.  It’s very easy to make a nickel here and there and get the hell out – it’s very hard to make a killing

    POT/Samz – Those funnymentals do tend to kick in eventually.  The question is whether you live that long…  8-)

    Promising scrutiny of high default rates, HUD Inspector General Kenneth Donohue subpoenas 15 mortgage companies for data on failed home loans, to determine any wrongdoing.

  124. yodi

    FLSR  down over 5.22

  125. judahbenhur

    JRW.  Welcome aboard. I was saving you a seat. Now, Mr. Stick, time to take us home.

  126. hanna5

     Nice on the quick DIA 107s; worked out for me too. Sadly, i didnt live that long on the POT trade…covered on friday. :(

  127. ssdirk

    Don’t mind if I join you gents.

  128. ssdirk

    TNA – quick stop out.  I will let my strangles run wild.

  129. RMM

    pHIL: HAVE EDZ calls apr 3, base 2.8$ and putters jan 5/1x,
    I thought emerging markets will do well,
    in any case, is there an adjustment ?

  130. samz3700

    hannah I had to roll pot to feb. 125s so still in trade – too much pressure for me in the 120s

  131. JRW III

    ss
    You’ve GOT to use mental stops !

  132. josec

    Phil,
    How low do you think BIDU will go, I’m in the 590 puts?
    Thanks

  133. Phil

    DIA/Hanna – The little wins are nice, the big wins come over time.

    EDZ/RMM – Those are bets that the emerging markets falter.  I’m still in mine with no change, waiting for a shoe to drop.

    MCD suddenly getting attention. 

    Volume 153M at 3:15 – still in prog trading range but a bit of selling pressure pushing down on Mr. Stick so no slam dunk today.  As I said earlier, as a fund manager you’ve gotta want some cash ahead of the Fed and the Congressional Hearings….

    AAPL hurting, BIDU worse, AMZN exactly at 2.5%.

    Transport sblew 1.5%, watch the Nas to fail it again as the Dow is way too high now if the others start blowing 1.25%.

  134. ssdirk

    JRW – It was. For some reason I just didn’t feel the stick today. 

  135. judahbenhur

    SRS.  Got out of SRS today in the ‘excitement’.  Got out even and I’m glad to see that one in my rear view mirror.  Sometimes getting back to even feels better than a gain. 

  136. roamer815

    Why didn’t Venezuela’s currency devaluation have more effect on the emerging market funds?

  137. JRW III

    judah,
    If you’re still in TNA ( I am ) 63.38 would be a good place to get out if they can’t hold it.

  138. lflantheman

    Just got here for the day.  Don’t short AAPL!   (Don’t throw the baby out with the bath water).  I’m buying back my short Jan 210 calls today and buying LEAP calls a few at a time as the price falls.  Come next week I predict they will blow away the numbers and fly upward. 

  139. JRW III

    ss
    Well you do have to go with a well disciplined instinct.

  140. ssdirk

    JRW – Your instinct is way better on this than mine for sure.  Maybe I should have just sold half, but not looking back now.

  141. judahbenhur

    JRW,  Still on board. Thanks for the advice. Yes, I was thinking if they can’t hold 63.40 I’m closing out my very small gain. 

  142. Phil

    BIDU/Josec – I hope those are puts you own, not sold!  China may have a big sell-off tomorrow morning and that’s where I’d take the short money and run on BIDU, who are off close to 10% since last Wed, which is a huge win if you are short. 

    SRS/Judah – Good attitude, the Jans especially were just a pain in the neck. 

    Venezuela/Roam – I don’t think many Vz stocks are indexed, maybe none.  

    Doug Kass presents the bear case on Fast Money toninght.

    Sector ETF strength: Livestock– COW +0.1%.

    Sector ETF weakness: Solar– KWT -4.3%. Gold Miners– GDX -3.9%. Semis– IGW -3.5%. Clean Energy– PBW -2.7%. Agribusiness– MOO -2.1%. Commodities– DBC -2.1%.

  143. yodi

    Phil Dia 105p feb holding still shorts @ 1.97 shall I hold them over night or close?

  144. josec

    Thanks Phil, yes I bought the puts.

  145. gel1

    Took the day off and went to the beach with the dog… noticed the waves come in and then go out…. hopefully the market recycles tomorrow. Got rid of my last SRS and took advantage of the fall in TBT and DD on all positions. Great buying opportunity for us bulls!

  146. Highlander

    flan,
    i agree, with vix down and aapl as well, i am accumulating the aapl jan ’11 $200′s and will cover with a feb ’10  caller after earnings.

  147. lflantheman

    Highlander…I think that’s an excellent plan!  It’s almost exactly the way I’m playing it.

  148. Phil

    In case you had forgotten: an update on the coming payment shocks as option ARMs recast (chart). Amherst Securities estimates many pay shocks will be in the 101-150% range (more than double).

    Woo-hoo on those AMZN shorts this week, that’s down $10 in 5 days!

    Volume picking up nicely on the way down, 168M at 3:44 so we’re looking at the biggest day in a while by the close. 

    DIA/Yodi – Feb are fine to hold overnight but lighten up if you are ahead.

    Bull/Gel – As long as you have some downside hedges.  There may still be an opportuntiy to DD much cheaper if we get early earnings disappointments.

    XLF below $15, XOM below $70, those wee on watch for the bullish breakouts.  Levels looking like this still:   Dow 10,549, S&P 1,135, Nasdaq 2,314, NYSE 7,389 and Russell 638, but close on S&P and RUT – maybe they close over as we now have a big push up in progress but the volume is going to be tough to overcome.

  149. judahbenhur

    JRW, Just got out.

  150. BigPinot

     Phil…I just bot a few TBT jan 50s for .3  Did I just throw it away?

  151. JRW III

    Out of TNA at 45.26 for a wash ! Oh well $8K on the first TNA play and $14K on the TZA play, better than a poke in the eye.

  152. jromeha

    JRW – could you explain your TNA/TZA plays?

  153. Phil

    Whee, that was fun!  Let’s do that again tomorrow on a Beige Book day!

    Dow up 60 points since 1pm – very bouncy.  Volume finishing around 215M, sellers really faded out in the last 1/2 hour.

    There is no news tomorrow other than Oil inventories ahead of BBook but there is the 2pm release of the Treasury Budget at the same time.   Thurs and Frid are big data days.   No earnings anyone really cares about – just EXFO, FUL, LLTC, XRTX and NWPX before tomorrow’s open so a big who cares from them. 

    Dow Futures STILL going up, another 15 points since the close just to make sure Asia and Europe don’t think we had a bad day when they look. 

    TBT/Big – Depends if the BBook indicates the Fed may want to tighten sooner, rather than later but, proably…

  154. BigPinot

     Phil…Ive been in and out of TLT puts a few times to no good result….is now a good time to go long June 87 PUTS?

  155. bord

    Phil, Your thoughts on JPM as a bull or bear play with earnings on friday? Any what’s the latest sentiment on XLF, still generally bullish?

  156. JRW III

    jromeha,
    Aside from som April bull call spreads on TZA, I play market direction on a daily basis; up till we hit resistance, down till we hit support.

  157. Phil

    TLT/Big – I just don’t like playing them.  Playing TBT up has been far more reliable for us than shorting TLT and you get  better premiums to sell but if the market is going to take a big tumble, that whole trade will go the wrong way as it takes Fed tightening off the table and people run back to the dollar so best to wait for a real sale, especially if you want to do something unhedged on TLT.

    Treasurys (long bonds in particular) were higher as billions more were auctioned: the 30-year yield -0.11 to 4.62%; 10-year -0.10 to 3.72%; 5-year -0.09 to 2.47%; 2-year -0.04 to 0.90%. The dollar gained some in mixed trade but sank 1.2% against yen; +0.2% against euro; +0.2% against Swiss franc; +1.1% against Aussie dollar; -0.3% against pound.

    JPM/Bord – The IBanks are black boxes plus JPM is weighed down by whatever nonsens Chase is stuck with so I would stay clear as they could go violently either way.  Better to let them show uys the way for investing in the next set.  XLF I’m still long-term bullish on because, clearly, our government will lie, cheat and steal to make sure the financial sector holds up so that puts a nice floor on them from which we can go long and make an income selling short puts and calls. 

    The second phase in credit-card reform kicks in today with a Federal Reserve rule protecting customers from costly fees and practices, especially: abrupt rate increases, overlimit fees and two-cycle billing. More changes take effect Aug. 22.

    Oil broke below $80 in late trading (after the close), nice if that sticks…  Only thing I heard is China has a lot of storage but that’s hardly news (although never underestimate how little most investors know, so anything can "surprise" them). 

  158. Phil

    Baidu Inc., China’s top Internet search engine, said hackers disabled its Web site Tuesday, in an attack similar to one against Twitter last month.  The latest attack left Baidu unavailable in China for much of Tuesday morning, with users seeing an error message when they attempted to visit the site’s home page. Most service resumed by afternoon, although a few users reported periodic disruptions.

  159. JRW III

    judah,
    I hope you made $0.60 on that last play; you got a much better entry than I did.

  160. ernest

    Does everyone feel that Apple is going to take off heading into earnings and the supposed tablet announcement on Jan. 27?  I’m thinking it’s a good time to buy some calls and then sell right before the announcement.

  161. Pharmboy

    Hello ILMN…..wow, look a that run up..  Nice pick, eh?

  162. Cap

    Just another Tricky Day …. we got some selloff; not enough.  And then the last 15 minute pump fest continuing into after hours.
     
    Check out BIDU after hours.  closed at 386.  A few hundred shares trade at 387 after hours; minutes later, a few hundred shares and its at 397.  No news I can see.  And no volume.  Strange.

  163. Cap

    Now I see … some story that GOOG may leave China due to cyberattacks.
     
    Yeah, right.

  164. Pharmboy

    STEC moving on takeover….that would be interesting…..

  165. Cap

    Apparently this GOOG story about pulling out of China is the real deal.  I am reading a story now.  Google has been attacked and gmail accounts have been accessed the purpose of which seems to be to spy on human rights activists and free speech advocates in CHINA.
     
    BIDU is now at 413 after hours.
     
    While GOOG pulling out of China may be good for BIDU, it would seem to be a DISASTER for CHINA period.
     
    GOOG saying that China is a no-go zone, should give anyone second thoughts about investing in CHINA.
     
    This could be a huge market mover.

  166. Cap

    Goog’s chief legal office said "We have decided we are no longer willing to continue censoring our results on Google.cn, and so over the next few weeks, we will be discussing with the Chinesed government the basis on which we could operate an unfiltered search engine within the law, if at all".
    "We recognize that this may well mean having to shut down Google.cn, and potentially our offices in China".  The decision will have potentially far – reaching consequences".
     
    Big consequences for China, that’s for sure.
     
    What a story to come out in the midst of expiration week.
     
    I am thinking BIDU should be shorted after hours up almost $30.

  167. lflantheman

     AAPL./ernest……I don’t think AAPL will do quite what ;you describe, but close.  I think it will be level the remainder of this week, probably pinning at 210 at expiration.  Then it ramps up a bit in expectation of earnings.  At earnings it rockets in expectation of another positive announcement on the 27th Jan.  After the announcement, I’m not sure, but probably a correction.  
    GOOG….This China thing has irked me from the beginning.  GOOG agreed to censor data on their site there beginning several years ago.  That was a mistake from the get-go.   Censorship is an ugly form of dishonesty foisted by the censors onto the censored, in order to control the latter.     How American is that?  GOOG traded honesty for money;  now they’re realizing it isn’t going to be in their best interest long term.         Duh!

  168. llorens

    Or buy GOOG on this perceived negative impact – down to $583 AH.

  169. stevenparker

    Iflan/goog – no one in China uses Google anyway.

  170. judahbenhur

    JRW, I made .50 in the afternoon (on top of the .50 in the morning), my afternoon entry was 44.70 and I exited at 45.20.  And, of course, compared to you, I’m only swinging a lightweight bat while I get used to TNA/TZA--1/10 the size of your standard trade.  Last year, I did the same thing regularly with DDM/DXD, using DIA the way you use IWM.  TNA/TZA has about twice the daily range as DDM/DXD, so I need to get a feel for the daily rhythm of IWM before I ramp up.

  171. llorens

    One thing that worries me about AAPL is that absolutely everyone is expecting that rocketship take-off. I think they will destroy their consensus EPS but I’ve seen the market (and stocks) do the exact opposite everytime 100% of the people expect a certain course. It’s like AAPL has a VIX of 4 right now.

  172. stevenparker

    agreed llorens – the two things we know for sure about the islate are (1) it’s going to be wonderful and (2) it’s going to be wonderful.
    Let’s hope it’s at least double wonderful.

  173. lflantheman

      llorens..AAPL         The way I play AAPL it really doesn’t matter what it does in the short term.  It’s a great company with lots of cool products.  Over the long haul it’s just much more likely up than down.  If you own the stock or ITM long term calls (like owning stock, but cheaper) you make your money by selling front-month calls for the premium.  If at earnings AAPL goes up, then my ITM calls rise and I sell premium during the excitement.  If it goes down, then I use that as an opportunity to increase position on ITM calls and perhaps to sell some puts for extra premium.  So for me it doesn’t matter what AAPL does at earnings.  I’m eventually going to make a profit o it either way.   

  174. ernest

    llorens/AAPL – Can you explain your strategy in detail?  I have been trading some straight call & put options, but I have been too afraid to try a spread yet, because despite all of the reading I have done, I’m still not sure how to calculate everything correctly and know how to unwind, roll up, or make other adjustments when things don’t go my way (or when I should sell part or all of a spread to get the most profit).  If you could give me a detailed example of what you’re doing, that would really help me.
    I can also be reached at ernest@purdue.edu if you want to keep this discussion offline.
    Thanks!

  175. jromeha

    ABC poll #s WAY down yet the only place that mentioned it was Seeking Alpha!!! Not that I expected much out of Yahoo, CNN, and Marketwatch, but I’d rather their usual BS spin than no mention at all!

  176. Phil

    BIDU/Cap – Very strange.  GOOG leaving China over censorship.  Seems kind of odd timing that BIDU is forced 10% lower in a week, topped off with "cyber-attack" that spooks out even more investors and then a miracle occurs to run them all the way back up to $415 just as after-hours trading closes. 

    This is big consequences for GOOG as a portion of their valuation includes the supposition of Global growth and they are dropping out of 20% of it but, this could be part of GOOG’s cost-cutting strategy.  I was already wondering, reading the specs of the new search system (coming out soon) if they were looking to trim down processing time and dropping China, with the translations and the many billions of web pages that make relatively little money for GOOG, does make econonic sense for GOOG and wrapping their decision in the constitution makes them seem heroic while they cut costs and jobs.  That frees them up to sell a ton of cloud time as well so I’ll be liking GOOG on a sell-off on this news

    AAPL – I dont’ think the stock went from $165 in September to $215 in Jan WITHOUT the IPad (I still like my name better) being priced in.  We went through this with the IPhone too, which came out around June ’07 after being announced (officially) in Jan 2007.  AAPL dropped after the announcement but then popped into June (up 50%) and then anouther 20% into Aug as sales looked good but then retraced 33% and then doubled into Dec ’07 before dropping in half by Feb.  All in all, it’s a crazy-assed stock and predicting what they will do is silly.  I like to buy them when they are cheap, which they are not at the moment.  It may be goulish but the next time I’ll probably enter them is the next time Jobs health concerns or some other rumor takes them back to $165 or less.

    ABC Consumer Comfort Index: -6 to -47, one of the steepest one-week drops in 25 years. The index had been at a 16-month high. Those who rated their personal finances positively slipped to 46%; only 24% think it’s a good time to buy things and just 9% rate the national economy positively.   That must be why the market goes up every day – guess who that 9% is!

    General Counsel Anastasia Kelly (before heading out the door) argued to pay czar Kenneth Feinberg that AIG execs wouldn’t accept stock; they wanted to be paid in cash. AIG (down 4% today to $28.46) is worthless – isn’t it?

    Because it’s not happening as fast as (say) Lehman Brothers’ collapse doesn’t mean that the commercial real estate crisis is minor, says Justin Fox. It’s just a slow-motion train wreck that will take years to play out rather than weeks.

    Who needs to agitate for direct investment on Chinese exchanges when Chinese ADRs are still outperforming the Shanghai Composite (chart)?

    Here’s a good chart that shows you why I still like XLF to outperform this year:

    DJUSFN vs. S&P 500 1.9.10

  177. Phil

    Haiti had a devastating earthquake this evening. 

  178. balancenv

    The Asia press comment so far are more of Google is using this to bargain with Chinese government. Google has 30% market share in China and gaining on BIDU (dropped from 61 to 58%). Google has several hundreds RD staff in China and the salary is on average 1/3 of US level. So I don’t think it’s a cost saving issue. 
    One interesting thing is among all the blogs and chat rooms discussions on major Chinese portals (sina, sohu, and qq), in the morning there’re quite a few appearance of Google exit china discussions, and beginning around noon, all disapear. Instead, most of the ‘hot’ discussions are on BIDU site being hacked, claiming the 1/2 day hack costs BIDU roughly 1M USD loss. 
    Some of the comments I’ve seen during the morning session is majority of the ‘net users’ regret Google decision and admits Google has better technology (even for Chinese contents), and BIDU’s search engine often gives preferences to those paying premium to get ranking bumped. One of the comment from a so called famous commentator on Internet industry claims Google’s issue with the Chinese market is "they have great technology, but their business gesture dealing with local partners is too high…". 
    Personally I think GOOG’s exiting China will drag for a while and BIDU will be the ONLY search engine player in China is over-hyped. With them still transitioning into a new ad bidding system (the phoenix Nest system), I do not foresee a great blow out earning result in late Jan (last earning date is 10/26).  
    BTW, from reading the local grapevines on COO exit, I think it’s from internal infighting. The recently promoted Haoyu Shen, was vice president of business operations and was ‘instrumental’ to the conversion to the new system. I think Shen bumped the COO out. 
     
     

  179. Pharmboy

    Big Pharma getting upgrades across the board by Credit Suisse.

  180. jcmcn5

    Phil — I don’t know if you’ll get to this here or not see it before the Wed. post, but with the TBT Jan 2011 spread — First time I’ve done such a long term spread, so my question is what am I looking for here, and what should I be on guard against before turing this into a bear call spd or just unwinding it?

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