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Tumultuous Tuesday – Funds Tend to Short Ten-Year Treasuries

Societe Generale is out with the latest edition of their hedge fund watch and in it we see that they’ve found hedge funds to have the "shortest position EVER on bonds."

Well, ever is since 2005 but still, hedge funds now have more than 270,000 short contracts on the 10-year Treasury Bond and that’s not even counting PSW Members and their TBT positions (ultra-short the 20-year) so we are either twice as smart as hedge funds or twice as dumb – either way, it looks like it’s coming to a head!

SocGen also reports large short positions in 30-year TBills too with a net short there of about 100,000 contracts and the Bank concludes that funds are also "strong net sellers of the Yen (50K net short) and buyers of US Dollars."  Short positions in the Euro are being reduced now that we’re near my $1.30 target but this is a critical line for the Euro and we could still break 10% lower if it doesn’t hold, I mentioned our Euro play in the Weekend Wrap-Up so I won’t get into it here but what a day we had yesterday already! 

According to Market Folly, hedge funds are also now net sellers of equities with long/short equity funds are now around 25% net long, which is definitely below their historical average of 35-40% net long.  Folly also sees that, according to CFTC data, many hedgies have been adding to shorts in S&P futures. Whether they are simply selling longs to lock in some profit or making a market timing call, one thing is clear: hedge funds are definitely cautious in this market.  Following the funds has been profitable this year as they are up 13% year-to-date after the Hedge Fund Generals Index was up 69% last year.     

PSW members did their best to avoid temptation yesterday despite the "rally" (that failed to make it back to Thursday’s highs on low volume) and despite the "fabulous" auto numbers that CNBC et al could not stop fawning over.  Indeed the statistics were so good they were – RIDICULOUS – Chrysler up 25%, DIA up 18.8%, F up 24.7%, GM up 6.4%, HMC up 12.5%, Hyundai up 30%, Kia up 17.3% and TM up 24.4%.  This caused me to comment to Members:

OK, now I may be an old fuddy-duddy but I’m counting less than 1M cars sold in a month in this group and it seems to me that there are well over 200M cars in this country so 12M cars a year is a replacement cycle of once every 16 years.  That doesn’t sound good, does it?   So, while the gains may be "impressive" - that’s only because last year was a complete catastrophe but we are a lot closer to the bottom than the top yet that is not in the least the story we’re getting is it? 

My eyeball estimate turned out to be very accurate as it turns out that the annualized sales rate for April was 11.2M vehicles and that’s DOWN (yes DOWN) 5% from 11.78M in March.  Much like this quarter’s earnings reports, the economic data we are seeing is comping to disaster and the market is pretty much acting like they are NJ Nets fans, lining up for Playoff tickets because their team wins 8 games in the first half of the season (as they only won 12 out of 82 all of last year).  Jersey fans may be crazy enough to wait for playoff tickets but they sure aren’t stupid enough to bet on the Nets just because they win a few games but, on Wall Street, hope springs eternal I guess…

My other eyeball estimate yesterday also turned out to be very useful as the watch levels from my 10:02 Alert to Members were:  Dow 11,100, S&P 1,197, Nas 2,480, SOX 385, NYSE 7,590 and RUT 725 and we keyed on the NYSE and that kept us from getting too excited as the other levels made their mark.  As I predicted in the Alert:

Rejections at those levels will be a good reason to get more bearish and, on the whole, today is a great day to be cashish and have a nice lunch and catch up on EMail because we’ve got a big week ahead of us and today is not likely to mean much judging by the very light trading we’re seeing this morning.

I also said "oil now back at $86.50 and we’ll want to short (futures) here with tight stops" and that attempt cost us a nickel but the second attempt came at $87 and this morning oil is all the way back to $84.62 – what a silly commodity!  Gold is also silly and we shorted that with a GLL spread – not willing to go naked short on gold as we do on oil.  We even flipped back to bearish on our mattress plays, going naked on our long DIA puts into the close – as I said in the weekend post, the market isn’t that complicated – just figure out what everyone else is doing and do the opposite.  My logic at 3:50 was: "Notice, by the way, that all we are doing today is making lower highs than last week.  This rally means nothing but setting a downtrend if we don’t pop over those levels."

So those are our targets to throw in the bearish towel: Dow 11,308, S&P 1,219, 2,535, NYSE 7,727 and Russell 745.  More likely, we’ll be watching for 3 of 5 break-DOWN levels this morning as the Euro continues to fall in early trading, along with the EU markets, which are down about 1.5% this morning, expanding on Asia’s poor performance this morning:

These charts are not live, the BSE fell 284 points since this chart (1.4%) to 17,137, breaking below the 50 dma (blue is 20).  The Nikkei is closed but the futures are down about 200 from yesterday’s close (something we talked about yesterday at length) and the DAX is down 75 points (2%) this morning (8:30) at 6,085 and we have no reason to think they’ll find support at their 50 dma.  Did I mention copper and our relentless shorting of FCX yesterday?  Copper hit $3.25 this morning and FCX is looking at $72.50 – look out below if they break lower! 

So it is a truly gravity defying performance put on by our US equities as they float high above – NOT JUST THE 50 DMA BUT, ladies and gentlemen, for perhaps the last time on the World stage in 2010 – the Flying US Indices will attempt to float above the 20 Day Moving Average in order to LIFT the other Global markets back to the very top of Wall Street’s big top.  Come and see the show!

Like good little market physicists, we know better than to fight gravity but, once the bonds of gravity are truly broken, then we also know that an object that is in motion will remain in motion unless acted upon by an opposing force.  Our upper levels are the obits within which the markets may travel but the thrust needed to truly break out will take a lot more push than the low-volume nonsense we’ve been seeing on our magical "up" days

Stock Market Physcis

Gravity will be a bitch this morning with Europe dragging us down and ICSC Retail Store Sales are not helping as they come in down 0.4% while Redbook Sales are down 22% from last week’s numbers.  The World’s oldest Democracy is rioting in the streets of Athens as all of Greece is on a 48-hour strike, protesting the IMF deal while the UK and Ireland are again grounded due to volcanic activity.  This is getting to be just like that 2012 movie isn’t it? 

Speaking of disasters, if you are trying to keep up with shareholder lawsuits filed against the company, you can check out  this one, this one, this one, this one, this one or that one.  The problem with having wealthy clients and wealthy investors is that they have access to the same high-profile law firms that you do when you get caught trying to screw them over…

Don’t take any wooden nickels…

 


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  1. lflantheman

    I went down into a burning ring of fire.
    I went down down down and the flames went higher.
    And it burned burned burned, that ring of fire.
    That ring of fire.          Johnny Cash

  2. samz3700

    Phil -
    I am in the June 42 ($7.11)  - 46 ($4.81) tbt vertical -  might finally have a small loss -
    any recommended actions?
    Also have
    Jan 2011 45 ($7.94) – 55 ($3.87) tbt vertical – still has plenty of time so less worried about it

  3. tradansh

    ARNA – Stock down today on this news. Might be a good time to scale in. Arena Pharmaceuticals Inc <ARNA.O>: * Files mixed shelf for up to $150 million – SEC filing .

  4. tradansh

    TLT catching a nice move up today pre-market, hitting 200dma at 92.6. Could get bad to TBT long positions.

  5. matt1966

    These big pre market moves are getting annoying. 

  6. kururi67

    Phil,
    I had been scaling into TBT plays over the last weeks during its drop but had hit R (5% of my portfolio in the position). With TBT down 2% more and it being one of your favorites, is this a time where I can waive the 5% rule a bit and take another slice of TBT. I am conflicted, I feel like I might kick myself 6 months for not buying more so cheaply…. but I also feel like I have been shoveling money into a furnace lately on this position.

  7. Pharmboy

    Let’s Get It Started  Good morning, America!

  8. samz3700

    kuri -
    If we get a real sell off – or more flight to the dollar – tlt can explode to the upside – it’s at 90+ now – the thing went to 120 during the panic – keep that in mind

  9. lflantheman

    Here’s MY plan:   I’m in cash;  will wait for some good stuff to pull back to entry levels for longs.  In no mood today to try and catch the falling knife.  And it looks to be falling. 

  10. lflantheman

    Here’s MY plan:   I’m in cash;  will wait for some good stuff to pull back to entry levels for longs.  In no mood today to try and catch the falling knife.  And it looks to be falling. 

  11. Pharmboy

    ARNA/Trad – you knew that was going to happen.  T’will be interesting to see what the price is.  At year end, they had 94M in cash and 140M debt.  I bet they are going to pay off part of the debt and bolster cash reservse, as they move about 30M/q in burn.
     
    Yeah Matt, cause everyone is taking their positions at the market close so it leaves us guessing. 

  12. EricL

    Given the strength of the rally, it makes sense that it has taken us over a week to get a break lower since all the ‘buy-the-dippers’ have to exhaust themselves.
     
    I don’t think all those funds shorting the ten-year are looking so smart. Eventually it will work, but they could easily be blown out first. Shorting bonds is basically either a bullish or very bearish bet. The bet is that we either get enough growth to kick-start inflation and force rates higher (that’s the bullish bet) or that the bond market implodes (the very bearish bet). The alternative is that we muddle along between those two extremes, and then the bond shorts lose, I think.

  13. ssdirk

    judah – I’m thinking we need some lines today.  I’ll post any I come up with.

  14. tradansh

    QCOR – Down pre-market. FDA Says Questcor’s Acthar Gel Linked to ‘Serious Adverse Effects’…. Asks Advisers for More Data.

  15. tradansh

    Pharm – VVUS also  moving down after earnings. Is it worthwhile to start scaling in?

  16. EricL

    I’d like to see us hit 1165 on the SPX. I think it would be healthy and I’ll buy a bit above that level.

  17. Phil

    Good morning! 

    Wow, this is harsh isn’t it?   Good-bye to all of yesterday’s gains in the first 5 seconds…

    Yesterday we were watching: Dow 11,100, S&P 1,197, Nas 2,480, SOX 385, NYSE 7,590 and RUT 725

    Below those we need to keep an eye on those 50 dma lines for SEVERE DAMAGE at:  Dow 10,800, S&P 1,170, Nas 2,400, NYSE 7,430 and Russell 690 – any of these breaking is going to be a big warning sign! 

    I’m not sure If those are even levels I’d want to jump in but we’ll cross that bridge when we come to it but we also don’t want to be greedy on our short plays if those levels seem to be holding.  If they do break, we’ll have a LONG time ahead of us to go short…

    Oil failing $84, Nat gas failed $4, copper is testing $3.20 (which is where it was on the Jan market collapse) and gold is still silly at $1,183 against a strong dollar ($1.305 to Euro, $1.515 to Pound and 94.5 Yen). 

    Watch last Wednesday’s lows and DON’T BE GREEDY!!!!

    Oh yeah – and WHEEEEEEEEEEEEEEEEEEEEEEEEEEEEEE!

    8-)

  18. Pharmboy

    QCOR/Trad – that is old news.  The company collected the data from previous trials and compiled it to make some sense of it.  Again, I think they are putting this out there for better entries.  The gel is already standard of care, and the side effects well known, so there is nothing new there.
     
    As for VVUS, I stay away from them, although I know others that have played them from a purely selfish standpoint.  I am not interested in their drug, and I think they have  a bigger mountain to climb than ARNA.  Who knows though, the FDA is a craps game.

  19. RMM

    Phil: you say  funds are shorting bonds, 5-10 years or 20 + stuff ?
     they expect a rise in interest rates/drop in bondprices ?
    I have TBT jun47puts, base 1.57 now 3.15$, not so good,
    need to add a short position on bonds: which ones ?

  20. oncmed

    Pharm,
    What do you think of BAX down here?  TIA

  21. Phil

    TBT/Samz – It’s tempting to roll down but if the markets keep crashing TBT could go lower and your timeframe is worrying as TBT stayed down for 45 days during the last crash so, if anything, I’d look to roll the $42 calls ($2.50) to the Sept $42s ($3.90), which will give you the same net upside and more time to sell callers.  The Jans are good but those $55 calls do nothing for you and you can take them out and wait for a bounce.  You can also offer .90 to roll down to the $43s, buying $2 of intrinsic for .90.

    Pre-market/Matt – This is not a game that retailers are allowed to play. 

    TBT/Kururi – Depends how far out you are but generally I’d say sell something that pays for your roll (Sept or longer) and you can always DD when things turn up.  As I said above, TBT could easily get back to $42 in a panic. 

    Cash/Iflan – Brilliant plan! 

    Now we’re back to bouncing off Wednesday’s lows again.

  22. daveo

    DIA Mattress:  I neglected to take out my callers yesterday so now I am still short 1/2 May 110 puts.  I’m contemplating a DD but I know the correct play is to roll to 2x the May 107s.  Any thoughts?  Just let them be as they are still all premium?

  23. Pharmboy

    BAX/Onc – that was unexpected on the infusion pump recall.  I still like them long term, and the August play (if you are still in it, can be moved to Jan11s and DD).  I am inclined to wait here to do anything, as another leg down is just going to hurt that much more in these big blue chips.

  24. roberthjrfl

    Phil, on TBT i have short june 46 and june 47 puts.  Is it better to roll to 1.5x Sept now or to wait.  You always say to sell into the excitement.  Thanks for the guidance.

  25. sns1

     Pharm- txs for your reply on GXDX yesterday

  26. Phil

    Bonds/Eric – It depends on the timeframe and what stage of the investment, I think.  If they are scaling into what may end up being the mother of all Treasury shorts, then this makes a lot of sense.  TBT may not rise for 2 years but, as long as you are willing to roll it along – it’s doubtful that we can be like Japan and keep rates at zero for 20 years.  In fact, it looks like Japan will no longer be able to do it either…

    RUT and Transports bounced off 2.5% rule, SOX down 3.7% (ouch!), Nas down 2.2%, NYSE -2%, S&P down 1.66% and Dow off 1.4%.  Watch for Nas getting back over 2% and S&P over 1.5% for sign of strength and, of course, RUT and TRANQ below 2.5% would be VERY BAD.

    Volume is not at all exciting, just 29M on the Dow at 9:55 so this is reversable!

    WFR back down 5% and a very sexy entry selling the July $13 puts for $1.50.

    Funds/RMM – It’s in the above post, at the beginning, in bold letter so, yes.  June is too tight though, I’d go for Sept as I just mentioned in above comment. 

    DIA/Daveo – No biggie, we’re not there yet (well, we’re right there actually) and you can always roll down to 2x whatever AFTER they lose more than 1/2 of their premium, not before. 

  27. tuscadog

    Phil, I’ve followed your guidance for two months now.  My $2mm portfolio has been 90% cash with $220k net short.  I’m an old guy and just learnng from your site.  Since I’m unsophisticated and there must be other new members like me, I have trouble keeping up with the speed of your moves.  Could you consider a tab with a table which summarizes the CURRENT positions we might ideally be holding on say a $1mm portfolio of shorts / longs ie an idiot proof crib sheet for the less sophisticated members?  Perhaps your assistant could attempt to keep this position list as close to  real time as possible, though I realize there will always be a lag.  eg I missed your comment at 3.50 yesterday re: shorting the DIA because of the way it was worded, otherwise I would have double my short position.

  28. tradansh

    Got clobbered today with the drop in TBT and other puts sold for long positions like GILD, WFR, SPWRA etc. Was un-hedged for most part.

  29. matt1966

    Phil / Premarket:  I don’t understand why they wouldn’t defend it better.  The volume premarket is pretty low but they allowed it to nearly break technicals in the financial sector.  Then the market opens and they get broken because there is so little room left to move.  All of yesterday’s move up was wiped out premarket.  It seems they are abondoning the market’s defense.  It forces me to conclude we’re going lower until proven wrong.  I’ll wait until we break last Wednesday’s low just to be sure.  But this market is a  ball buster to be sure.

  30. Phil

    BP holding up but RIG still getting pounded.  HAL treading water. 

    Pending home sales up 5.3% in March, which is up 21% from last year when 5 homes were sold so 6 homes under contract now – WOW!!!!

    March Factory orders are up 1.3% and -0.4% was expected so nice beat for what it’s worth. 

    There’s our positive data for today…

    ECB president Trichet bends the rules to guarantee it will keep taking Greek bonds as collateral for loans, and it may need to extend that to other nations, renew a program of lending unlimited cash to banks and even start buying government debt if the Greek bailout plan fails to stem the euro’s slide, economists say. "Rather you break the rule book than the euro area," says one.  MORE FREE MONEY!!!

    After last week’s S&P downgrade of Spain, Moody’s and Fitch each say they are maintaining Spain’s maximum triple-A rating with stable outlooks.

    Man I love capitalism!  As an arrest is made in the Times Square bomb case, does the scare present an investment opportunity? Consider three video detection technology stocks: NICE Systems (NICE), Arcsight (ARST) and Digital Globe (DGI).

    Not that we practice it in this country but, in theory…  Obama will offer companies $5B to help pay for retiree health insurance and offset some of the costs employers announced after the new health care law was enacted. Companies such as Caterpillar (CAT) and Deere (DE) had pointed to a provision that ended a tax break for providing drug coverage to retirees.

    When it comes to the Gulf of Mexico oil spill, says one analyst, we’re only in the first inning of a nine inning game. So how bad is it going to get?  If you think the Gulf of Mexico oil spill is a local problem, think again. Consumers across the country who drink coffee, eat bananas or plan on buying new tires could find prices rising because of the spill.

     

  31. tradansh

    DCTH doesnt want to go down. For the last couple of days, every time it moves down, buyers come in and scoop it up.

  32. dmankoff

    HI, Phil, how about a trade with UNG  and also with TBT, brand new trades on both and WFR ?

  33. judahbenhur

    SS, I had a morning meeting and only followed the open by smartphone.  Not sure I would have entered anything here, though the TOS support line looks like it held.  Thinking about TZA.

  34. Pharmboy

    QCOR and DCTH are being bought on the dips Trad.  Classic way to shake us out of position. 

  35. Pharmboy

    GILD and SPWRA are dogs right now, but if you reverse those letters, I think it spells …. lightning bolts!  (still laugh at your last sentence from yesterday Gel!)

  36. tradansh

    Phil – Thanks for your advice on NLY yesterday. They just cut their dividend and the stock started dropping.

  37. dilbert

    I received this from my tradeking account – is this common?
    Do I shut up and pay up or contest this?
    This email is to inform you that there is a negative balance in your account in the amount of $615.04 that needs to be covered.  This is due to a dividend payment that you owed in the amount of $624.49 from the SPY position you were short as of 3/18 due to an assignment.  Please deposit funds into your account in the amount of $615.04 to cover this debit by 5/7/2010.

  38. ravalos

    Phil, any action with VNO today after the announcement? Should we roll higher our short May $80s or wait more? thx

  39. dmankoff

    hi, Phil, what do you think about a new trade also on XLF?  so XLF  TBT   WFR  and UNG

  40. tradansh

    Phil – Disaster hedges, would you still recommend the trades from a few days back or recommend any new/revised trades with this drop?

  41. lflantheman

    STEC momentum  June 12 calls    3.25

  42. gel1

    Australia raised rates today ( yet again ). Inflation is building in so many countries, including China, Canada and many of our trading partners, that I do believe we have much more than is acknowleged. The doves at the Fed are aware of the inflation which is increasing ( it is up in March ) , but will be forced to adjust rates, IMO, long before year end.

  43. lflantheman

    Interesting observation.  I bought 100 Stec June 12 option contracts.  I looked at YAHOO..shows no volume.  TDW only shows 41 options sold today.  Interesting, eh?    These sites obviously aren’t accurate, at least not in real time.

  44. Phil

    TBT/Robert – As above, I’d roll out to Sept, not June, it’s too close and TBT can go lower short-term. 

    Positions/Tusca – You are not supposed to "keep up" with all the trade ideas listed here.  You need to construct a sensible portfolio using SOME of the positions – preferably ones you agree with – in a reasonably balanced mix.  I do not want 500 people stampeding in and out of the same positions at the same time, that would be silly, and dangerous.  Sage and I will be putting up Smart Portfolio Management articles for $100K and $1M portfolios by next weekend (I think) and, of course, the closest thing we have to a position list is the Buy List, which only requires one move every month or so and, if the market ever picks a direction, then we’ll have a new Buy List but right now, if you were really following me, you’d be in cash or hedged to ZERO and not worried about whether the Dow goes up down or sideways.  Sure we’re making some bets now but just to keep things interesting – this is not a really investable market when we go up and down 200 points 4 times in 5 days – especially for guys who are "just learning." 

    Clobbered/Trad – They are all good to scale into when the madness subsides.

    Premarket/Matt – I agree, it’s a disturbing change in trend although we’re still holding that channel at the moment and, on the whole, the S&P is working into those triangle thingies (I missed that day at chart school) which indicate a violent break up or down at the end, probably next week. 

    WFR/DMan – See above for WFR.  TBT I would wait to see if the Euro collapses because (as I discussed in yesterday’s post) Japan is a friggin’ disaster and that leaves nowhere for money to go but US dollars so TBT can drop some more until the Euro gets stable.  UNG I like long-term and the Jan $5/7 spread is just $1.15 and you can either sell puts if they go up (maybe the $5 puts for .50, now .30) or sell 1/2 June $8 calls if they hit .40+

    NLY/Trad – Glad you didn’t go in!  Hard to trust those REITs, even NLY who is a peripheral player. 

    SPY/Dilbert – It depends on the broker’s rules.  Worth a phone call…

    VNO/Rav – I didn’t think that report was worth $85.  I’m waiting for the transcript of the CC but earnings are up 25% from last year and the stock is up 100%.  You have to be willing to roll them along until something spooks the investors. 

    XLF/DMan – Financials looking iffy at the moment so patiently waiting to see where good opportunities lie. 

    AAPL getting clobbered this morning on anti-trust stuff.  Down 3% means they are 0.45% of Nasdaqs 2.22% drop. 

    Inflation/Gel – Thank goodness this country doesn’t have any of that!  The Fed says they expect inflation to be contained and, of course, they are never wrong (or, when they are, they cover it up!)

    March Pending Home Sales: +5.3% to 102.9 month-on-month, vs. +5% expected, and against +8.2% to 97.6 prior. Sales +21.1% year-over-year. “Later in the second half of the year, and into 2011, home sales will likely become self-sustaining if the economy can add jobs at a respectable pace,” says NAR chief economist Lawrence Yun.

    March Factory Orders: +1.3% vs. consensus of -0.2%. Feb. revised to +1.3% from +0.6%. Ex-transport +3.1%. Orders for non-defense capital goods excluding aircraft +4.5%.

    Farmers’ heavy reliance on Monsanto’s (MON) Roundup weedkiller has led to the growth of Roundup-resistant superweeds, forcing farmers to spray fields with more toxic herbicides and pull weeds by hand, among other labor-intensive methods. The bottom line could be lower crop yields, higher food prices and more pollution.

  45. Phil

    Good news Gel!  Inequality of income distribution in the US is at level not seen since the 1920’s:

  46. Phil

    D’oh!  Here we go….

  47. ravalos

    Phil, I have no problem with rolling VNO, I just want to do it at the right time (and learn in the process) :) thx

  48. gel1

    EUO doing a victory dance today!

  49. tradansh

    AGNC/Phil – Then what about them? Are they also not a safe bet?

  50. jcaesar

    Phil - You take this to be garden-variety panic, or are we about to hear something unpleasant (another EU country downgraded?).

  51. RMM

    Phil: with funds going short on bonds, makes no sense that TBT is dropping,
    my TBT jun 47: roll to sep 47 or lower strike ?

  52. yodi

    Phil  HOlding TBT long jan11 44c pd 6.42 now 4.65 sold jun 48p for 1.49 now 4.10 sold jun 50c for 1.39 now .26 what ajustment do you recommend thks

  53. Phil

    EUO/Gel – 8-)

    VNO/Rav – They are hanging tough, we’ll have to see if the index 50s hold. 

    Speaking of index 50 dmas, we have our first red one and, not surprisingly, it’s the NYSE.  Overall it’s:  Dow 10,800 (+131), S&P 1,170 (+6), Nas 2,400 (+29), NYSE 7,430 (-75) and Russell 690 (+22)

    So S&P is next big test, then Nas and RUT should be neck and neck with Dow having good support at 10,900, which is 5% rull support off 10,380, which is 20% up from our old, solid 5% rule line of 8,650 that we haven’t had to think about for so long that I had to go look it up! 

    So let’s assume bounce at 10,900 and that’s down 245 so about a 50-point bounce which means we expect 10,950 to be a point of contention and the Dow will have trouble getting back over it with a red NYSE. 

    The volume is NOT backing up this move down.   This is an absense of buying, not so much panic selling or even orderly bulk selling so we’ll have to take a Dow move back over 10,950 more seriously than usual.  It won’t mean a thing if we drop another major level but NYSE is also at 2.5% rule so we can expect a 0.5% bounce from them back to about 7,387 but the RUT already failed 2.5% (2.75%) and if they can’t get back over (714.5) I doubt the other will.

  54. lflantheman

    AAPL pulling back nicely with the market, now 258.    Scaling back in with July 250 calls.  Starting with 1/4, next 1/4 at 255.

  55. ssdirk

    judah – looks like a 10:30 TZA signal on a reverse screen play today.  Not in anything.

  56. matt1966

    Phil / Absence of buying:  I think the prop job is over.  For now..

  57. ravalos

    Phil, how do you check the volume on the Dow? Which indicator (symbol) you use?

  58. microflux

    Phil have you seen LYG ? -10% ?

  59. judahbenhur

    SS, Yes, that’s when I got in TZA.  Small position, though.

  60. judahbenhur

    SS, If Dow 10,900 is defended, I’m out, looking to reload.

  61. RMM

    Phil: what is protective DIA put position to have ? would you sell some DIA puts now ?

  62. gel1

    Phil
    With the market diving and the VIX leaping upwards, I would like to enter a few Buy/Writes – do you have your eye on any that look attractive?

  63. stockbern

    SVNT/ Pharm     Sept options chain looking good here , looking forward to a Sept 14 approval date ahead of  9/18 opex.

  64. traderd

     Phil,
    New member here, I am in the TBT  Sept 48 calls at 2.25. Would you advise any adjustments to this position? 

  65. judahbenhur

    SS, Not sure here. I just got out of TZA, and I know this looks like a buy signal for TNA, but…

  66. matt1966

    I admit, I’m confused as to where we go from here for the day.. but can we all agree that the trend is our friend and it’s now down?

  67. sns1

     Phil- if we fail 50dma what’s the next stop?

  68. ssdirk

    judah – I hear ya.  Hard to pull the trigger in this wind.

  69. Cap

    Nice selloff today … yet some REITs continue to defy belief & gravity.
     
    Look at SLG at new highs !  SPG close.
     
    SLG in need of a punishing selloff IMO.

  70. mrmocha

    PharmBoy – I have VNDA longs that have been great to sell 10 and 11 calls against, but VNDA has taken a nasty dip of late.  Thoughts on buying more here, hold, or bail?

  71. magret

    Phil, do you think its the right time for another SSO overnight play?

  72. Jtiff

    Phil-
    I closed out my EDZ positions and took the profits.  I still have TZA Oct $6 calls and was considering doing the same there.  That would bring be nearly all into cash.  I sold the TZA Oct 4 puts and would still have those.  What do you think?

  73. Pharmboy

    VNDA/mrm – I jumped from their ship at 11 last time and noted the dip.  Not sure why, BMY did amend their agreement and they missed earnings, so I am at a loss.  Assuming their schizo drug continues to impress, I can see them being taken out by NVS, but that is a big ??.  I don’t see anything else in their pipe that overwhelms me, so you are probably gonna have to play for a takeout.  If you are up, might be better to just cut the chord.
     
    SVNT/stock – yes, they are looking for approval then, and there are a bunch of big players in that stock.  Watch their movement to make sure they are accumulating or selling, as many have taken their position when the stock was at 7, 10 and 12.  I am no longer playing them, although they have been nice to sell 12.5 P against on the dips.

  74. wiiboxer

    Phil, I have the AET position for about 3 months. After rolling, selling putter and caller with mistake and bad timming, I have now
    long Jan 12 25 Call (open 7.91, now 7.6)
    short May 30 Call (open 1.05, now .52)
    short May 30 Put (open .93, now 1.71).
    Overall for the past 3 months, I lost about $3 on AET position. AET is at critical support and it was upgraded last week, but it keeps going down. Would you advise me on AET? Be patience and wait to get premium to cover my $3 lost. Most of my lost occured thru panic buying back putter when AET drop hard and did not let go caller when AET keep moving up. Thanks.

  75. yodi

    Please note GS dropped only .10 today !!!!!!

  76. sns1

     Pharm- are you a buyer of anything today? txs

  77. sns1

     Phil- Great call on going to cash! we tested 1176 a few weeks ago before we made our big move up…thoughts on if we hold here or where we go if we dont?

  78. Phil

    Wow, copper $3.19!!

    AGNC/Trad – They made no mention of capping dividends and I like their structure a little better than NLY in this environment but they are all dangerous if rates start flying up – keep that in mind.

    Garden variety/Jc – This isn’t panic at all.  This is low-volume selling.  If we get panic selling the maket can look like this for days and days in a row as there simply aren’t enough buyers to offload all the shares to.  This is why I said to get out, it was easy to sell things last week, this week it’s a little trickier…

    Obama with good timing for a 50-point bounce!

    TBT/RMM – Funds are going short on bonds AND long on cash – those are hedges to each other.  It does make sense that TBT drops as people panic into the dollar so I’d go Sept and plan on rolling those lower if TBT goes lower. 

    TBT/Yodi – Same as above, take out the caller, spend $1 to roll down $2 and don’t worry about the putter for now as June is still far away.  Look to sell calls on the next run-up, of course. 

    Dow volume/Rav – It’s a box on ETrade Pro. 

    LYG/Micro – All EU banks are very dangerous because they may have a lot of loans out to the STUPID PIGS.  Stay away but also, there will be nice buying opportunities if people start to panic because, after all, what’s a few Billion more losses?

    We’re holding 10,900 but barely

    DIA/RMM – I wouldn’t chase it now but we hit the July $113 puts before things headed south.  They are now $6.20 but better off with the Sept $111 puts as a longer-term plosition and you can sell 1/2 May $109s against them for $1.85 to get near our preferred net $5 entry.  For those of you in the DIA July $113 puts, if we do break over 10,950 then it is time to roll out to Sept $111 puts, hopefully for .50. 

    VIX/Gel – They have terrible prices but you can buy the Aug $30s for $2.60 and sell the May $27.50s for $1.25 but keep in mind that you are not actually protected as the months move independently of each other.  Still, I think the Augs will hold value and, with 2 more months to sell, it’s a nice spread.

    Nasdaq down 3% now and the additional loss is not AAPL’s fault (down 2.75% still)

    Welcome Traderd!  On TBT, I would take advantage of the move down to roll to the $45s for $1 and then your next goal is to roll to the $42s for $1, as which point it would be best to cover by selling something for $2 to cover (currently, the $46s are $2.10).

    Trend/Matt – Now that we’ve broken below the bottom of the triangle wedgy thing (about 1,190 on S&P) I think it’s a bit of a downtrend until we re-establish it but, unfortunatley, that can happen this afternoon.  Germany votes Friday so this whole weekend is up for grabs.  Cash is still king!

    50 dma/SNS – I didn’t think I’d have to mention them today but 200 dmas are: Dow 10,200, S&P 1,100, Nas 2,225, NYSE 7,100 (closest), RUT 625 (furthest)  A nice, healthy 10% correction would make me very happy and put me in a buying mood if we hold it.

    SSO/Magret – It’s worth a poke as a hedge against a reversal: May $40/42 bull call spread at $1.40, selling $38 puts for .50.  This hedge can be rolled down to June by (FOR EXAMPLE) rolling the putters down to a put that pays + .50 and rolling the spread to a lower +.60 spread or less so you are in a lower June spread for net $1.50 and simply out of luck if that one fails!

    Cap, what did you think of VNO? 

    EDZ/Jtiff – Nice job.  You can see why I like to keep after them!  I agree with taking profits, of course but you can also get out of the TZA Oct $6 calls ($1.40) by putting 1/2 the profits into the July $7/8 spread at .15  and you can mostly pay for them by rolling the Oct $4 puts (.26) to the July $5 puts (.37) as you can always roll them back and they expire sooner and if TZA heads higher, you pocket another .95. 

  79. ssdirk

    judah – taking a stab at IWM 71 puts if we break the TOS support line.

  80. judahbenhur

    SS, I’m looking more to the Dow 10,900 line to see if that holds, but the two almost line up.

  81. Phil

    SOX at 5% rule!  2.5% breaking all over the place – not good for the bulls…

    AET/Wii – Yes, patience.  People are worried about what baskets insurance companies have their cash in right now amd upi are very deep in the money and badly affected by it.  2012 is a long way off so just keep selling premium and ROLL, don’t buy back, your callers and putters.  The May $30 put can be rolled for about .10 to the July $28 puts, just make sure that roll doesn’t get away from you and you’re fine.

    Despite reassurances from Fitch and Moody’s that the rating in Spain would be maintained, eurozone CDS spreads have surged again: Spain’s spread jumps to 212 basis points from 163, Portugal’s to 366 bp from 284, Ireland’s to 225 from 189. Greece’s tightened – but just to 698 bp.

    NYSE and the SEC fine Goldman Sachs’ (GS) Execution and Clearing unit $450K for violating trading regulations related to timely close outs – though as one commenter notes, if Goldman dropped that on the floor, it probably wouldn’t bother to pick it up.

    Goldman Sachs (GS) reportedly may enter settlement talks with the SEC as soon as today. The firm is readying a statement to be released first, Charlie Gasparino says, and any settlement would include structural changes at Goldman.

  82. ssdirk

    judah – got in a little early at 1.61.

  83. samz3700

    VIX is up 24%

  84. salvum1

      PHIL/ TLT
    I know we have a TBT play, but would a short on TLT also work?  Say the 2011 short 85 puts, long 95 puts, short the 95 calls for 3.00 debit for a 10 spread?  Did I do that correctly?  Thx

  85. Pharmboy

    sns – I am sitting back, and rolling some Ps on a few things with this spike in the VIX.  I am not buying anything.  I am watching QCOR 10 May C.  If they pull back again to 40c, I might buy another round.  I may sell some Jan12 $40 P on GILD for 7. but weekly charts say they could test 36 area.

  86. judahbenhur

    Phil, Your view of a stick save today?

  87. Phil

    Cash/SNS – It is nice isn’t it?  I think it can be 10% down from here if we keep going but it’s going to be a bumpy ride regardless. 

    WYNN falling hard.  Very good break for those caught with BIDU, AAPL and AMZN callers! 

    TLT/Salvum – Sure that works too.  I always prefer to sell naked puts because at least you have a stock if things go wrong and not just a short position but it does accomplish the same thing.

    Rumors that Spain would ask for €280B in aid are "complete madness," says Prime Minister Zapatero, and could hurt the country’s interests as it tries to resist continental contagion. (earlierSure, $400Bn is "complete madness" – that makes it seem lik no big deal when they need $200Bn

    Graphic: Web of Debt

  88. Jordan

    No volume… very eery.

  89. ssdirk

    Judah – out of puts for 6%.

  90. Cap

    Phil — VNO ?  dunno; only saw the headlines.  Surely its way overvalued no matter how they spin a "beat".
     
    The fantasy of low expectations.

  91. judahbenhur

    SS, Nice. I’m in the 70 puts with a good early entry.  I think we still go down, but I’m wary of the Stick.

  92. Cap

    VNO has always been too complex for anyone to understand as a REIT.  Its more of a plaything for Steve Roth and Fascitelli.
     
    Vornado Realty Trust’s (VNO) first-quarter earnings rose 59% on prior-year charges and higher margins while occupancy rates fell slightly.

    The New Jersey-based real estate investment trust owns and manages commercial real estate, with its main properties totaling more than 100 million square feet in New York; Washington, D.C.; Virginia; Puerto Rico; and Illinois.

    In March, Standard & Poor’s Ratings Services lifted its outlook on the company to stable, citing its high occupancy levels last year and relatively robust internal growth.

    Vornado reported a profit of $200.3 million, or $1.09 a share, up from $125.8 million, or 80 cents a share, a year earlier. Earnings excluding prior-year write-offs and other impacts rose to $1.08 a share from 90 cents a share, while funds from operations--a key profitability measure for REITs--rose to $1.88 a share from $1.55 a share.

    Revenue rose 2.6% to $696.3 million. Analysts polled by Thomson Reuters estimated $636 million.

    Operating margins increased to 32% from 27.8%. Average occupancy rates decreased year over year and were down slightly from previous quarter.

    Shares closed at $86.05 Monday and weren’t active premarket. The stock has risen 23% this year.

  93. JRW III

    Good morning,
    Wish I could be here today, I’m still in Yosemite ( no cell )
    Most lines have NOT changed except for pivots because of yesterday, I’d ignore those and go with the trends from last week;Good Hunting !!

  94. sns1

    Phil- is it reasonable to expect a 10% correction? We had a 9% correction in Feb. Now we have better data/news (Healthcare reform is done, earnings are good, Greece got its package, etc). Perhaps we shuold only have a 5% correction to the highs of January (1150)?

  95. gel1

    What an ugly day!…. If "adversity" is the best "university", then I learned enough today to get an advanced degree.

  96. Phil

    PFE having a good day..

    Stick/Judah – Sure, the volume is only 111M on the Dow at 12:55 and that’s only a little warm as 140M at 3pm is our usual stick limit.  We’re hitting out 2.5% marks anyway so a 0.5% bounce is to be expected so Mr. Stick only has to give a little top-spin to natural bottom fishing that should kick in when iether GS announces they are settling for $1.3Bn (it needs to be a number that sounds like more than $1Bn but is much less than $2Bn and seems "exact" enough so that people assume there is some formula to it) or Germany makes some supportive statement of Greece or Spain says something more convincing than "complete madness" to calm people down….

    Volume/Jordan – I imagine there are many many people trying to sell and not getting their price.  I think if they do try a stick it will be sold into as discipline may be breaking down as some of these funds swtich to CYA mode. 

    VNO/Cap – Thanks, I think the big REITs are pretty much up on the assumption that they are picking up buildings at fire sale prices but if CRE starts to turn down again, those buildings won’t look like such bargains…

    Somehow CNBC is trying to connect the market to the terrorist from which I guess we assume that an attempted attack with a terrorist on the loose is good for the market but the actual arrest of a terrorist makes the market sell-off?

    Have fun JRW – you picked the right week to go on vacation!

    10%/SNS – After a nearly 100% run in the markets?  I’d say it’s necessary!  5% would help but 10%, a nice, solid test of the 200 dma with a couple of weeks of consolidation would really give us what we need to get back to 12,000 this year (assuming these earnings aren’t BS). 

    VIX has spiked 27% today and is just off an intraday high of 25.70, after running up 40% since April 26. "This is much more of a macro event in front of us," says one strategist. "It’s not like earnings season… We’re now talking about sovereign risk and systemic risk."

    Google (GOOG) says it will begin digital book sales in the next two months through "Google Editions," taking on Amazon.com (AMZN) and recent entrant Apple (AAPL), though details are short so far.

    Dow -2.03%. 10-yr +0.51%. Euro -1.17% vs. dollar. Crude -3.52% to $83.16. Gold -1.11% to $1170.20.

  97. Cap

    This type of day "should" close at the lows barring any catalyst to reverse.

  98. tradansh

    ACI down 5%, SWC down 12% – Are they good for selling some puts?

  99. gel1

    I can’t accept this market drop is going further into the basement. Earnings are too good for this to continue. I bought back all my short callers that are up over 20% on the day, and will wait for the inevitable upward market bounce to sell some more callers..

  100. EricL

    I’ve been buying some SPY May verticals long the 112s and short the 117s. Building about half my intended position, with a plan to add if we crater into the close or tomorrow morning. I think SPX 1165-70  is a good area of support from late March and also is close enough to the 50 sma to be worth a shot. If we can’t hold 1156 or so on the /ES, I may close these.
     
    Also watching GDX, which now looks like it might get to 48.

  101. EricL

    Sold about 1/3 of my KRE put position too for a nice double on those.

  102. Phil

    ACI/Trad – I still like MEE as a cheap play but they don’t like me!  BTU is on sale and, if you are going to buy on sale – buy the best (or at least sell puts against them).  ACI would be my 2nd choice in that space but I wouldn’t do anything unless our indexes get back over the -2% marks today as Asia has a long way to catch up and Europe was only saved by the bell with FTSE and DAX down 2.5% and CAC down 3.6% (see that chart above for how much money France has riding on these dopey countries). 

    Earnings/Gel – Earnings are still much more than 20% below where they were when the market was 20% higher than this.  That’s the simplest way to look at it.  Also, when earnings were 20% higher than this there was no stimulus money and we didn’t have 500 things to factor risk into on the long-term outlook.  Also, also, don’t forget that then, like now, over 1/3 of earnings were bank earnings and (funny thing) it turned out all those earnings were total BS and in fact they had losses because the assets they valued on their books weren’t really worth what they said and they had $500Tn worth of CDS floating around covering bets that could never be paid.  NOTHING has changed since then other than there are now $650Tn worth of CDS floating around and, so far, the government has taken the first several Trillion dollar hits instead of the bank. 

    In short – be careful!

  103. SeanC

    Phi/XOM: my short June 67.5 put is down 86%; the June 67.5/70 call spread lost ~50%.  Would you suggest 1) do nothing; 2) roll the short put to a lower strike; 3) sell the whole thing (I think this will not be what you recommend)

  104. EricL

    The GOOG chart looks terrible.

  105. gel1

    For  those of you that are following CFR (Cullen Frost Bank). The "good ole boys" down there in San Antonio are reporting a large boost in interest income (9%) as the Texas economy is recovering nicely. The bank is adding employees and locations. I’m buying more.

  106. jason_l

     Hi Phil
    Remember I mentioned a few days ago I had an AMZN position that I wanted to adjust?  Well, I adjusted the short put so that post-adjustment I had (and still have) 
    +1 May 130P / -1 July 145P
    AMZN is now right at the short strike (130) and this has me feeling like I should either close the whole position, or roll the short strike (down and out?), although maybe I should just leave it to see if AMZN can close above 130 (if it looks like it will close below by end of play I would have thought I should do something about the position).
    What would you advise?  Many thanks.

  107. morxlntway

    Phil – What did you mean today when you told someone, "don’t let those puts get away from you"?  I notice there are times you say, "why are you worrying about that now, it’s only May," and times when you advise rolling a Sept trade when it is only May. Can you elaborate a bit for me. Thanks

  108. jason_l

     Sorry duh that was WRONG – the short and long legs are the wrong way around, duh
    I actually have:
    -1 May 130P / +1 July 145P
     
    Thanks!

  109. gel1

    I have been shorting the FXE by holding Jan. 130 puts. I do believe the Euro will trend lower for some time, so I am doubling down on this position later in the week. Some folks are predicting parity with the Eura vs USD in the next 12 months. These puts appreciated nicely today, and appear to be a good play on a dropping Euro.

  110. Jordan

    Phil, I am into the "buy call sell put and sell higher call" play (you need to come up with a shorthand for that) on DXD, in for about 0.15 because I came in late when Dow had gone up a bit more than when you recommended.  October expiration on all options.  Today is helpful for that position.  Question is, on down days like this, should I do any adjustments or close some of the position, and what criteria should I use?  Or just let it ride?

  111. Jtiff

     Thanks Phil.  I took your advice on TZA.  I figure you think it wise to wait until things calm down before any more entries?  When would be a good time to reload on EDZ?

  112. gel1

    I have been holding long positions in TBT for over a year – a test of patience and tenacious behavior. I am sitting tight, and will add more if we continue to see a further drop. My naked puts are sure a test of margin availability though.

  113. tradansh

    GOOG looks like a very scary thing. Heading to 485, me think.

  114. EricL

    AAPL still holding above the post-earnings gap higher. Stuff like this makes me cautiously bullish. If funds were dumping and desperate to raise cash, I think a $260 consumer stock that’s just had a massive rally would be an obvious sell for them. Same with BIDU.

  115. dmankoff

    HI, Phil,  how can establish a good play on TZA today?   how about selling the May or June 6 puts on TZA
    or buying TZA and selling the 6 calls against it, and also selling the 6 putsw as well, to buy some more cheaper ?

  116. Jordan

    Periodicalkly during the day, WSJ or MarketWatch or others will pick a point to write an article about how the market is up, or how it’s down.  The point that they pick to launch the story (and thus fix that level in the people’s minds) is interesting to me.  For example, the WSJ has this article from today, conveniently written and pointing to a very big drop that the Dow has somewhat rebounded from.
    "
    Dow Digs 271-Point Hole"
    http://online.wsj.com/article/SB10001424052748703866704575223792849395342.html

  117. stockbern

    CFR/ gel1  Plus they just raised the dividend.      Ditto on the TBT naked puts.  Just rolled down and out some May p to Sept.

  118. Pharmboy

    Can we get a little luv?
     
    The U.S. Supreme Court backed another set of pharma investors trying to sue a drug maker about its handling of a big drug safety issue. This time, it’s Pfizer that appealed to the Supremes for relief from a securities lawsuit--and lost. The high court rejected Pfizer’s appeal, allowing the securities-fraud suit to proceed.

    It marks the second time in in as many weeks that the court made way for a securities suit against Big Pharma; just last week, the Supremes allowed an investor suit against Merck over Vioxx safety. In the Pfizer case, the drug in question is Celebrex, a cousin to Vioxx: Both drugs belong to the Cox-2 inhibitor class.

    The legal issues were similar as well. Like Merck, Pfizer had argued that the plaintiffs missed the two-year statute of limitations. And as in the Merck case, the court determined that the lawsuit was filed within two years of the first public evidence of possible fraud. Pfizer’s appeal had been on hold pending a decision in the Merck case.

    The Pfizer plaintiffs allege that the company’s Pharmacia unit withheld full data from a study showing that using Celebrex was no safer than less expensive drugs. (DUH!)  That’s why MRKs VIOXX was SOOO  much better….and I do not say that with sarcasm!  It is, was and always will be.  Now for heart attacks, baby aspirin is the way to go.  Don’t go there snow!

  119. dflam

    Phil : Not clear on all your TBT comments. I’ve got Sept $43 calls at $6.96 ,now $3.50 and sold Sept. $50 c for $2.37 ,now $1.07 and sold Sept. $45 p at $1.58 ,now  $3.22. Should I roll down to Sept.$41/$48 bull call spread  and leave putter as is? Thanks.  

  120. jburgess

    Hi Phil! I was thinking about doing a buy/write, or bull put on T. Any suggestions?

  121. kustomz

    GOOG I’m thinking the same trad, trigger finger getting very itchy right now..wouldn’t mind starting a small position here

  122. salvum1

     PHIL / PG
    How about buying the 2011 60s and selling the june 62.5 for a net 3.70 on a synthtic covered call?

  123. philisit

    Volume still giving hints about Stick Into Close?

  124. gel1

    China had a first quarter growth of 11.9% – The government is concerned about inflation, and are accordingly tightening credit…. just a temporary slowdown will result, and the growth trend will continue. The commodity plays I have will be kept for long term profit expectations.

  125. kustomz

    gel, you don’t think trouble in Euro zone will affect China’s future growth prospects?

  126. Phil

    XOM/Sean – I sugest doing nothing as the $67.50 puts still have $1.50 in premium (50%) and the call spread is only $1 out of the money.  Keep in mind he premise of the play is that we DO WANT to own XOM at net about $67.50 in June and there’s nothing about their earnings that says we shouldn’t.   If not, you can always roll the puts, which were the cost of the play, until XOM goes up.

    AMZN/Jason – I can’t remember what we were "fixing" to put you in a backwards spread other than perhaps locking in profits?  That $5.15 on the May $130 puts should be guarded as it’s the money you need to roll the July $145 putter down to either the Oct $125 puts (-$6.50) or 2x the July $130 puts about even.  AMZN’s chart looks awful so you may want to ride it down a bit.

    Rolling/Morx – What I meant by that is that the roll is currently .10 and as long as the net roll stays about .10 then there’s no need to pull the trigger.  Only when you think it’s moving up and will cost you too much more (you need to decide on your tolerance) do you have to "worry" about making a roll early.  If you have a plan, then you won’t need to panic…

    AMZN/Jason – Oh, well I feel MUCH better about that then!  In that case you can take $15 off the table by rolling down the the July $115 puts ($4.20) and then you can roll the putter or DD or whatever if you have to.  If AMZN comes back and your putter expires worthless. then whatever is left in your July puts is a bounus.

    BUY1SELL2/Jordan – It’s really and artificial buy/write but, when you are playing it tight, then the call sales become both redundant and dangerous.  No adjustments to disaster plays unless they are over a double at least, then you have to conside whether they are still a good risk/reward on them.

    EDZ/Jtiff – I think we may be at the beginning of a major correction.  If the EU starts unraveling, anything could happen.  Don’t forget our meltdown really started with troubles in Iceland and Ireland even though it turns out that our local issues were 100 times worse than what actually triggered the global sell-off - How is it different now?

    TZA/Dman – I HATE to chase things.  If you must I’d go for the July $6/8 bull call spread at .40 and sell the June $5 puts, now .22 for .40 if TZA heads down and, otherwsie, be thrilled with the potential 400% gain.

    WSJ/Jordan – Owned by a guy who has more assets than all but 100 people on the planet Earth.  Not surprising that he wants them defended. 

    TBT/Dflam – I would leave the putters (plenty of time to recover), buy back the callers for flexibility, roll down the $43 calls at .50 per $1 and wait for a chance to sell calls, covering if we break lower and you can’t stand it only or if we have a good run and you get a good price.

    T/Jbur – I like the stock at $25.80, selling the Jan $25 puts and calls for $4.35 for net $21.45/23.23 plus the dividend.  I like VZ better at $28.64, selling the 2012 $30s for $8 for net $20.64/25.32 plus that dividend.

    PG/Salvum – I’d let them finish selling off first.  Maybe $60.

    Volume 140M at 2:30, righ on the edge of what’s stickable….

    LOL Kustomz – Nothing affects China’s future growth prospects!  Not even the fact that there isn’t enough metal in the world to make them 1Bn cars is enough to dissuade forecasters from projecting infinite 11% growth.  No US customers?  No problem, they sell to Europe.  No  EU customers?  They sell to India and Japan.   No Asian customerrs?  Why "internal" growth will drive China’s economy as the peasants making $2 a day are all saving up to buy a $10 Barbie doll, I’m sure..  8)

  127. David Ristau

    Hey all,

    I have posted a new article about my report. This report is about the future of The Oxen Report. Starting Monday, I will be coming to PSW full time and a lot of things will be changing with the report. I wanted to let everyone know and prepare for it.

    There is a lot of good information in the story, and I would appreciate everyone reading it if you have a moment.

    Thank you!

  128. hanna5

    Phil / GOOG : scanned through the threads, but sorry if this has been mentioned already. Anyone selling some GOOG puts here? The sept 490s are almost $30, thats GOOG at 460 with nearly a 100/share in cash and 25/share in earnings! And, those can be rolled!! Doesnt this sound like a great trade!? What am i missing….

  129. lflantheman

    Indeed, I am selling GOOG puts.  I’ll buy it anytime under 490.

  130. EricL

    hanna,
     
    Why would you want a GOOG long of any kind here? It has broken through all major moving averages, has shattered its uptrend line, and has no support nearby (there’s some about $6 down from here though). It’s sheer gambling to go long GOOG right now, IMO.

  131. Jordan

    Phil/Buy1Sell2  I like that name, maybe shorten it to B1S2.  Nice.
     
    So, will wait for double if it happens before I consider doing anything.  It’s tricky if the overall spread is for a credit.  What then?

  132. EricL

    Make that $12 down (495). It *could* work, but there are a lot of stocks that look more promising, imo.

  133. matt1966

    Yes folks, it’s official!  We have been ‘correcting’ ever since GS got slammed by the Feds for fraud.  The banks have topped out and are giving up quite a bit.  I think it’s just become too much for ‘them’ to defend.  So, they’re lightening their load.  And, doing it very cleverly I might add.  None of this broadcasting support as on the way up.  No, resistance get’s taken out whenver they need to suck in a few more bulls to hand the bag over to. 
     
    Wheeee!

  134. SeanC

    Thanks Phil.  that’s waht I thought you would say; but just want to confirm.

  135. EricL

    AAPL still holding on but barely: could get ugly if it can’t hold 255.

  136. jason_l

    Thanks Phil.
    hanna5, FWIW GOOG is currently under its 200SMA.

  137. jason_l

    GS +1% on a day like this, has to say something for GS stock.  XLF down 2%.
    Phil, should we be (tentatively) taking a bullish position on GS, perhaps hedged with a bearish position on XLF?

  138. sns1

    Eric L- It seems you have a good feel for mkt movements. If we hit 1165 level or worse, what are you planning to load up on? Index plays or specific stocks? Txs

  139. jcaesar

    Anyone noticed the euro has been slowly, gradually melting throughout the day?  It doesn’t seem to hitting any resistance.  FXE currently at 129.68.  Down 1.47%.

  140. matt1966

    Calling a close for FAS at 96.19.   Let’s see how low we can go..

  141. sns1

    Jason- Bruce Berkowitz just reported a position in GS, which explains some strength in addition to expectation they settle with SEC

  142. sns1

    Phil- Do you expect follow through tomorrow? Are you a buyer of anything here?

  143. yodi

    Phil DIA mattress 1/2 or full cover on may 109 or 110p  on closing ? thks

  144. kustomz

    This may sound disgusting but i would love to vomit on Cramer…he makes me sick. CNBC stooping to new lows with the please save our markets Cramer shtick. Someone needs to show Cramer HCBK (and they’re a good bank) last earnings release to get an idea about how bad those jumbo’s are performing.
    http://www.favstocks.com/prime-time-hudson-city-bancorp-non-performance/239880/

    Phil so what your saying is sell steel and buy MAT? Im so confused.

    Borrowing costs are on the rise, and thats bahhahahhad in this o so delicate recovery.

  145. EricL

    sns,
     
    I like gold and gold miners best. I’ve been buying some SPY call verticals too as I mentioned above. Also long GDX, GLD, and various individual miners (ABX, GG, GOLD, SLW, PAAS etc.). Some of these aren’t having a good day, so have to be watched carefully. In every case I’m long with either verticals or diagonals.
     
    Although I think we will find support here, Phil could turn out to be right and we’re instead starting a bigger correction. A break of SPX 1155 would make me a lot more cautious, even bearish.

  146. EricL

    sns, I also started a small AAPL long today, but absolutely out if it looks to close below 255. This is also with diagonals (long June 240s, short May 260s).

  147. morxlntway

    dflan – are you rolling your TBT 43 to Sept 41 for a $1 or maybe just the $42s?

  148. EricL

    sns, I also still like EVVV but this one is risky. The bet is they get bought out. I’m long naked calls here.

  149. hanna5

    Thanks EricL, my put positions are mostly initiated not as a short term trade, but as a long entrance. If i can enter GOOG in Jan at net 450, i would do so happily. I know many people trade on technicals, and i will do so for short term trades. But, for better or worse, i disregard technicals for long term stock positions. i think GOOG is fundementally solid at net 450 (sept 490 puts at $30, with a roll to jan if necessary)…

  150. jason_l

    Thanks for the pointer sns1.  I also read Andew Wilkinson’s notes y’day (I think) about a sizable bullish position established in GS.

  151. iprosper20

    Hi Phil, do you think fcx may get to the $66.00 range? copper is way down and gold is struggling…..

  152. cwan120

    Whoa, this is intense.  Is Mr. Stick going to show up or not?
    It’s like Waiting for Godot.
    8)

  153. EricL

    GDX now flying back up.
     
    KRE puts really saved my bacon today :)

  154. matt1966

    cwan, Mr. Stick ain’t showin today!
     
    Kustomz, the housing bubble inflated homes at every level.  When the foundation gets blown out by subprimes going South it puts downward pressure on everything.  That being said.. it’s not like someone is going to downgrade from a $500k – $1M home to a $100k – $300k home just cuz they can get a better deal on it.  But on the margins there will definately be more pressure.

  155. sns1

    Eric- Txs for your feedback. Very helpful…gold could remain under pressure as dollar gets stronger IMHO

  156. sns1

    Pharm- Thoughts on AMLN at $20…back to levels pre-FDA (though I recogize it moved from $12 in November)

  157. samz3700

    wow eur.usd actually broke through 1.30 before rebounding off lows

  158. jburgess

    Phil: Regarding VZ
    T/Jbur – I like the stock at $25.80, selling the Jan $25 puts and calls for $4.35 for net $21.45/23.23 plus the dividend.  I like VZ better at $28.64, selling the 2012 $30s for $8 for net $20.64/25.32 plus that dividend.
    Do not see any 2012 $30s for $8 or anything close on my screen

  159. kustomz

    trust me mr stck is here, just watch goog when it starts to sell off a big stick steps in same with the euro

  160. Phil

    Hey David! 

    GOOG/Hanna – You have to REALLY want to own GOOG to sell the puts and it’s fine if you have tons of cash and margin to hold that long but not a play I usually go for. 

    Doubles/Jordan – It depends what spread and for how much with what goals etc.  If I have a play to make 500%, I like to be about halfway there before I kill it.  Up 100% (or 20% to goal if a credit spread) hardly seems worth it unless you think it was just luck but, if that were the case, I wouldn’t have designed a 500% play in the first place. 

    Confirming is good Sean! 

    GS/Jason – Up in anticipation of paying relatively small fine and getting back to their usual evil.  Probably won’t be that easy.  I do like the Jan $100/145 bull call spread on them but that was balanced with 5x the puts so no longer a good balance now that they are down. 

    Euro at $130.05!  Copper $3.18!  

    Follow-Through/SNS – Finishing near day’s lows not at all bullish.   Means we’re very likely in at least a 5% correction with the normal follow-through 1.5%, .75% and then dribbling into the line (assuming we decellerate and 5% holds)

    DIA/Yodi – Can’t turn down 1/2 cover with $109 puts at $2.  They are easy to roll to 2x the $105 puts (now .84) so not putting much of a cap on gains and good protection in case things get fixed again.

    Cramer/Kustomz – Disgusting and appropriate!

    Speaking of miners – my precious ABX holding up fairly well…

    FCX/Iprosp – $65 is my bear target for them but we need gold to fail $1,150 I think but copper under $3.20 is already a stake through the heart of that stock. 

    Stick/Cwan – As expected, all attempts to buy are met with plenty of sellers.  Mr Stick will have to ply his trade in the overnights, I think…

  161. Pharmboy

    AMLN/sns – staying away now.  That train has left, and I think MRK and NVO eat their lunch.  Buyout, possibly, but not here.

  162. sns1

    txs Pharm

  163. sns1

    Eric- BTW, I agree that for LT gold and miners are great inflation hedge as all these fiat currencies could go to shit

  164. Phil

    “The markets were in free fall," says the man who used to head the fixed-income loan business for Lehman Brothers (LEHMQ.PK), suggesting Barclays (BCS) got no "secret" $5B discount on securities when it bought Lehman’s brokerage. James Seery was testifying in day two of a trial in which Lehman seeks $11B from Barclays.

    Geithner tells Senators they should enact the bank tax to help the government recoup bailout funds. He says the fee also would restrain banks’ risk-taking by making it more costly for them to take on big bets without having the assets to back them up.

    Simon Johnson rips financial reform legislation as it now exists, saying it places few constraints on the activities of big banks and allows regulators to tweak the rules down the road. "The Senate leadership, on both sides of the aisle… would prefer [not] to infuriate powerful banks."

    Meanwhile, rah rah Goldman:   It’s no longer just Buffett sticking up for Goldman (GS), as Wilbur Ross calls it "the best-managed of the big firms, without a doubt." Derivatives didn’t cause the financial crisis, Ross says, and if all the Bush tax cuts expire, “you’ll see corporations retaining more of the cash, either for internal growth or for acquisitions.”

    Greece’s bailout “might collapse” and its debt crisis makes it “hard to see” how the euro will survive in its current form, Charles Goodhart says. "[Apart] from having too large a deficit and too large a debt ratio, [the Greeks] are very uncompetitive, and if they actually cut back the deficit as fast as is being required, they’re just going to go into appalling deflation."

    Weren’t rates supposed to be going up? That was before eurozone troubles sent investors on a flight to safety; the 10-year Treasury yield is at a two-month low of 3.62%.  People just do not understand the Treasury markets

    The drop in shares of Transocean (RIG -0.7%), the company BP (BP) hired to drill the Gulf well, is "out of proportion to the lasting consequences" from the spill and now presents a buying opportunity, Gray Cardiff says. "Pressure to exploit existing fields is too great to close down projects underway or in Transocean’s backlog."

    Dow volume 184M at 3:50, we’ll probably finish at 240M or more with lots of last-minute deals made to push us up at least a bit but 10,950 is a tough nut to crack at the end

    VZ/JBur – That was the $30 calls sold for $5.75 AND the $30 puts sold for $2.25!

  165. hanna5

    never doubt the last minute stick!

  166. EricL

    sns,
     
    Yes, but I think it’s really the risk of sovereign default that is likely to be the driver for higher gold prices, not inflation necessarily (although that could happen if things improve). The fact that gold has been so strong even as the dollar has marched relentlessly higher is very encouraging, to me.

  167. dflam

    morxintway; Couldn’t get $41 for $1.roll,but got $42 for $.50 so took it.

  168. RMM

    Phil: is this ok to hedge with gold or gold miners ? If so HOW ?

  169. jburgess

    Thanks Phil!

  170. sns1

    Eric- Fair point…if they go down, gold is safe haven, if they go up, money priniting leads to inflation

  171. EricL

    Man, I do so much better when volatility runs up like this. I can’t stand that slow trickle higher when you don’t believe in the bull thesis.
    I love you VIX explosion <sniffle>.

  172. dflam

    phil : Ive got VZ position in IRA account which requires 100 %  margin for naked puts. The $2.25  premium collected on $30 puts is approx. 3.65% ROI on this basis. Broker won’t allow synthentic puts in IRA account. Any ideas?
      

  173. gel1

    Phil…. I glad to hear David will continue as part of your team…. I like his stuff and love to trade with him.

  174. gel1

    Eric… I like your strategy re the precious metals. Much like TBT, the fundamentals are pointing in the direction you are following and I too have the same positions. Currencies will eventually be debased because of debt, and precious metals will inversly react to this inevitable change. The patience of Job is required though, in order to profit from this.

  175. matt1966

    Ok, so I haven’t started a TBT position yet because I’ve been concerned about a flight to safety from the Euro and the Yen.  But the gap down today makes me want to take a nibble for my IRA.  Time is definately on my side there.  So, starting today (AH), I’m scaling in.
     
    Yes, nice 10 minute stick job.  Just enuff to keep the bulls thinking the world isn’t going to end.  Because…. really it is.  Prediction:  gap down premarket, closing up.  If we gap up at open, I think it will just more of the same… setting the bulls up for another drop in a day or two.

  176. Pharmboy

    ITMN – FDA did NOT approve it…..OMG. 

  177. drumkeerin

    Gel
    Read your comments today and yesterday regarding crippling inrflation as the only way out. I agree.  Problem with TBT is that in hectic times, the argument will be that this is solely an instrument for the usual "fat cats".  And it will be not be allowed to remain a free standing instrument against shennanigans with Treasury Bonds. As far as the gold paper instruments go, we need only go back to 1933. If they didn’t have a problem with the actual metal, imagine how easily they could blow the paper away.

  178. tradansh

    Pharm – ITMN got effed. 46 to 8. Unbelieable, how many people would have gotten screwed up with that one.

  179. tradansh

    dflam – I have the same situation in my IRA. So, I am looking for some good dividend stocks with more premium than VZ. For VZ specifically, you can just sell covered calls and get more return than selling puts. Phil might have other ideas.

  180. powermd

    Good evening everyone- I’m a new member, and this is my first post. I’m fairly new to trading options. I’ve been trading for a few months now (successfully) with directional options trades based on momentum and fundamental/technical/statistical predictions. I’m getting curious to try something more advanced, so I’ve been following what you guys do. 
    Just want to run this trade by the group, and of course Phil. Based on research from Birinyi GOOG is predicted to continue to fall to approximately $478 by 5/28 based on historical statistics related to a drop following earnings. I’ve made a large profit trading long puts so far, however I the risk/reward on the directional trade is looks much less favorable with today’s drop. I’m considering a bear put spread buying the 500s, and selling the 490s. Assuming 10 contracts, risk is about $3500, reward is $6500, with a breakeven at $496. If today’s events really are a turn in the market, this could work out well for me. 

  181. cwan120

    Hi, Peter and Fellow Stranglers,
    I just got the following email from TOS regarding PM margin requirement.  Can Peter or someone explain what is "an array of down 12% to up 10% for OEX and SPX options"?  Thanks!

    BTW, my account was hit by a pretty sizable reduction in BP when I logged in at about 7:00pm tonight.  And then I saw this message.
    — Email from TOS —

    Our clearing firm has notified us that the Options Clearing Corp (OCC) is applying a stricter Value at Risk method to calculate the margin requirements for index option positions at the clearing firm level.  Because the VaR method can create significantly higher margin requirements than the traditional TIMS model, our clearing firm has chosen to pass on the increase in the margin requirements to the portfolio margin accounts of our customers.  The clearing firm is requiring us to use an array of down 12% to up 10% for OEX and SPX options, replacing the previous array of down 8% to up 6%.  Any increases in the margin requirements you see in your account are due to these changes. 
     

    If you have any questions, please email margins@thinkorswim.com
     
    Thanks,
    Margin Dept.

  182. judahbenhur

    Cwan, I received the same note and same adjustment for my puts/calls that are less than 12%/10% away.  It is a sizable adjustment for me, too, since my puts calls had been more than 8%/6% away but not 12%/10%.  I have plenty of margin in my account, but it sure changes the picture going forward and is going to make it difficult to do large amounts of strangles.  I don’t typically stay 12%/10% down and up with just a couple of weeks left before the options expiration date. 

  183. Peter D

    Cwan & Judah,
    Out of the chaos, the positive thing is that I actually like the 12%/10% rather than the 15%/15%.  Yes, it’s a painful adjustment, but the -8%/+6% margin was way too cheap.  I talked to TOS and they will give time to adjust our positions, and won’t have margin calls, unless you were in trouble with the original -8%/+6%.  Actually, some of my accounts are very balance and didn’t have much of a hit on the margin, but some were hit.
     
    To reduce margin, we can roll out a month or two.  We’d need to be more aggressive in rolling out with the increased margin.  Don’t get mad and close out positions as VIX is at 23.84, which is the time to sell more premium, not buying them back.

  184. judahbenhur

    Peter,  I have some May SPX 1080 puts, protected by put verticals.  I can easily roll to June 1020 or 1000, which would put me back on the right side of the margin, assuming we don’t drop another 30-50 points.  I guess I could roll the verticals as well.  Would you suggest doing that, or wait a few days or weeks?  The increased margin requirement isn’t a problem for me, just a surprise.

  185. Peter D

    ITMN, a bunch of people is going to make a fortune as there are 9,000 or more Open Interest for May Puts (strikes 40, 35, 30 and 25).  There are a few losers too with large Open Interests for the Calls.  If you bought a Long Strangles, you’d do well.  I have never do a short strangle on biotech, so I’m just an observer.

  186. Peter D

    judah, I’m contemplating on cashing out the put verticals, but I think my head will prevail and I’ll keep them in case we drop further.

  187. johnp592

    lol, Cap, great link :)

  188. lflantheman

     Here’s a question for anyone who may be on this evening.  I’m short some GOOG May 520 puts which are now about double what I sold them for, meaning I’m down 100% on the trade.  I could roll them out or out and down, but assuming GOOG may drop further, would it make sense to convert this to a bear put spread, say buying May 530 puts for instance.?  This combination would be profitable if GOOG continues to slide.  Make sense?  

  189. pstas

    Stranglers/Peter- does anyone know if these new rules also apply to RUT? I got the same email along with adjustments to my account. I note RUT was not mentioned?

  190. ravalos

    Lflan, I assume the original trade plan was to OWN GOOG at (at the time of the trade) a very good price of 520. That plan was to buy it.. With your alternate suggestion you are trying now to profit from it’s slide. I think there are better ways to make the same amount of money with leas risk. If I were to stick to the original plan ( and to the mind set of your personality that set up this trade) I would just pay a bit to roll it down so u can get it at a better price.

  191. lflantheman

      ravalos…..That is not correct. I dont want to own it.   I sold the options because I thought GOOG would not be under 520 at May expiration.  I sold it for profit.  But now I see that it might be under 520 at expiration, so I have to roll it, buy it back, or figure some other repair strategy to salvage the trade.

  192. judahbenhur

    Peter, I’m not sure I share your optimism about the new margin calculation.  If I look at June on the call side and think that I have to be at least 10% higher, that puts us near 1300 and then higher when SPX recovers.  But the June 1300 callers only pay .50, yesterday the 1320 callers (10% up from yesterday’s levels) only paid .50, so it would seem difficult to make the strategy work well on the call side if you always have to maintain a 10%.

  193. humvee4me

    lflan:  you can roll your Goog puts about even at June 510, or Sept 470 also about even; that will still allow the same profit in a longer time frame (assuming goog cooperates) without additional risk.  I’ve been in similar circumstances before, and its so easy to get whipsawed.  

  194. ravalos

    Lflan, I see. That changes the whole thing but then u broke one of Phil’s rules when selling puts. In that case, it’s probably better to roll down since eventually GOOG will reach a range to stay within until expiration. If u have the margin you can sell 2x to a lower price. Google is a great company with good Q1 numbers and we are close to May expiration. We still don’t know whether the markets are experiencing the awaited correction or if this was just a blip. In addition, u woulk break another rule when buying premium to establish the bear put spread right at the time when VIX shot up like crazy all the way to 25 making your option even more expensive. You should wait just a bit this week to confirm and then roll down. If u definitely want to establish the bear put spread then finance some of the puts with short calls, after all the stock can’t go to both directions at the same time.

  195. cwan120

    Hi, Judah,
    I have the same May 1080 putters.  I also have some May 1075 putters.  Like you, I am wondering whether/when to roll.
    Sigh… The good ol’ time is over.

  196. cwan120

    Hi, Peter, and Fellow Stranglers,
    Do you know how the margin is computed for positions inside vs outside the +10%/-12% band?
     
    Pstas: If they haven’t applied the same rules to RUT yet, I bet they’ll do so soon.  Don’t hold your breath.  I’m going to treat RUT just like SPX.

  197. judahbenhur

    Cwan, Depending on tomorrow’s action, I was thinking of rolling down 40 or 50 points, selling 3 for every 2 I buy back and selling some extra calls.  I had been planning on seeing whether SPX holds 1150 this week, and I still may, before rolling.  A roll down to 1230 just barely gets me below 12%, but I’m only rolling because I assume SPX may continue to drop, which means I’ll be less than 12% again.  That said, if I looking at the BP calculation provided by TOS, I don’t see a dramatic difference between inside and outside the magic band.  That may just mean the BP mechanism in TOS doesn’t provide the same computation as they are now applying.

  198. judahbenhur

    Cwan, I meant "a roll down to 1030"… have a good evening.

  199. gel1

    Drum/TBT
    Yes, inflation is inevitable, and I believe it will be worse this time around. We have never, in our historical past, ever had this much quantitative easing, and this episode is worldwide. We, therefore will inherit the inflation from our trading partners, which will exacerbate the inflation we are generating on our own. I agree with you, that there will be a penalty for profiting from the pain that others suffer as a result of inflation ( those lousy fat cat greedy predators ), however it will come in the form of investment specific taxes. I have been an investor in gold derivitives since I was 28 years old, and have profited substantially on the moves. I do not feel greedy for my profits, as I put hard earned after tax money at risk… to me that is a reasonable reward as it involved a substantial investment in time, research, stress, and patience. I am a staunch believer in the concept of hedging against inflation and worldwide malaise using gold. I am investor in Peter Schiff’s Euro Pacific hedge fund and would recommend this to anyone who has sentiments as I have in the coming fiscal breakdown. They are also the go-to guys for assistance if physical gold holdings are of interest. IMO

  200. gel1

    Cap…. The Judicial Watch ratings are interesting, but not suprising. All of the politicos are corrupt, and it is just a matter of degree. The system we have encourages corruption and those that are comfortable with this behavior are attracted to it. To think otherwise is naive.

  201. kustomz

    http://www.youtube.com/watch?v=E4MAifsp-8E&feature=related

    Puts a smile on my face, i can watch it over and over

  202. gel1

    kustomz…. This says it all – I am now convinced the inmates are running the asylem. A good laugh!

  203. Peter D

    pstas, cwan & judah,
    The margin calculation is continuous, but would stop at the -12% & +10%.  So we don’t necessarily need to be outside of this range.  We need a larger reserve per contract and hence the return is reduced as we can afford less contracts for a given budget.  Other than that, everything else is the same.  TOS software can implement this 12%/10% rule easily and that’s good as there wouldn’t be a random margin slapped on the accounts (knock on wood).
     
    As for RUT, cwan is right. We shouldn’t hold our breath (that they won’t increase the margin).  RUT has always had a -10%/+10% equidistant test for the margin, so going to 12%/10% wouldn’t be significant.  They may choose a higher number though.

  204. tchayipov

    Phil/ SPWRA
    do you think that BP incident should be bullish for SPWRA?

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