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Thursday Already? This Week Is Flying By!

Woops – blink and you miss an opportunity in this market (see David Fry's chart).

This is where we (fundamental analysts) have a great advantage over the TA crowd.  We don't need to wait for "confirmation" of some pattern to tell us when to buy.  I tell members that waiting for TA signals is like going to a store and seeing your favorite jeans on sale for 30% off but then refusing to buy until you see other people buying them – by which time you often miss your chance as they sell out

TA people don't believe stocks have a "value" outside of what the "trend" says the value is.  If I say: "Hey, you can buy C for $3.65" they don't say "How much can I buy?" they say "which way is it heading?"  If I say: "BAC is down to $13.50 and you know that includes MER for FREE!" they say "yeah but they are forming a right shoulder."  I'm not a contrarian – really, I'm not.  I just believe things have actual long-term values. 

I told Members to run out and buy Toyotas on sale (cars, not the stock) when they had the big recall because it was a known issue so the new ones wouldn't have problems and and meanwhile dealers were giving all kinds of crazy incentives.  A Camry that was worth $30,000 on Monday is a good deal at $25,000 on Friday isn't it?  Should you stand at the dealership and say "Well, I like the Camry but the price is forming a right shoulder pattern and I can extrapolate that the price will be $15,000 if it breaks the trend-line from 1987."  If you said that, people would think you were an idiot, right?  Why should a stock be different?

On Monday I detailed my 9 Favorite Dow Plays (+WFR to make 10) and not only do we look for stocks that are already "on sale" but we have a coupon, in the form of our FABULOUS Buy/Write Strategy, to give ourselves an additional 20% discount off today's low prices.  How can people say no?  Yet they do say no to net 50% discounts on Dow components and I do get frustrated as it's obvious to me that it's a barrage of media negativity that scares people and keeps them on the sidelines, just when a stock sale is reaching it's peak discount

We've been very fortunate to be offered another chance to buy some of the greatest companies of the 20th century at 21st century lows - yet still there are people don't believe AA has real value at $10.  Not only could we buy AA for $10.20 (now $10.50) but we were able to sell 2012 $10 puts and calls for $4.55 so our net cost of entry was $5.65, 44% off the current price.  The puts we sold obligate us to buy another round of AA at $10 in 2012 (only if AA is below $10, otherwise we just keep the money) and that would put us in 2x the number of shares we started with at an average of $7.83, still a 22% discount off the current price.  Alcoa was founded in 1888 and aluminum seems popular enough to be used for another couple of years so I feel good about buying them at net 1/5th of the 2008 highs – but look at the downtrend

Anyway, so that's our strategy and we're sticking to it.  This is not a strategy for short-term traders.  In our short-term trades we are ALL about the trends but short-term trading is a game while long-term investing is about your future.  Don't treat your future like a game!  I am not generally bullish, I am rangish and currently I am bottomish as we test the lower end of the same trading range we marked out way back on May 5th.  So I didn't "suddenly flip bullish" at 1,014 on the S&P – that was the point we were waiting for for 2 months!  This is not complicated folks - it just happens on a time-frame that many investors just don't have the patience to wait out anymore (60 days!?!).  Here's an update of our chart – notice we are right in our predicted (by Fibonacci) range:

So PREPARE for me to go "bearish" at around 1,100 on the S&P where I will probably want to use our "5 Plays that Make 500% if the Market Falls" to lock in our profits but then I will go "bullish" again if we get over that 1,121 line and hold it for a couple of days (note false move around New Year's that didn't fool us at the time).  Meanwhile, call me a fool but I think the 200 WEEK moving average and the 50 WEEK moving average trumps the 200 day and 50 day moving averages that have formed a dreaded short-term "death cross" that I strongly feel was manipulated specifically to get all the TA sheeple to dump out of the markets ahead of what may be a very good earnings quarter

Meanwhile, let's look at some fundamentals!  Another 454,000 people lost thier jobs this week but today that's good news because people are back to not caring so up we go in the futures.  Continuing claims dropped 224,000 and that is good news as it's the lowest level since November and the most interesting thing to me is this chart showing the massive surge in Temp workers, which is usually a pretty good leading indicator for real job activity.

That's a lot of temps!  In fact, that's 19.6% more temp jobs than last June and that is the biggest year over year increase EVER (since 1990, when they began tracking it).  What happens to corportations who are getting busy and need help but the MSM convinces them that the improvements in the economy are only temporary?  They hire temps!  It's very possible that the irrational levels of MSM negativity are causing this very unusual gap between temps and hires.  Corporate America is still scared to pull the trigger on jobs but if earnings come in strong and Q3 growth is projected – look out above!

Even the Capitalist tools at Forbes are now saying "the pouting pundits of pessimism are misreading and overreacting to economic data" and I see Retail Sales growing 4%, which is accellerating to the fastest pace of the year according to the International Council of Shopping Centers, who say: "Sales results have been uneven, [but the underlying growth rate] suggests a relatively healthy, moderate pace of spending for the remainder of the year."  This morning we see ANF sales up 9% from last year, COST up 4%, M up 6.5%, JCP up 4.5% and JWN up 14.1% as the top 10% continue to party on, even while others hunkered down during a miserable June. 

Hamburg has the most to lose from trade-surplus reductions Both PNC and Raymond James have now come around to our point of view and are telling their clients that pessimism may have peaked and the Hamburg port in Germany (40% bigger than LA) reports a 16% increase in shipments over last year and Russian oil exports are up over 30% from last year as that country begins to become a real threat to OPEC's price stability – so more supply AND low prices on oil – that would be a great combination!

Apartment vacancies fell in Q2 and rents went up 0.7%, which is the biggest quarterly gain in 2 years so good news for the CRE sector.  Rents fell in just 10 of 82 markets tracked as the lack of new construction is now pressuring availability, which drives rents up and begins to make housing an attractive alternative again.  That's why they call them economic CYCLES folks.  That lack of new supply is "allowing the apartment sector to do a lot better, faster than anyone in the industry anticipated," says Alex Goldfarb of Sandler O'Neill.

Of course we are all still wondering what will happen with the EU bank stress tests but it doesn't seem to be bothering the EU markets as they are up ANOTHER 2% this morning so I think we'll be seeing how all the global markets handle the 5% rule for the week and what a short squeeze we will get if we pop through those levels.  The BOE and the ECB held their rates steady and our own rates are finally heading a bit higher (go TBT!) but let's not get over-confident.  We have our bounce and now we need to see what sticks so let's keep an eye on our bounce levels and continue to be careful out there.  

 


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  1. In light of your always insightful writings, I would like to add some reflections from my reading:
    A note from Art Cashin UBS-
     
    Two Different Worlds

     

    – In his always interesting and informative Barrons column, Mike Santoli remarked on the very evident split between the technicians and analysts/economists. Here’s a taste:

    Tape readers, unlike fundamental analysts who see value in beaten-down stocks, see an enduring downward trend emerging.
    THE CURRENT MARKET ARGUMENT PITS the charts against the cheap, the increasingly worried tape readers who see an enduring downtrend emerging versus the spread-sheet studiers who spy increasing value with every percent decline in the Dow, and contend that stocks are over-anticipating a recession relapse.

    The difference between the two groups is stunning. It is hard to recall a similar definitive split


  2. to save someone a phone call, ET Pro is no working this morning. They hope to have it back by opening.


  3. Beat jobs report
    Retail earnings beating left and right
    CNBC putting on people who are saying a double dip is not in the cards anymore….
    I feel like I’m in Bizarro World


  4. Phil / EM – what’s your favorite bullish play on emerging markets?


  5.  IWM
    58.60 59.10 60.02 60.79 61.38 61.97 62.59 62.92 63.25 63.60


  6. Good morning,
     
    IWM 58.68, 60.64, 61.41, 62.08, 62.36, 62.98, 63.31


  7. What happened to TZA prize ? Reverse split ?


  8. Temps/Phil
    I’d be careful about judging temp employee use by history, Phil. My son is just coming off a couple years or so of frustration working for a temp agency – mostly for Wells Fargo, working on mortgages (he’s going to Korea to teach English).  When Countrywide went under, many of their employees joined W-F as temps also, and my son heard that C-W had temps underwriting mortgages, using the id of underwriters who were no longer even with the firm.
    I saw the same trend in academia, where schools move more and more to hiring "part-time’ faculty to teach x number of credit hours and pay them based on hours taught. Some schools, state-supported, have as much as 60% of their teachers on this basis.
    In both cases, no benefits. Why would they give up these deals and hire people as full-time permanents?


  9. JRW….
    IWM is coming off your 62.08 pivot, 1 min IWM is turning over 8MA hard and the mom, stoch, and RS are way over extended.  Did you enter TZA?  If not why? 


  10. Good morning!  

    Anything less than testing our 5% lines is going to be disappointing. 

    The Dow, for example, fell from 11,200 to 9,700 so 1,500 points and we demand a 20% retrace to 10,000 and we did get that but that’s a "weak bounce" and is THE LEAST we expect.  What we want to see now is 5% moves up off our consolidation levels and that’s a bit of a judgment call but try the Yahoo 3-month charts and you should see why I’m picking my lines.  So Dow support (ignoring panic lows) is 9,800 and 1.05x that is 10,290 so THAT is the 5% move I want to see beaten to believe this is more than a quick move up.

    We will expect strong resistance at the 5% mark and a 1% pullback from there is no surprise at all, nor would be having trouble getting over that 4% line on the way up and how easily we punch through will be a good indicator of whether or not we can expect a real, sustained move higher. 

    Dow support 9,800 – 5% = 10,290, S&P 1,050 – 1,102, Nas 2,150 – 2.257, NYSE 6,600 – 6,930, Russell 620, 651

    Notice we haven’t even made it back to support on the RUT – that’s a bad sign and the futures were rejected at 620 this morning so we need to watch them carefully.  S&P will also have a hell of a hard time at 1,070 and Dow 10,150 and Nas 2,200, of course.  So the Nas is only just over support and if they fail that and the RUT is below 620, we need to be ready to get bearish or if the Dow can’t hold on so it’s just 2 of 5 to turn bearish here – not our usual 3 of 5.

    DIA $98 puts are a great cover, now .45 if the Dow fails 10,050, using that line as the on/off switch.  They should gain 50% for each 100 points the Dow falls so a nice, quick way to put the brakes on losses without having to panic out of bullish positions.

    Don’t forget between 10:30 and 11 we have oil and natural gas inventories.  We need to hold $75 oil to keep that sector happy ($77.50 is our "sweet spot") so we’ll have to see how that goes too. 


  11. JRW… I didn’t enter becuase it has been my observation that again we are in the ‘pump on BS stage’ where everything goes straight up.  I’m concerned about going short till we reach at least 10200 and further 10600…
    My point is ‘my observation’ is not very technical or fundamental…I was just wondering how you are looking at it…
    For now the down trend looks to me intact since the 1m IWM rolled over on the 8MA/


  12. RMM- yes TZA reverse split yesterday 5-1


  13. yip,
    Look at the 3 min chart and you’ll see still above 8ema; I’ll give it another try staying above R1 first
    Now, in TZA at $39.03


  14. JRW….The other day I thought you mentioned you were using the 1min that’s why I asked.  However I have the 3min MA with 8MA as well. 
    Do you sometimes use the 1 minute?  Is that when the trend is established?


  15. This new TZA pricing makes for nice execution; 10,000 shares in one order with no problems
    And out at $39.00


  16. JRW IWM clearly over 3min and 1min 8MA… Your TZA is getting crushed,  finally have a loss?  Your human?  :)


  17. Sorry I missed it…got it.


  18. yip,
    I use the i min primarily, like now, to see buy programs and turns. 3 min for conformation.
    I’ll be surprised if we don;t fill the gap and test60.64 but that doesn’t ALWAYS happen !!
    It does look like they want to take it up from here.


  19.  Phil, 
    I couldn’t get out of the DIA 97 Puts (bought 30 @ .88 per your post yesterday) as I didn’t get your answer until the market ran up like crazy… should I hold on to them now for an eventual retracement? 
    Thanks, 


  20. JRW I was thinking the same test however I bought TNA at 37.95 reluctantly, normally that doesn’t work out…well see


  21. Hi Phil,
    On the short side of the mattress holding still short 102 p Jul as well as 101 shall I play with them to buy back and sell again or roll to jul 99 or 98p thks


  22. Cashin/Loopy – I like that guy but I have noticed he’s kind have sold out on camera and tells them what they want to hear becasue his writing does not match his inteviews. 

    Emerging/Terra – I think China at the moment or perhaps RSX but we went with EEM last week and that gave us a good run.  If oil goes up, lean more towards Russia and if our Retail is up, more towards China but I’m not into any emerging markets if this market doesn’t get moving first! 

    TZA/RMM – Yep, reverse split and no new contracts so far.  That makes things kind of interesting but a real pain in the ass to figure out how you are doing on your strikes.

    Temps/Snow – Good point, if the cost of temps has fallen so low that there is no penalty to having them, then it could be the start of a new trend in employment, rather than a leading indicator.

    Oh look – CNBC says rich people are worried about our future too!  How nice…

    I’m expecting a bit of a sell-off into EU close, especially if we have a build in oil.  It’s what happens after that that I’m interested in.  It is ALL about RUT 620 to make or break this rally (about half a point higher at 1.5%)…

    Bad news for firms like PetroChina (PTR) and Sinopec (SNP -1.45%): China extends its resource tax to the entire nation, after introducing it for western provinces earlier this week.

    Another snag for financial reform, as W.Virginia Governor Joe Manchin delays naming a successor for the late Sen. Robert Byrd. The move could complicate Democratic efforts to muster up the 60 votes needed, and would likely necessitate winning the support of at least three moderate Republicans.

    Still banging the drum and starting to sound desperate"Double-digit returns, not just in bonds, but in stocks, are over," Pimco’s Bill Gross declares. Delevering plus new legislation passed in recent months "produces a slower growing economy and ultimately lower asset returns, lower yields on bonds and lower price appreciation for stocks." In the new normal, 3%-5% returns are worthy targets, he says.

    Greece’s government took a major step forward in overhauling its debt-plagued economy by forcing through a pension bill that would cut the cost of its welfare state by reducing benefits and raising the retirement age to 65. Thousands of public sector workers protested in front of the parliament building in Athens.

    BP (BP +1.1%) plays down reports that it could plug its leaking Gulf well sooner than expected, sticking to its August timetable for completing its relief well. July 27 was only the "very, very best scenario if everything went absolutely superbly according to plan and there are no interruptions, but the expectation is that it will be August."

    Transocean (RIG) made plenty of news abroad well before its rig exploded in the Gulf, a NYT profile says. It is suspected of dealing with men accused of laundering money for Myanmar’s government, it faces tax fraud charges in Norway and tax inquiries in the U.S. and Brazil. Transocean has even run into trouble with Louisiana, where one of its merger partners was trying to avoid potential liability in a pollution case.


  23. another great day to roll up the sept mattress


  24. Bears outnumber bulls by an unusually large margin, according to tracking of investor sentiment by AAII – but that’s a good thing, BTIG’s Mike O’Rourke says, because it suggests that many investors are on the sidelines and may jump back into the market on good news.

    Nat gas up 78Bcf and Nat gas fell below $4.50 so there’s a negative.  If we get the same kind of low demand indication from oil at 11, that should give us a good downside test.


  25. DIA mattress --  Hi Phil — should I roll up Sept 100 put to 101 put or higher or wait till next week, thanks


  26. JRW looks to be breaking down..
    OUT of TNA at 37.07…waiting


  27. Here’s to hoping today is a repeat of May 26th..


  28. Matt
     
    May 26th
    Rally…Fail…Close lower?


  29. Here is the link to the Inv Intel numbers released yesterday at 10:00EST.  Note Bears are at 34.8% !
    http://www.schaeffersresearch.com/streetools/market_tools/investors_intelligence.aspx


  30. TZA/JRW – Way nicer now that we get some real movement on it.  Was like pulling teeth to get a quick nickle before…

    Speaking of which, my 4 HOUR chart says TNA was just rejected off R1 at 38.52 and the downside test to neutral is $35.48.  On IWM that’s 62.28/60.45 so quite the gap to fill before we want to re-load.


  31. In TZA at $38.84


  32. JRW – really? I would think TNA would be the play here since it has pulled back and is not breaking the intraday low…


  33. Hey Phil, does that 4 hour chart of yours use sand?  8-)
     
    Yip, close down.  Which is up in a bear’s world.


  34. desev, I noticed there’s a line on the graph for OEX.  Do you know if that’s for option expiration?  Not sure how to read that one but would be interested in knowing..
     
    JRW, when SRS had a reverse split back in May (1for5) it market the bottom for SRS.  I would like to think the same could be true for TZA.  But with oe next week.. I doubt it.  But perhaps immediately afterward!


  35. DIA/Amatta – You have to be VERY careful with just in case trades.  I put up those levels (like the DIA above) for good reasons.  Also, with ANY day trade or short-term trade, DO NOT wait for me to tell you to take a 20% loss off the table because I do expect you to do that (see Strategy Section) and if you don’t have the discipline to do that ALL THE TIME, then DO NOT DAY TRADE.   Down 62% with 7 trading sessions to go and 300 points out of the money at a level we HOPE we don’t revist is not very easy to fix.  Best I can tell you it that the Aug $101/100 bear put spread is about .40 so you can roll to that and you have a bearish hedge that gets you even if the Dow goes down from here but I sure hope it ends up worthless and you’d better have enough upside bets to hope so too. 

    Mattress/Yodi – I think you should keep a stop on the $101 puts at $1.50 and, if we recover from there, you can sell the $102 puts to cover, now $1.94, on the way back up.  You could be aggressive and take them off now though, I expect a retest of 10,000 and, if I’m right, it can save you .40.

    Rolling up Mattresses/Morx – Good man!  On the program…


  36. Matt
    You’ve missed a few days posts last week.. I all about the Bear…just waiting for this market to get tired of retracing.  I think 10600 is close to the highest we will see in years in the next month and I think after that we go lower and stay lower,.


  37. JRW – I guess you were right on that short-term play…I wonder if that was an anticipatory sell off into the Oil Inventory report


  38. Mattress/Gucci – If you stopped out the $108 puts (and I hope you did!) and you are left with $100 puts then yes, your goal is to roll them up aggressively until you can’t roll them up for less than .50 per $1 so pretty much we should be in the Sept $102 puts for our long side, now $4.80

    Oil draw of 5Mb, gasoline up 1.3Mb and distillates up 300K so net 3.4Mb draw is pretty good and should support $75 oil but whisper seems to have been higher (as we’re up from $73.50 yesterday to $76 and we are getting some pullback but let’s look for good support around yesterday’s close on the indexes and that could be bullish right about when they EU shuts down at 11:30.


  39. Bull%/Dez – That’s interesting, I would have thought more bearish by now.

    Sand/Matt – No but if you forget to wind it the chimes don’t go off….

    EIA Petroleum Inventories: Crude -4.96M vs. consensus of -1.8M. Gasoline +1.32M vs. consensus of -0.5M. Distillates +0.32M vs. consensus of +1.4M. Futures +1.85% to $75.44.

    EIA Natural Gas Inventory: +78 bcf vs. consensus of +73 bcf. Futures -2.7% to $4.44

    Banks are restructuring many unpaid loans on commercial real estate rather than foreclose – wise strategy, or "extend and pretend?" A big push to modify such loans has slowed a spike in defaults and helped preserve banks’ capital. But it has also created uncertainties about the health of the commercial property market and some banks.


  40. Phil: should US treasuries be moved from AAA to lower, what will then happen to stock and bond market ?


  41. Out of TZA at $39.58


  42. In TNA at $37.29


  43. JRW – There was no volume to that 11:08 spike…amazing reversal. Only confirmation I had was MACD Histogram at 11:09.  What is your opinion on that spike up?


  44. Anyone having trouble with the IWM charts today?


  45.  Finally I get a break, and at the right time. In TFU10 613.90, stop 611.90. Go TNA!


  46. Whipsaw day… I’m amazed I’m slightly up…Generally I’d be more than slightly down….


  47. goldman / spike
    A test of the selling, I think we may have seen the low for the day.


  48. Phil / extend and pretend /  it only makes sense when you expect an upturn in the near future.  I don’t see it.  This could go on for 5 – 10 years.  So, if they extend it for 10 years and then finally pull the plug and foreclose they will be throwing good money after bad.  Of course, at 0.25% interest rate, the Fed isn’t exactly killing them if they do extend.  My question is, if this is ok to do.. why isn’t it always ok?  I think the answer to that has ‘inflation’ some where in it..
     
    2.5% / 5% / Fibonacci Rule:  I was calculating what the 1/3 and 2/3 retracements of yesterday’s move in FAS and wouldn’t you know.. the 1/3 retracement was exactly where we just bottomed out… and the 2/3 retracement is where, if we follow its pattern, May 26th ended the day.  I wonder if Fib has a bigger impact then the 5% rule?


  49. TZA reverse split may have changed the RUT game…huge money can play both directions with ease, creating more volatility…


  50. exec – yes. yesterday also. It’s like a fatfinger line then i have to change the chart then change it back. annoying


  51. Matt…Love those Fib observations… They are so consistent….


  52. EU finish looks like up 1.4% on FTSE and CAC but DAX up just 0.65%.  CAC made 3,529, FTSE 5,086 and DAX 6.031 so little pullback at the end but no failure.  Germany left us and the UK behind over a month ago.

    Anyway, now that the EU is closed and we tested our gaps, we’ll see if we can pul a rally together but I would have been happier to see Dow test 10,000.

    Oil is skimming right along $75, gold is $1,190 again, nat gas dipped to $4.39 and copper just bounced off $3 but held it. 

    Treasuries/RMM – I think they should be.   AAA should be no concievable risk of default - does that describe US Treasuries when we are $15Tn in debt and running a $2Tn annual deficit?  I do expect some recognition of this problem one day and that should send rates high enough to reflect the risk of investing in US paper notes.  It will be bad for banks (they will have to pay interest again) but good for the economy in general as risk is very mispriced in the markets right now.   I think, for example, that Norway is an AAA but to say the US and Norway are in the same risk planet is ridiculous.

    Inflation/Matt – That is the answer.   Don’t forget the bank collects $430,000 on a $200,000 mortgage and they take a $20,000 deposit on the house so if they can extend and get their payments for just 15 years, they are paid back and they can take the home for free and whatever they sell it for is profits.  Inflation makes that very easy for them but they like a litte, never a lot.   Fib does have a bigger impact than the 5% rule because I made up the 5% rule and I’m not that famous.  Fibonacci, on the other hand, is used in many TradeBot programs because it is a very good regressive series indicator and it doesn’t depend on wriggly lines that move around almost at random – which is why I use Fib too. 


  53. Out of TZA at $37.37


  54. In TZA at $39.48, and that last post was TNA of couse


  55. Phil
    I noticed your comments below. 1/2 my mattress is still 108p sept if I would have stopped out I would have run up an enormous margin the only thing I did with the other half I rolled down to 100 and 102 and 103. The long puts sept guarantee the jul shorts !! Your comments pls
    Phil
    July 8th, 2010 at 11:03 am | Permalink  
    Mattress/Gucci – If you stopped out the $108 puts (and I hope you did!) and you are left with $100 puts then yes, your goal is to roll them up aggressively until you can’t roll them up for less than .50 per $1 so pretty much we should be in the Sept $102 puts for our long side, now $4.80


  56. This is one of those days where I’ve got one OE set up to sell my TZA one to buy more and one one to buy TNA.
     
    Oh oh, out of TZA at $40.03


  57. Yea JRW damn that was FAST!  you did like 2 orders at once I was thinking and you confirmed it!  HAHA


  58. Phil and as you said earlier that we will test the DOW 1000 again and I think we will go below.


  59. I think this market is consolidating at the yesterdays spike rally which is a good sign  and we finish higher today and move on up to upper end of trading range at 1100 next week, any close in the green today would be a confirmation of my scenario
    bought some rut calls to partipate


  60.  I was thinking about a DNDN Noc 20/40 straddle for ~ 3.50


  61.  Nov…


  62. It seems to be following Demark trendline down… however testing now…


  63. Mattress/Yodi – The idea is to transition from 1.5x with 1x Sept $108 and .5x Sept $100 to .5x Sept $108 and .5x Sept $100 and then to 1x the Sept $100 puts, where you start the rolling cycle again.  Remind me on the weekend and I’ll see if I can figure out a chart or something but it’s hard to say becuase it’s more about understanding the goals of the trade more than anything.  The main goal is to take advantage of a big profit on the higher puts and get them off the table, of course.  Soon we have to roll to Dec anyway (when we roll to Aug) so not the worst thing as the ratio doesn’t change much. 

    John Paulson’s bets on a V-shaped recovery took an unsurprising hit in June, when investors said his Advantage Plus hedge fund lost 6.9% to bring his first-half return to -8.8%. Paulson’s sticking to his guns with heavy bets on financials including BAC, C, STI, WFC and JPM.

    Boeing (BA +1.8%) delivered 114 commercial planes – including 95 next-gen 737s, but no 747s – in the second quarter, up from Q1′s 108 deliveries. It’s maintaining its 2010 total outlook of 460-465 aircraft.

    Pretty desperateChrysler (FIATY.PK) makes the first two months much better for buyers of its vehicles, offering a 60-day money-back guarantee and to make the first two months of payments. The automaker is also temporarily offering interest-free 60-month loans on most models, as long as they’re financed through GMAC.

    Early tremors from tonight’s LeBronQuake felt in stock of Madison Square Garden (MSG), which gained 6.4% yesterday on bets coveted NBA free agent LeBron James would play there for the company’s New York Knicks, but is down 4.6% today on reports James is leaning toward signing with Miami. James announces a decision tonight in an hourlong ESPN (DIS) special.

    Big yawner so far.  Volume at noon is 70M on the Dow so right on the money for a program trading day that can end in s stick.  We are in striking distance of 10,150 and 1,070 and even 620 on the RUT and we can have a bang-up end to the week if we hit those at the close so I’d be inclined to bet up if we hold this line (flat or better) through 2:30.

    Oil is $74.91, gold $1,194, copper $3.005 and nat gas still $4.40 so keep an eye on copper and that’s all you need to do to predict the market today.   


  64. Phil - where/how are you tracking oil, gold and copper real time (futures, CNBC delayed, etc)?  Does ETPro have that ability?  Thanks!


  65. 615.25 on the Russell is the trigger; if we don’t break it, we’re going down !!


  66. JRW..  Would you comment on how you got 615.25?  Simply support and Resistance?  You have lines etc on BOTH IWM and RUT..  It’s not redundant?


  67. Up / Down / All Around:  At the risk of sounding like the boy who cried wolf.. I’m calling down.  Can ya believe it?


  68. yip
    Trend line connecting today’s tops, countered by support trend from yesterday’s bottoms.


  69. This action is killing me, boring whipsaw..  I wish my leg was broken I would get out of here.


  70. wasn’t broken..LOL


  71. DNDN/BDC – Are we expecting announcement?

    Commodities/Goldman – All on TOS, which has nice futures tracking charts as default.   You don’t need an account, you can use the Paper Trading as far as I know and get the same stuff. 

    AAPL looking like TSLA today.  Being used to drop the markets I think so I’m inclined to ignore this dip as Nas is down worse than other indexes so I think a long Q play when the Nas stops falling might be fun, maybe QQQQ $44s for .57, selling $55s for .37+ or getting out below .50.  That leaves a $1 verical for .20 (still at risk of course) and something we can hold into the weekend if we’re still bullish.

    What nonsenseBerkshire Hathaway’s (BRK.A -0.8%) near-30 point outperformance of the S&P 500 this year has earned it its first "Sell" call in more than six years. Stifel Nicolaus’ Meyer Shields downgraded the shares from Hold, saying fair value is about 13% below yesterday’s close.

    Rich clients are still holding out on wealth managers, with some $10T still up for grabs, according to the Scorpio Partnership. The private banking sector – led by BofA (BAC), UBS (UBS) and Morgan Stanley (MS) (chart) – could yet double its size, as it manages about $16.5T of the $40T in investible assets for high-net-worth individuals. Wow! 

    Three lunchtime reads:
    1) James Rickards interview: Geopolitics, gold and the dollar
    2) Five questionable arguments against the double-dip
    3) Do Treasurys, currencies already discount deflation?


  72. LOL Yip – I thought you were looking to chew it off…


  73. FAS has found resistance 3 times today at an intraday triple bottom @ $20.44-$20.45…some upward resistance around $20.75…if we can’t break that upward resistance on the next upswing, then I’ll probably sell and wait to see what happens at the $20.44-$20.45 mark before I jump into FAZ


  74. In TNA at $37.20


  75. Hi everyone!   Phil i enjoy your insight into the mrkt. what would you suggest for an easy uncomplicated downside protection for a beginner, if we dont make rut 615


  76. odd activity: IWM July 65 calls – almost 20,000 contracts traded today. Open interest around 29K.


  77. HAHA… no chewing…except maybe tearing a bit of the cast off here and there…. hate this thing


  78. Phil/Anybody?  "QQQQ $44s for .57, selling $55s for .37+ or getting out below .50.  That leaves a $1 verical for .20"  Can you help explain this for me?  I assume you meant the $45s, but I guess Schwab really does speak a different language because I can’t see how to fill for those prices.  Thanks


  79. broke 615.25 on the RUT….up we go


  80. JRW,  aka "W"
    Nice call on the RUT.


  81. BRK downgrade/ Phil- that downgrade is one of the dumbest things yet. Fair market value is closer to 130-140,000 per A share. Whitney Tilson, whose funds are 14% BRK would agree.


  82. I’m wondering if volume will drop off now in TZA due to the reverse split creating some additional  trading opportunities?


  83. JRW- doesn’t look like a convincing break through 61.50 yet.


  84. rdn4evr / QQQQ
    I’ve got the 44′s for .57 on Schwab


  85. Uncomplicated/Z4 – Well, uncomlicated is often ungood, keep that in mind.  The least complicated protection overall is the DIA Aug $88 puts at .50 because they have a delta of .10 and the $83 puts have a delta of .05 which means you will "only" lose .35 on a 500-point move up but, on a 500-point move down, the $92 puts have a delta of .17 so you will gain about (the average of 5 strikes) .65 so your risk is .35 to a reward of .65 on the cover and, even better, the worse the Dow does and the faster it goes down, the faster your put grows.  So a complex relationship but you don’t have to worry about it and just take the put and set a .10 stop or don’t even put it on if we’re looking strong and just keep your eye on buying whatever Aug put is .50 this week (every week you need to re-evaluate which strike will work best.  Generally, once there are less then 2 weeks left to expiration, you want to move out another month).  

    Nice 1:10 timing JRW!  

    IWM/Aug – That kind of move would be great!

    QQQQ/RDN – Damn, sorry, meant selling the $45s for .37+.  They are still just .25.  The idea is to buy the lower calls on momentume and then sell the higher calls and turn it into a vertical.  I don’t pull the numbers out of a hat, .38 was the high of the day on the $45s.

    BRK.a/Jbur – It’s just lazy analysts.  The S&P is down therefore Berkshire is too high.  Of course I see it the other way – if BRK.A is doing well, then how bad can the S&P be doing? 

    Still trending to 2:30 stick.  The earlier it starts, the more we can get outt of it


  86. Jbur,
    Well, it’s not like I haven’t been wrong before; and if they’re going to take us down, this would be the place !!


  87.  Hi Phil
    left short with 10 BP Jul 50 P @3.95.  Any chance to b/e somehow?
    Thanks much 


  88.  JRW – Thanks. So then is the idea that you would wait and only fill the 45 sale at .37+ and/or put a stop in at $0.50 if you couldn’t sell the $45s? 


  89. Phil; activity in pactiv corp. PTV , in May there was news of a buyout, are you hearing anything or have an opinion?


  90. JRW- let’s hope your not wrong. We could all use some fun!


  91.  Phil – Thanks – just saw your response – now i’ve got it (I think).


  92. The Treasury sells $12B in 10-year TIPS – the most since 2004 – at 1.295%. Bid-to-cover ratio of 2.88; indirect bidders take 51.9%; direct bidders take just 4.2%. Overall, Treasury yields stayed higher: the 30-year yield +0.04 to 4%; 10-year +0.04 to 3.02%; 5-year +0.03 to 1.81%.

    And as the IMF turns its attention to the U.S., it wants the administration to raise taxes and consider cutting Social Security benefits to cut the deficit by 8% of GDP. After 3.3% U.S. growth this year, the IMF sees growth not cresting 3% for the next five years. (earlier)

    Robert Prechter’s take-your-guns-and- soup-to-mountains forecast has Rich Karlgaard revisiting the "howling insanity" of The Men Who Want to Be Roubini – and he says that crazy bullishness isn’t any better; we’re headed for a few years of a rangebound market, with America "retracing its own 1970s, and not its 1930s or Japan’s 2000s."

    This is very strange.  GOOG picked up this headline but the link is dead:

    ETF Data Daily: $3 Billion Worth of Direxion 3X Shorts Redeemed
    IndexUniverse.comDave NadigOlivier Ludwig - 3 hours ago

    pulled $2.22 billion out of the Direxion Daily Small Cap Bear 3X ETF were at the top of IndexUniverse.com’s list of ETF redemptions yesterday.

  93. Hi, Phil,
    That "uncomplicated" hedge has a real complicated but truly nice analysis behind it.  I really like it!


  94. So, what is the objective for the DJI today? I’ll go in the pool with a bet at 10,100, although 10,150 is tempting for reasons Phil gave.


  95. BP/Ban – Well the $50s are a bit high but you can still roll to 2x Jan $38 puts about even and I’d say it’s worth adding $6K of margin (I think) to save at least $12K of position loss.  You can go as low at $32.50 in 2012 but those Jan $38s have plenty of premium to burn off so I’d do it in stages.  You can also buy the Jan $38 calls for $3.35 and sell the $34 calls for $5.15 and that’s $1.80.  The logic of the bear call spread is you can’t lose your $1.80 unless BP is over $35.80, in which case you only owe your putters $2.20 or less.  You can only lose, at most,  $2.20 on the spread at $38 but then your putters are wiped out and you are pretty happy.  If BP doesn’t go up, then you have $1.80 to go towards your next roll. 

    PTV/42L – They are a good company in general, solid but not exciting.  No idea about a buyout but I guess that explains their gap to $30 from $24 and I very much doubt a buyer is going to pay a premium to $30, even if there was one at $24.  It’s not like these guys invented anything – it would be a strategic acquisition and those are hard to fund in this environment. 

    Objective/Snow – Hoppefully this is a flush prior to the stick to get rid of all the non-believers.   2,150 must hold on the Nas and it would be nice to see the SOX perk up and AAPL needs to hold that 2.5% line at $256.  If we can hold all that together – we should be good.    8-)


  96. Stick/Phil
    "Hoppefully this is a flush prior to the stick to get rid of all the non-believers"
    I’m a believer! Until I get down 20%……


  97. Out of TNA at $37.19; set to reload


  98. Cough, cough.. sorry, had something in my throat.  8-)


  99. Back in TNA at $36.75


  100. cwan120/schwab: When it happens,it’s usuallly on a spread order where 1 leg is priced 5 to 10 cents out of line with the bid ask.It then forces me to enter 2 separate orders( 1 for each leg). Schwab says to call them when it happens & I’ll call them next time.They treat me well since I have 4 accounts with them & I like their Streetsmart Pro program. 


  101. Damn, they should have let me be the guest on that tax debate!  What a weasel that guy was. 

    This is what we expected, a pullback to yesterday’s pre-stick levels but now it’s got to hold up.


  102. How are we looking Phil??
    Approaching 2:30pm & just kissed 2150 on the Nasdaq…..you still thinking a stick into the close??
    Thx


  103.  Phil-
    Is it a bearish sign that the VIX is going up at the same time as the DOW and such?  Or is that not as important?


  104.  Phil-
    Is a rise in the VIX at the same time the other indicies are going up a bearish signal?  Is that something you look for?


  105.  Sorry about the double post.  


  106. Out of TNA at $36.96; rally failing


  107. Hey all,

    I have a new Midterm Trade position that I am opening today to start the earnings season off right. I am getting involved in Alcoa (AA). Check out why I think this one could have a nice end of the week and good earnings report. 

    Analysis, entry, exit, and stop loss is here.

    Good Investing!


  108.  What an annoying day for RUT. Whipped out 3 times with stops from failed rallies. Probably done for the day. Probably…


  109. Phil, I’ve got yesterday’s stick starting at 2:35pm.  How bout you?  As for FAS/FAZ, they’ve still got a ways to go to get to where they were then…


  110. Back in TNA at $37.07


  111. dr craig… Tell me about it, I’m amazed i’m up half a percent.  JRW is an anomaly…  NO DOUBT. 


  112. even more annoying…..


  113. Investors, or perhaps one big investor, pulled $2.22 billion out of the Direxion Daily Small Cap Bear 3X ETF (NYSEArca:TZANews) yesterday in a sign that the bearish trend in global stock markets may be slowing down for now, according to data compiled by IndexUniverse.com.
    Three other Direxion funds, also offering investors triple-bearish exposure, were at the top of IndexUniverse.com’s list of ETF redemptions yesterday. The Direxion Daily Real Estate Bear 3X (NYSEArca:DRVNews), the Direxion Daily Technology Bear (NYSEArca:TYPNews) and the Direxion Daily Energy Bear 3X (NYSEArca:ERYNews) were third, fourth and fifth on the list, with redemptions $436.9 million, $207.9 million and $137.9 million, respectively.
    Andy O’Rourke, director of marketing at Newton, Mass.-based Direxion, said he wouldn’t comment until he had seen his company’s own creations and redemptions data.
    On the creations side of the exchange-traded fund universe, investors added $455.5 million to the iShares Russell 2000 ETF (NYSEArca:IWMNews), $198.2 million to Vanguard’s MSCI Emerging Markets ETF (NYSEArca:VWONews) and $174.2 million to the iShares MSCI Emerging Markets Index Fund (NYSEArca:EEMNews).


  114. Hey David; when is AA reporting?


  115. VIX/Jtiff – I do think the VIX is a "wrongness" indicator.  In other words, it ends up measuring how much people think the market will be snapping back.  It’s just that we’re so used to things going generally up, that people assume it’s a worry index but it doesn’t only measure puts but overall volatility expections so the higher the VIX, the more "wrong" the move is to investors who are covering.  So we don’t want to see the VIX rising with the market but, on the other hand, I wouldn’t put much stock in small, intra-day moves. 

    Stick/Matt – It’s been going up pretty much since my last comment (2:26) but lame and slow at the moment – this may just be people who anticipate a stick and not an actual stick yet.  Dow volume at 2:50 is 108M so SUPER LAME. 

    Thanks Edro!  Of course it is possible that the exit from TZA was an issue with the reverse-split – just based on the timing…

    AA/Morx – Next Tuesday I believe. 


  116. Morx -

    Monday evening actually.


  117. That’s it !!
     
    Out of TNA at $37.32; too much work for 3% !!


  118. Phil, I guess I sorta get what a "stick" is but after the mkt is closed would you take the time to amplify.


  119. Consumer Credit

    Released on 7/8/2010 3:00:00 PM For May, 2010

     
    Prior
    Consensus
    Consensus Range
    Actual

    Consumer Credit – M/M change
    $1.0 B
    $-2.0 B
    $-5.0 B to $2.0 B
    $-9.1 B


  120. In TNA at $37.32


  121. Oh, poor JRW – what a rough day….   8-)

    Stick/Dez – No big deal, just our shorhand for the TradeBot that "THEY" run into the close to goose the markets.  It’s like that judge’s description of pornography – you might not be able to describe it but you sure know it when you see it….

    MOS getting some fans today (2 days actually).  APC also on a two-day tear.  AFL having lots of fun, PWER, CF… a few guys on my watch list that are getting away fast and an interesting mix.  I still think the majors are being held down while someone is cherry picking at the moment...

    TSLA looks like they are re-IPOing. 

    Geithner tells CNBC the Obama administration still hopes to hold the top tax rate on both capital gains and dividends to 20% next year – a big increase over the current 15%. but a lot better than the 39.6% top rate for dividends that some Democrats have said they were planning next year for higher earners.

    Goldman Sachs (GS -1.5%) shares fall on heavy volume after analyst Meredith Whitney lowers earnings estimates for the bank, projecting Q2 earnings of $1.70/share, down from her previous forecast of $4.75. For the year, Whitney expects EPS of $15.70, down from her prior view of $20. (ETF: XLF)

    Opinions on General Electric (GE) are sharply divided between analysts who see a buying opportunity and investors betting the stock has further to fall. GE Capital is set up for a positive performance in Q2 after refinancing debt at a lower cost, but Europe’s debt problems should mean costs will go up for refinancing, ultimately affecting GE Capital debt.

    Consumer Credit Report.

    Finally Mr. Stick!


  122. That’s 20% on the QQQQ $44s so, if the $45s don’t hit goal before we pull back, we just take money and run!


  123. Nice!!!!
    Great call Phil……I almost dumped my TNA until I read your post.


  124. Phil,
    Any feeling on direction going overnight??  Thx.
    jpuma


  125. Wow, Merideth Whitney estimates GS estimates for the quarter at $1.74.  Down from $4.74 last quarter.  And they’re the best of the best.  No wonder banks are rallying! 


  126. Wooooooooaaaaaaa!   I was a c hair away from covering!!!!!


  127.  Phil, Sep 90 naked POT short puts…good time to cover with something in case they head down again? 1/2 sale of Aug 100 callers maybe? I guess that wouldn’t really pay for anything…


  128.  Phil, QLD 50/53 spread with Aug 39 putter….did we close that out this week? (sorry, been away) Seems like I should take the money and run.


  129. Out of TNA at $38.07; R1 was too much for Mr Stick !!


  130.  Nice call on that stick
    I stuck out a TNA position based on your input and looks pretty good a the moment.
    Unfortunately seems all successes/failures lately have to be measured in moments  -- but I’ll take it and RUN!!
    Thanks JRW for the inputs I use to help with decisions.


  131. SBUX   Any opinions on them into Opex?   I have a long spread, but got away from me a while ago so I rolled back part of longs into July so I have Jul 24s that I’m planning to sell.   Now that they are back over a buck I’m thinking of dumping them here, but wondered if anyone had a better idea.


  132. JRW or anyone else.
    Question: when you’re holding a large position of a triple, and the market is moving rapidly on the Stick, how do you set your exit point.  If you wait for an indicator, the price can drop dramatically in a second or two.


  133. Phil: JPM had a massive red candle at about 3:40.  Is this a flashevent again ?


  134. exec / exit
    That’s what those little lines are for; look for weakness at one of your predetermined points.
     
    Of course I just blew my last exit by 18 cents ………………


  135. Overnight/Jpuma – Well if we are hitting my goals (10,150, 1,070 and 620) then we should be gapping higher tomorrow but I wouldn’t go chasing anyting here – more like content to sit on our longs.  If we are rejected at our levels – much more iffy

    POT/Ajay – Not the way that sector moves today, they will probably be fine and you can always roll.  Huge premium left on those and $90 is not all that expensive for POT unless the economy is a total disaster. 

    QLD/Ajay – I have confidence in that one but you can buy back the Aug putter if it makes you feel good. 

    R1/JRW – Yep, we don’t have enough gast to get over so far and getting over in last 5 mins is cheating.

    SBUX/Eph – Too tricky in this economy.  Coffee and sugar prices all over the place and they are paying lots of money to close stores and kill leases.  It’s possible they managed it all well but coin flip I think.


  136. JPM/RMM – One stock does not a flash event make.  Whitney downgrade could have spooked a big boy out of financials, probably what held us down in the afternoon. 

    Well that was a totally fun day.  Hopefully we do gap up tomorrow and finish the week over our 5% lines. 

    620 on the RUT – Party time, excellent – woooo, woooo!!! (sorry Matt).

    Later all, I have a meeting.


  137. JRW III
    July 8th, 2010 at 3:44 pm | Permalink  
    Out of TNA at $38.07; R1 was too much for Mr Stick !!

    JRW,
    I don’t get it?  I sold right at my R1 which was 37.88?


  138.  Thanks, Phil. Oops, I cashed out the QLD 50/53 at 2.20…max it can be is $3 anyway. Better to take the money and run. Trying to unload the Aug 39 putters at 0.45, but not filling.  The trade was originally $0 and if I can get out of the putter, I’ll have made $2.75!


  139. What a weird day.  Certainly not a repeat of 5/26!   Oh the shenanigans.


  140. Later Phil.  I find your bullish call from last week amazing.  Just wanted to let you know, this was probably one of the hardest calls I have seen you make.


  141. exec
    61.85 on IWM; I monitor IWM, not the ETF’s and it looked like it was failing there, as it turned out, it failed at 62.02, an R/S level.


  142. JRW,
    I understand.  I was having computer issues all day so the only line I had to work off of was the PP on IWM.  I put a limit in and it took at 3:31.  Gave up .34 cents……not bad though……..had I not seen Phil’s post, I was getting ready to sell TNA at a 2K loss around 2:30.  I’ll take the couple and quit bitchin.
     
    I don’t know how you manage to dump this stuff when it goes south.  It moves so fast and my mind has a difficult time selling when I go negative.  Do you set stops or just discipline?


  143. Well, 5% on the day; still too much work but………………………..


  144. exec
    No stops, and don’t own the possition, if you’re going negative, and all your indicators would be puting you in the oposite ETF,you’re wrong, so dump it. Remember my Rule #2, it’s better to be rich than right !!


  145. JR,
    What’s your rule #3?


  146. roscoe – i wonder if that changed yesterday & today?


  147. Just a reminder, the BP Jan 2011 $20 puts sold last Friday for $2.45 are now $1.50.  I plan to continue holding them short, some may find it prudent to take a bit off the table (e.g. make an offer to buy some of them back for $1.45).  Unfortunately, with the b/a spread so wide, stop order is not preferred.


  148. Phil:  On the DXD protection spread (buy Oct. $30/ $38 bullcall spread paired with sale of Jan. $26 P for net $.10) ,you say $1000 has $79 k upside.If the net on the overall position is $.10, my math works out that it would require me to buy or sell 10,000 contracts per position to spend $1000.
    Is my math correct? If yes, todays contract volume for above 3 positions was 104,25,and 14 respectively which is a long way from the number of contracts required to spend $1000.What am I missing here? Thank you for your clarification. 


  149.  1.8% loss today on 3 round trips through TFU10. Would have been about a 2% gain if I had participated in the stick (had an order ready to go at RUT 610), but I was put off by the weak action, and I knew I was too busy to actively manage another trade. I’m beginning to see value in losing the tight stops and playing more aggressively with my finger on the trigger. Of course, this really requires a full time commitment. There were so many technically good entries today that just failed. Phoooey. 


  150. Phil – forgot to remind you yesterday about picking somethings from your 10 cheap picks for a 15k IRA account. Thank you.


  151. Phil – What are your thoughts on Oil? I noticed that there seem to be quite a bit OTM puts on USO being traded. Do you think something like this would work for a smallish portfolio?
    Buy Jan 11 $30 call for 6.00
    Sell Jan 11 $32 call for 4.7 (Net = 1.3)
    Sell Jan 11 $27 put for 1.05 (Net = 0.25, profit if called away=700%). 
    We could be more conservative and sell the Jan 11 $31 call for 5.35 and the $26 put (0.88) to make it 0.23 debit. 


  152. Dear Mr. Bot,
    Thank you for ignoring the end of day economic news…and instead blessing us with your binary magic stick…aka 3% vertical profit in only 45 minutes!  It would seem that consumers are refusing to play the borrowing game…is it a lack of borrowing interest, ability to borrow, or perhaps refusal to borrow…not that we care, as long as we are makin-money, why do consumers matter…really?  Would also like to give a shout out to our govt for replacing the consumer two years ago…and hopefully for at least two more years so we can keep this party rolling!  We shall see after Nov elections….$1T, $2T, even bettter how about $2.5T QE for a 6 month rally!  Oh, almost forgot to thank Mr. Bank for replacing those pesky retail investors who would have sold on negative news…it is nice that we can finally make money and not be distracted by the"human train wreck" that is unfolding…
    Long live Mr. Bot…you duh machine!
    Sincerely yours,
    Goldman
    And for the pesky humans out there…if your are interested in the consumer borrowing numbers: http://finance.yahoo.com/news/Consumer-borrowing-down-apf-369803114.html?x=0&sec=topStories&pos=2&asset=&ccode=
    The Federal Reserve said Thursday that borrowing dropped by $9.1 billion in May. It also said borrowing declined by $14.9 billion in April, revising an initial estimate that showed a gain of $995 million for the month.


  153. dflam re Schwab,
    Thanks for the info.  I just saw your post, as I had to leave for a while in the afternoon.


  154. check out those downward spikes on the SPY chart after hours. also note : SSO & SDS both $34.75.


  155. Phil,
    Finally had time to read your morning post.  Good commentary.


  156. Phil – On the same spread that dflam is asking about above. I bought the spread (DXD Oct. $30/ $38 bullcall spread) for $2.00, but did not sell any puts yet. The spread is already down to about $1.30. Since who knows whats going to happen between now and October should I adjust the spread or just wait until the market is done running up and then sell some DXD puts.
    Thanks!


  157. QLD/Ajay – Nothing wrong with that deal!

    Hard calls/Jordan – It was hard because I ended up having to fight everyone one it but I did feel very strongly about it.  Sometimes, it does come down to going with your gut on things and you can’t program that into a computer – yet…

    ETF moves/Roscoe – Good to keep track of.

    DXD/Dflam – $1,000 is 100 options which is 10,000 contracts at .10 per contract or $10 per 100 options = $1,000 for 100 options and, if 1 the profit is $7.90 per contract, that’s $790 per optiont (100 contracts each) or $79,000 for 100 options.  10,000 options would be 1M contracts and that would be a lot! 

    IRA/Nicha – Oh yes…  well you don’t have margin to speak of with $15K so you want to be careful with small trades that aren’t likely to burn you like:

    • 2 AA Jan $7.50/9 bull call spreads at $1.15 ($230), selling 1 Jan $9 put for .70 ($70) net $160 with $300 upside, should use $450 in net margin and $230 in cash to make $140 – 20% in 6 months.  Worst case is owning 100 shares AA at net $11.30 (now $10.72).
    • 2 GE Jan 12.50/15 bull call spreads at $1.60 ($320), selling 2 Jan $12.50 put for .80 ($160) is net $160 with $500 upside, should use $1,250 in net margin and $160 in cash to make $340 – 24% in 6 months.  Worst case is owning 200 shares of GE at net $13.30 (now $14.83).
    • 3 WFR 2012 $5/7.50 bull call spreads at $1.70 ($510), selling 3 2012 $7.50 puts for $1.20 ($360) is net $150 with $750 upside, should use $1,125 in net margin and $150 in cash to make $600 - 47% in 18 months.  Worst case is owning 300 shares of WFR at net $8 (now $10.37).  

    Oil/RN – In a smallish portfolio you shouldn’t be touching oil.  USO is an ETF that loses value over time due to heavy turnover (fees eat into the value) and oil is always iffy.  You are better off investing in RIG or XOM or VLO – all of whom do well if oil goes up but at least you have solid profitable companies to fall back on (RIG being a bit risky at the moment). 

    Borrowing/Goldman - I thought we wanted consumers to pay down their debt?  

    Americans continue to shore up their finances, as consumer credit outstanding decreased in May at a seasonally adjusted annual rate of 4.5%, down $9.1B to $2.4T, more than an expected drop of $3B. The decrease followed a revised $14.9B drop in April that was initially estimated as a $1B increase.

    Finall/Exec – Damn, I knew no one was reading these things! 

    DXD/RJ – It’s very good to wait because, if DXD goes up, you don’t need the puts for protection and, if DXD goes down, then you have more expensive puts to sell – you pretty much can’t lose by waiting on that leg.  When you have a trade like that you need to know what to expect.  DXD was as low at $24.50 in Apr and that will probably knock your spread down to the current value of the $34/42 spread at .60.  So the question is (shifting everything $4) what to do then?  Probably selling the $22 puts for $1.40 (current price of $26 puts) and using that $1.40 to roll the $30 puts down to the $22 puts for about the same.  So, if the Dow gets back to about 11,200 – the game plan is to flip the spread to the $22/38 spread by adding the $22 short puts.  At that point you can roll the caller and take maybe .75 off the table but that would still leave $1.25 as a total loss plus the .70 you already lost so $1.95 out the window at about 11,500.  So, having looked ahead to the future, now you need to decide if you will make enough money on the long side to justify pressing the play or do you just try to get out with a 20% loss?

    No, it’s not 1932, Amity Shlaes agrees, but there are some troubling similarities: instability in the international currency arrangement, the lack of commitment to boost trade, and – most important and most eerily mindful of 1932 – imminent tax increases.

    While European regulators have announced a few details of stress tests planned on 91 banks across 27 countries, analysts say key questions aren’t being addressed, including the degree to which the tests will probe banks’ ability to withstand declines in the values of certain governments’ bonds. "Maybe [the stress tests] are not very stressful," an RBS analyst says.

    The U.S. Treasury Department declines to officially cite China as a currency manipulator in its report to Congress, noting China’s "significant step" of ending the yuan’s dollar peg. The report says the yuan "remains undervalued" but what matters now is how far and how fast the currency is allowed to appreciate in value.

    In a major step toward an AIDS vaccine, U.S. government scientists have discovered three powerful antibodies, the strongest of which neutralizes 91% of HIV strains, more than any AIDS antibody yet discovered.   Wow - GOVERNMENT scientists!  Because private enterprise doesn’t want an actual cure.  There’s no money in a vaccine compared to a lifetime of treatment…  33M people in the US have this costing our health-care system about $500Bn a year yet funding for research was cut and cut and cut for the past decade.   


  158. A whopping $0.30 in TZA all in the last 1/2 hour on 3 quick trades into the battle of the stick into the close ! 
    JRW I am not. 
    Energy names somewhat strong today.
    REITs still weak.
    Not buying this low volume rally; but who knows.
    Hearing more and more chatter from some pros that bottom may be in (for a while) and 1040-1100 range may be in play.
    Would not surprise me to see some kind of summer rally before more fireworks after Labor day.
    Gotta be nimble …  and keep raising cash along the way.
     
    If you are a call seller … AMZN 120′s and SPG 85s for July could be good.
    If you are a put seller….. RIG Aug 42.50s or 45′s.
     
    Somehow Phil; you got your RUT 620 at the close !
     
    Whiter LeBron ?   Intrade sez Miami; or maybe Cleveland.  Knicks not out of it.  10 minutes we will know.


  159. Phil re: dflam,
    Maybe it is a semantics thing but your terminology about options and contracts has confused me before. I think most of us are under the impression that the option is the contract… that is 1 option contract = 100 shares of underlying stock and that is the end of the story. Why do you make a distinction between "options" and "contracts?"  100 options does equal 10000 shares that you are contracted to buy or sell. Is that what you are getting at?


  160. Go heat!,


  161. Phil, reading your advice on the IRA for Nicha, I believe no broker will let you sell naked put on an IRA account which would kill the financing of the spreads. If you know of a broker who would allow selling puts on an IRA, it would be great though!
    On a different subject, I was wondering when you would prefer a straight buy/write strategy to an artificial buy/write. Your example of AA makes for a perfect study. As of now (10 PM), I could buy 1000 shares of AA and sell 10 contracts 2012 10 P and C for $4504 total margin (for covered stock and put) and you can earn max $3910 if AA is above $10 on Jan 2012. Worst case, you get another 1000 shares at $8.04. With an artifical buy/write, I would sell the 2012 7.5 P ($0.92) and buy the 7.5/10 C vertical for $1.41. Cost of 10 verticals – put sale = $490 + $775 margin for the naked put. I tie up $1265 (and outlays only $490) and if AA is above $10 in 2012, I stand to make $2010. Worst case, I end up with 1000 shares of AA at $7.99. For a similar risk, this look like better returns. I am using all figures provided by TOS now. Of course, I don’t collect a dividend, but the difference more than makes up for it. Did I miss something? 


  162. Or you could simply sell the 2012 7.5 P for $0.92 and collect $920 if AA is above $7.5 in 2012 for just $775 in margin. Worst case you get 1000 shares of AA for $6.58 and I could think of worst things in life! It’s not very aggressive and not fancy, but I guess who cares!


  163. Loopy – really? You from Miami? Lebron took the easy way out. If this is how he gets his championship he will never be considered on of the greatest of all time now. I was a laker hater but now will be rooting for KOBE to crush Miami if Miami even makes it that far.


  164.  Is LeBron the new Scottie Pippen??


  165. Cramer has no shame – in the 11:00 PM rerun he is now saying that the political system in China is superior to ours because the government can basically impose what it wants on its people! It’s a "command economy" he says proudly. It is sometimes called a dictatorship I heard! The same people who call Obama a socialist love the Communist regime in China. This is really what is all about, these guys would love to have the same power that the Chinese leaders have but are afraid to say it! But only when they are in power. When it’s Obama as president, he should have less power… It figures!


  166. stj/Cramer: I truly mean no disrespect but how did Cramer being an idiot turn into a slight against President Obama. I have never heard Cramer call our President a Socialist. For that matter, I have never once heard anyone jump on the China bandwagon because  they dislike our President. I dont think even Rush or Beck would be that foolish (although you never know). I did hear Danny Glover supporting Hugo Chavez but that guy (both guys actually) is a little nuts.  I have seen every President in my lifetime accused of power grabbing. It is the perfect criticism from any opposition since every President must wield power to effect change; change that most often is despised by the other party. They all make backroom deals and support pork while promising to do neither. Just like the promise of alternative energy is passed down from President to President, so are the laundry lists of accusations and oppositions. Yes, some Presidents are horrible and deserving of criticism but ALL of them get treated about the same. Of couse this is just MHO.


  167. stj/IRA: TOS allows selling puts in an IRA, though the margin requirements (100% of the cash required at assignment is held back) cause quite a hit to one’s buying power.


  168. Options and contacts/Aclend – First of all, I don’t distinguish generally because we are always talking about OPTIONS, which is for control of 100 shares of stock and why on earth would we talk about anything else because that’s the way they are priced.   The strict definition of of an options CONTRACT is a contract that gives its owner the right but not the obligation, to either buy or sell specified underlying assets at specified price for a specified period of time.  Contracts are GENERALLY sold in lots of 100 (controlling 100 shares of stock) but sometimes (like TZA currently) they are different as each TZA OPTION only contains 20 CONTRACTS to control TZA stock.  Meanwhile, this is not an Options 101 class and options are priced on a per contract basis so the term do get mixed up and we’re not here to police them or we’d spend all day on this BS.  Hopefully people know enough to understand that when you buy a normal $1 option, it costs $100 and controls 100 shares of a stock. 

    IRA/Stjean – I’m pretty sure TOS and some other brokers do allow naked put selling.  Any time you can’s sell the naked put on a play you can always just buy the call spread.  It actually makes more money (per total commitment) when you are right but has less downside protection and, of course, the thing I don’t like about it is, if you are wrong, they expire worthless and you have nothing.   You are right on the artificial and it always depends on what your long-term goal is for a stock.  Generally, when stocks are this cheap, I want to establish long-term ownership.  While the numbers are more attractive in round one, you have less flexibility and are more likely to get called away with nothing in your retirement portfolio but cash. 

    Let’s rewind that situation and look at AA from 18 months ago, when it was $8 per share.  Had I done a buy/write then and sold the July $7.50 puts and calls for $4, I would have been in for $6/8 and now the $7.50 putter is worthless and the $7.50 caller is $3.20 with the stock at $10.72.  Had you gone artificial with the $5/7.50 spread at $1.90 and sold the puts for $1.70, you’d be up $2.30 (assuming called away) but not really flexible.  With the stock, I can split the $3.20 I owe the July $7.50 caller into the 2012 $10 puts and calls for $4.70, which LOWERS my basis, putting $1.50 in my pocket against stock I already own (no more premiums) for now net $2.50 with a call away at $10 (300% profit) and a put-to price of just $6.25, which is 41% down from here so that’s my FREE protection on my AA position and I now have a stock in my portfolio that I pretty much never need to worry about again. 

    One more year like that and my position is around net zero basis and I can even stop selling puts (if full) and just sell something like 2012 $12.50 calls for $1.65 so if I started with $6,000 and a $16,000 commitment at 2x, I end up with the whole $6,000 back on 4.5 years and now I’m collecting $1,650 a year for free (Bazillion percent dividends!) and my worst-case scenario is I get $12.50 cash for my stock.   Do that with $600,000 and in 4.5 years you have $600,000 in cash and $600,000 worth of positions and you are getting paid $165,000 a year just off the stocks and you have massive amounts of sideline margin and you can double up again in the next 4.5 years.  That’s the difference between owning stock and taking artificial plays – artificial plays mean you are not building a base for the long-term.  Cash is nice but it’s also very nice to own stock in solid companies for real long-term investing. 

    How about a more extreme example?  Take AAPL 18 months ago at $85.  Let’s say you went with the July $70/85 bull call spread at $6 and sold the $70 puts for $5 for net $1 on the $15 spread.  Well, pretty much you would have $15 now and be done with it.  If you had bought the stock for $8,500 and sold the $85 puts and calls for $15, you’d be in for net $70/77.50 and the $85 caller is now $173 with the stock at $258.  You can buy another round of stock for $25,800 and sell the 2012 $220 puts and calls for $110 (2x = $22,000), which puts you in 200 shares of AAPL for net $28,100 or $140.50/180.25 with a call away at $220 for a nice $15,900 profit and FREE protection all the way to $180.25 (down 31%) but, the reality is, we’ll roll it again and build it again until we are making such ridiculous amounts of money that there’s nothing left to do but take it off the table. 

    It’s great to use options for leverage to make tons of money on cash but sometimes you don’t make anything and you end up with nothing.  Again, this goes back to whether or not you believe stocks have actual long-term value (no matter what they are currently priced at) and whether you are looking to build a long-term portfolio or if you are just speculating to increase your cash.  I find speculating a great deal of fun but speculators never get to retire – they end up being old men on TV like TBoone who are always chasing the next deal.   That’s a fun life if it’s what you want it but my Grandpa Max was an investor and we spent summers traveling around the world, staying in the best hotels and walking in parks and seeing plays and concerts and going to the beach and he loved to take me grocery shopping and would tell me how to pick out good meat, fish, fruits and vegetables and, after a day of adventures, we’d go home and open the paper and check his stocks before moving on to dinner and our evening’s entertainment.  I’d rather be Max Davis’ grandson than TBoon Pickens’ and I hope my grandchildren will be able to say the same about me. 

    Cramer/Stjean – What do you expect, he’s a Capitalist.  Capitalism is a nice concept but it’s been perverted into Corporate Fascism. 

    China/Mtjon – Here’s Glen Beck saying China is better than America and America is a worse communist regime than Russia.   I should just stop there because this is such a great example of Fox sleazery that I don’t think it can be topped.  Here’s NBC gushing over China on the Today show.  Here’s Jim Rogers telling you the 21st Centrury belongs to China and says "they are the best Capitalists in the World."  Chinese workers are better than lazy American workers according to Rogers because they don’t ask for days off. Here’s Cramer comparing Obama to Lenin and saying "thank heavens for the Chinese Communitst, deeply rooted in the profit Government"  Cramer:  "We have an agenda in this country that’s a radical agenda… this is the greatest wealth destruction I’ve ever seen by a President."  Here’s Cramer on March 3rd 2009 saying Obama has to give up his programs or the Market will keep going down forever – just days before the biggest rally of all time began.  As to Limbaugh, I think calling Obama a communist would conflict with his theme of insinuating that Barack HUSSEIN Obama is a terrorist who has been placed in the White House to destroy our country from within.  Of course this video says it all: "Barack Obama is a Communist Trojan Horse Designed to Lead You to Your Doom!

    Of course you should now worry about Obama being a Socialist or a Communist when this well-circulated and clearly professional video proves he’s the Anti-Christ.  That’s the wonder of YouTube – now PACs and Lobbyists can hire professional production companies to create elaborate smear campaigns and then completely disassociate themselves from it by having anonymous people smear their dirt. 

    Maybe the Dems should listen to Rush, who tells us how a President should deal with criticism

    Other fun things that you seem to have missed or forgotten:

    During last night’s “Great American Panel” segment on Hannity, panelist Layla Kayleigh confronted Sean Hannity on his divisive tactics against President Barack Obama. When he insisted he was only being “critical,” she noted that when Democrats criticized President Bush, they were called unpatriotic. “No, they weren’t,” Hannity disingenuously said (or else he suffers from amnesia). OK, so maybe they weren’t called “unpatriotic.” They were “only” accused of being sick, hating America, undermining the troops and more.

    From the 2004 Election: The GOP is trying to quash criticism of the president simply because it’s criticism of the president. The election is becoming a referendum on democracy.  In some countries, the commander in chief builds a propaganda apparatus that equates him with the military and the nation. If you object that he’s making bad decisions and disserving the national interest, you’re accused of weakening the nation, undermining its security, sabotaging the commander in chief, and serving a foreign power—the very charges Miller leveled tonight against Bush’s critics.  Are you prepared to become one of those countries?

    When patriotism is impugned, the facts go out the window. You’re not allowed to point out that Bush shifted the rationale for the Iraq war further and further from U.S. national security—from complicity in 9/11 to weapons of mass destruction to building democracy to relieving Iraqis of their dictator—without explaining why American troops and taxpayers should bear the burden. You’re not allowed to point out that the longer a liberator stays, the more he looks like an occupier. You’re not allowed to propose that the enormous postwar expenses Bush failed to budget for be covered by repealing his tax cuts for the wealthy instead of further indebting every American child.

    If you dare to say these things, you’re accused—as Kerry now stands accused by Cheney and Miller—of defaming America and refusing "to support American troops in combat." You’re contrasted to a president who "is unashamed of his belief that God is not indifferent to America." You’re derided, in Cheney’s words, for trying to show al-Qaida "our softer side." Your Silver Star, Bronze Star, and three Purple Hearts are no match for the vice president’s five draft deferments.

    From March 8th, 2002:

    Last week, Senate Majority Leader Tom Daschle (duly elected from the state of South Dakota), along with Senator Robert C. Byrd, D-W.Va., dared to question the Bush administration’s demand for huge increases in military spending without an explanation of military goals. As Chair of the Senate Appropriations Committee, Byrd has the responsibility of asking just such questions.

    Republicans quickly responded with a barrage of name calling, personally attacking the Democratic leaders rather than addressing the issues of military strategy or spending. The attacks were reminiscent of Attorney General John Ashcroft’s congressional testimony in December. Ashcroft said that people who raise concerns about the impact of the Justice Department’s actions on civil liberties ("those who scare peace-loving people with phantoms of lost liberty") actually "aid terrorists" and "give ammunition to America’s enemies."

    Senate Minority Leader Trent Lott, R-Miss., ranted: "How dare Senator Daschle criticize President Bush while we are fighting our war on terrorism?" He accused Daschle of trying to "divide the country." Gandy notes, "Perhaps Senator Lott has forgotten his own comments about President Clinton’s policy in the Persian Gulf. Real patriots have a responsibility to question policies they believe to be wrong."

    Meanwhile, House Majority Whip Tom DeLay, R-Tx., called Daschle’s comments "disgusting," and Tom Davis, R-Va., who leads the National Republican Congressional Committee, said that Senator Daschle’s comments gave "aid and comfort to the enemy."

    Before he was driven off the air

    Dan Rather, the star news anchor for the US television network CBS, said last night that "patriotism run amok" was in danger of trampling the freedom of American journalists to ask tough questions. And he admitted that he had shrunk from taking on the Bush administration over the war on terrorism.

    In the weeks after September 11 Rather wore a Stars and Stripes pin in his lapel during his evening news show in an apparent display of total solidarity with the American cause. However, in an interview with BBC’s Newsnight, he graphically described the pressures to conform that built up after the attacks on the World Trade Centre and the Pentagon.

    "It is an obscene comparison – you know I am not sure I like it – but you know there was a time in South Africa that people would put flaming tyres around people’s necks if they dissented. And in some ways the fear is that you will be necklaced here, you will have a flaming tyre of lack of patriotism put around your neck," he said. "Now it is that fear that keeps journalists from asking the toughest of the tough questions."

    "Limiting access, limiting information to cover the backsides of those who are in charge of the war, is extremely dangerous and cannot and should not be accepted. And I am sorry to say that, up to and including the moment of this interview, that overwhelmingly it has been accepted by the American people. And the current administration revels in that, they relish that, and they take refuge in that."

    He said his view of the patriotism differed from that of the administration. "It’s unpatriotic not to stand up, look them in the eye, and ask the questions they don’t want to hear – they being those who have the responsibility, the ultimate responsibility – of sending our sons and daughters, our husbands, wives, our blood, to face death."

    Too bad the death that was faced was the end of Rather’s career as it turned out questioning Bush was fatal for Rather…  How quickly and conveniently the Republicans have forgotten how Bush was able to get away with all the things he did for 8 years.  That’s what pisses Democrats off now – we pretty much bit our toungue until 2006, when things finally got so insanely bad that people spoke up again out of frustration and started making changes but way too late to stop the catastrophe we’re trying to clean up now.  What a total joke that every little thing this President does is not just criticized but villified…


  169.  Guys 
    I have a position in VZ and my reg options changed to (FTR 24; US$100) Could anybody explain please what kind of options are they and why they have very strange prices in TOS


  170. Gang of 13 Activity (Gang of 12 + Govt): 
    The Federal Reserve said on Thursday total outstanding credit to U.S. consumers, everything from car loans to credit cards, fell $9.15 billion, much sharper than forecasts for a $2 billion decrease. April’s reading was revised to a hefty $14.86 billion drop from the originally reported rise of $1 billion.
     
    So the take away is, yeah, credit dropped more then expected but hey, it’s not dropping less then the previous month!  What a crock of $.
     
    Goldman / Mr. Bot:   Good stuff!  Any newbies out there wondering what a stick save is yesterday was a perfect example of it.  With bullshit like that happening over and over it makes me want to bitch slap anyone who ever complains about an end of day sell off-


  171. sorry, should read:
     
    So the take away is, yeah, credit dropped more then expected but hey, it’s dropping less then the previous month!  What a crock of $


  172. jromeha,
    Yep, I’m just up the road in Boca Raton.  I don’t know what the easy road is in the NBA but hopefully we will see you in the finals!!  I think any great contender in the NBA needs to have 3 big names to get the opportunity.


  173. Dan Rather … what IS the frequency Kenneth ?
    That bozo blew up his own career w/ his hyper partisan National Guard story based on what has been proven to be clearly fake memos.  Only Rather, Phil and MSNBC believe otherwise.
     
    But don’t worry; Dan is still working to get to the "truth" … clear his bad name and all that … well, isn’t he ?
     
    The travesty is that Rather got away with it for so long, being a partisan parading around as a "journalist".
     
    Sort of like that CNN woman who just got bounced after Tweeting her love and affection for a recently departed Hezbollah big shot cleric; one who just happened to have been involved w/ the 1983 Marine Barracks bombing as well as the spiritual guide behind many Hezbollah terrorist atrocities.   CNN had no problem with her heading up their mideast coverage until such a blatant, public shout out.   Your name in News !   CNN.   (at least they did the right thing and immediately terminated her, but how do these folks get to play pretend journalist for so long).
     
    And the funny thing is, you don’t see too many right wingers in these jobs … its only lefties or terror sympathizers.


  174. stjeanluc
    I have an IRA account with TOS and I have sold many naked puts with no problem.


  175. Anyone have an opinion on the following spread?
    DRYS Jan 11 bull call spread 2.50/5.00 for net 1.04, selling the Jan 11 $4.00 puts for .93 for net .11 This is a spread (stock currently @ 3.72) 1.22 in the money. Worst case is getting the stock for 4.00 in Jan less any amount you may make in the spread.


  176. jobs/cap
    "And the funny thing is, you don’t see too many right wingers in these jobs … its only lefties or terror sympathizers." Wait, there’re jobs for lefties & terror sympathizers like me? Where’s the application form? Oh wait, I’m already employed, and planning to retire. Besides, I’m a radical, not a leftie. Oh well, it’s hard times.


  177. Cap – As always – spoken like a true "independent"


  178. Hi Phil, 
    I sold 10 July 39 P’s and 5 38 July P’s. The 38′s are even now, should I buy them back or wait to see if they push up and start compensating for the 39′s losses?
    Thanks


  179.  Any thoughts on APOL? They’ve been beat way down, starting to come back.