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Which Way Wednesday – Under the Big Top

SPY WEEKLY1,332.

That is a 100% in the S&P since it’s March 2009 low of 666 (see David Fry’s chart).  Does it matter?  Can we expect even a LITTLE pullback after a 100% run or is it "to the moon Alice" and maybe Mars and Jupiter while we’re at it as the Federal Reserve’s multi-Trillion Dollar thrusters send us to the stars, breaking the bonds of gravity (and logic) as they send stocks every higher in an expanding universe of freshly supplied money.  As fellow stock market physicist, Art Cashin said yesterday

The Newtonian Rally Continues – A mild paraphrase of one Sir Isaac Newton’s laws of force and motion (inertia) says that a body in motion will stay in motion unless acted upon by some counterforce. That seems to be the guiding rule for the QE2 rally since it started with the Jackson Hole speech before Labor Day.

Yesterday, the Dow rallied for the sixth straight day. Simultaneously, treasuries fell for the sixth straight day.  It was a low volume levitation, however. The NYSE volume failed to make it to 900 million shares.

Does the low volume indicate we are losing thrust or was it merely a function of the end of the Fed’s current POMO schedule forcing us to coast on momentum for a day as they prepare to fire stage three thrusters to help the S&P achieve final escape velocity?  As I said to Members yesterday: 

The Fed can feed $3.5Tn into the thrusters and you can have a spectacular launch that looks like it’s heading straight to the moon but it’s right at the peak, when you need to fire that second stage perfectly, that you have the highest probability of failure. When a market escapes gravity – you will know it. Like the Nasdaq in 1999 and oil in 2008 – not just a little up every day but spectacular gains that go unpunished. That’s what we’ll see if they hyperinflation begins to creep into the markets.

As I had pointed out years ago in our educational post on "Stock Market Physics": 

What we have in this chart, along the dotted line, is an actual picture Kepler’s third law of motion in action as the Nasdaq forms an elliptical orbit as it attempts to escape. By simply applying the following formula we can see where the Nasdaq is going:

T^2 = {4 \pi^2 a^3 \over G (M+m)}.

  • T = time since the last crash

  • a = total number of points gained

  • G = bearish sentiment + bad news

  • M = total value of the global market

  • m= total value of the Nasdaq

In absence of new fuel (inflows), we can expect some sideways drift – something has to change in the formula (kidding about being able to predict where we are going by the way!) for us to break orbit.

What the Fed has done with their $3.5Tn meddling in the markets is introduced a new factor: The ever-expanding money supply and, like our expanding universe, it means that we have an outside force acting on the markets that make all our other measurements invalid.  It’s kind of like saying "How fast will you fill a one gallon container using an 8 ounce glass of water if you can pour one glass every 30 seconds?", which has a straightforward answer.  What the Fed has done by drowning us in money is added to that question "…if you are standing at the bottom of the ocean."  See, makes a difference in an otherwise straightforward calculation, doesn’t it?

But (and it’s a Big But), what if the question is "How many 8 ounce glasses can a gallon container hold?"  Now it doesn’t matter if fill that gallon container at the bottom of the ocean or back on the moon – the answer is always going to be 16 glasses.  So, while the Fed may be able to affect the rate at which stocks return to their "full" value, it remains to be seen whether or not they can affect the FACT of what that full value should be.  To some extent, we expect inflation to expand the bottom lines of the companies we invest in – so they "expand" in "value" along with the expanding universe of money that the Fed is creating.

The Fed, as we know, claims there is no inflation.  If there is no inflation, then those rising input costs that companies are reporting must be something else and the idea that they can pass those costs along to the consumer is also an impossibility because, if there is no inflation, how will the consumers get money to pay more for everything?  See, even in a market universe awash with cash – we still have to balance our equations, don’t we?

 

It’s going to be a loony day on our lunar market mission as Ron Paul (aka ‘Gravity") squares off against Ben Bernanke (aka "The Bernank – Pilot who Sits in the Bubble") about the wisdom of applying more thrust (aka "Quantitative Easing") to the expanding economic ship (aka "Mass") which is already moving at a dangerous speed (aka "Inflation").  Doctor Paul seems to be the only one concerned about the fact that the economic ship took off without any passengers, or at least only 10% of them and that’s why today’s hearing is titled: "Can monetary policy really create jobs?"  We will be hearing testimony from Austrian-school economist Thomas DiLorenzo, whose testimony includes the great lines:

As applied to today’s economic situation, it is obvious that the artificially low interest rates caused by the policies of the Greenspan Fed created an unsustainable boom in the housing market. Thousands of new jobs were in fact created – and then destroyed – giving an updated meaning to Joseph Schumpeter’s phrase “creative destruction.” Many Americans who obtained jobs and pursued careers in housing construction and related industries realized that those jobs and careers were not sustainable after all; they were fooled by the Fed’s low interest rate policies. Thus, the Fed was not only responsible for causing the massive unemployment that we endure today, but also a great amount of what economists call “mismatch” unemployment. The skills that people in these industries developed were no longer in demand; they lost their jobs; and now they must retool and re-educate themselves.

In summary, the Fed’s monetary policies tend to create temporary and unsustainable increases in employment while being the very engine of recession and depression that creates a much greater degree of job destruction and unemployment.

Ohio University’s Richard Vedder will read the following into the record:

On the fiscal side, politicians unfettered by rules behave like unsupervised alcoholics in liquor stores. Thus we need some sort of constitutional constraints on governmental fiscal actions.

I said last week, as we prepared for the upcoming testimony: "In the words of the immortal Flounder: "Oh boy, is this great!"  We rarely get an opportunity to have this kind of political fun – I can only hope that Ron Paul doesn’t disappoint us by selling out and rolling over for the Fed, as so many wannabe game-changers have done in the past.  

There’s nothing new going on here, the cartoon on the right is from the Chicago Tribune in 1934, expressing concern over how much money the government was spending to bring us out of the depression. Note the "kids" drunk with power in cart?  They are called "Pinkies" from Columbia and Harvard, a reference to the far left of the day. You can see a menacing Joseph Stalin on the right edge saying, "How red the sunrise is getting". As it turned out we could not borrow and spend our way out of the depression, the government measures only insured that it lasted a few extra years

Today it is all about G (from the equation above), which is Sentiment.  Right now, there are no bears.  They have all been taken out and shot and are as extinct as moose would be if Sarah Palin had more free time and helicopters to hunt them down with.  Helicopter Ben has murdered the bears, pushing bearish sentiment to the lowest levels since the great capitulation of 1999 when even the most value-oriented investor began to say: "$1Bn for a sock puppet that sells dog food on-line?  Sure, sounds great."

  • We’re paying $2Bn for a company that doesn’t even have a sock representing them but does allow you to make a reservation with your IPhone (OPEN) – a mere 168 times projected 2011 earnings will buy you a share.    
  • We paying $11.5Bn and 73 times earnings for a company (NFLX), also with no puppets, that charges $8.95 a month to watch movies on-line, which is nice but my cable company has hundreds of movies and TV shows on-demand included in their service for free and, of course, there are at least 6 other companies offering or planning to offer the same service and they all think they will get 50% of the market while holding their margins.   Good luck!
  • We are paying $22Bn and 48 times earnings for a company that does not have a sock puppet, but does have Captain Kirk, whose acting ability has, on occasion, been compared to that of a sock (PCLN).  What does Priceline do that is so unique that they deserve a p/e ratio 150% higher than Apple Computer, who earn in a week three times more than PCLN does in a year?  Why they have on-line travel reservations.  Isn’t that BRILLIANT?  I mean, who else could possibly do that?  

Things are a little crazy out there and I think we’re getting into a dangerous place where sentiment could change and that could, however briefly, cause us to pull back off our lofty highs but, then again – if we’re filling a jug of water at the bottom of the ocean – it’s not a good idea to bet that no one will get wet.  Until Uncle Ben is actually forced to turn off his money hose – this rising tide will continue to lift all ships

 


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  1. rainman

    Great title Phil! In the center ring, Uncle Benny Bernank and Ron Paul! (don’t try this at home folks!).

  2. dclark41

    Pharm
    Any guesses why DCTH is up 4.33% premarket?

  3. lflantheman

    amatta/Peter D……"Too many positions"       I was intrigued but not surprised by Peter’s reply to amatta, who has about 30 positions in the market.  Peter suggested he close out a few and work with fewer.  Good advice.  Mathematically, any more than 12 positions in different equities or ETFs will push you closer and closer to performance reflecting that of the overall market.  And your goal is to significantly BEAT the market.  Imagine pushing it to the extreme and holding positions in say, 100 companies.   At that point you will be almost assured to reflect the performance of the overall market.  And how can you manage them intelligently?  You can’t.  How many of you own stock or options in more than 12 companies or ETFs?  I’ll BET it’s most of you.  And if you do hold a large number of positions then I’ll bet that you are struggling to consistently beat the S & P 500.   Right now in all of my portfolios combined I have positions in a total of 8 companies or ETFs ( I just counted them) and I’m hammering the market.  Food for thought.

  4. augrusot

     dclark41
    DCTH was highlighted on Mad Money last night. From google:
    Jim said that Delcath Systems (NASDAQ: DCTH) is in the “sweet spot. Companies like these are getting bought every day. I’m going to say that I like your stock."

  5. terrapin22

    Phil / Oil – any other research support this claim?  $150 oil would sure act as a counterforce to this rally. 
    http://www.guardian.co.uk/business/2011/feb/08/saudi-oil-reserves-overstated-wikileaks

  6. pstas

     Iflantheman- OK- I’ll ask the obvious question- which positions? AAPL for sure, what else?

  7. Pharmboy

    CRAMER……..unreal. This bump, I would take the money and run, or at least 1/2 off the table.  There will be plenty of time to get back in.  Remember, retail watches Cramer, and his buddies ‘back up the truck’ and take the money home.

  8. jasu1

     lflantheman,


    Would that not be dependent on the size of your portfolio. Being concentrated on just the 8 positions would expose you to severe risk. Might be good to know what these positions are that you are hammering the market with. If I am too personal, I apologize in advance. Thank you.


    jasu1  

  9. dclark41

    Inflantheman
    Are you in broad ETF’s or more specific ETF’s? I counted 19 for me 2 being ETF’s. I still find what I have manageable, but I am constantly thinking if my next move should be to increase the size of my current holdings or adjust what I have to create the proper mix I ultimately want without expanding the amount of different issues I own. I also look at the positions I own as being long and short. I am not sure if you have some short term trading investments as part of your 12. Your points are well taken and after a miserable year last year I am very conscious of the number of different investments I hold.

  10. nicha

     Iflan – How do you choose which ones to keep or invest in? I agree with you that managing too many positions is a headache. I have over 25 positions in 3 accounts. But when opportunities arise, I buy. Sometimes, the risk/reward is too good to pass up. The question for you and all is how do you determine not to buy?

  11. lflantheman

    pstas…I knew you would ask.  :)   
    Long:   AAPL, JCP   (with some partial covers)
    Short:   XLE, ANF, NVDA, NFLX   (with some partial covers)
    Iron Condor:  PCX              And I stated incorrectly.  There are only 7.
    jasu1………..I think the size of the portfolio is irrelevant.  
    Note that if you ask me a week from now, these holdings may be (are likely to be) entirely different. 

  12. dclark41

    Pharm
    For a guy that is such an idiot he sure has a lot of clout and can move a stock! I am as tired of that guy as everyone else is, but I am amazed at the powerful forum the MSM has provided him. I wish he would say that he hates NFLX!

  13. lflantheman

    nicha…I choose investments by spending time here, listening to people who know more than I do, then doing my own research, finally deciding what I think has the highest probability of success.

  14. Cap

     GM –  no time to post y’day, sorry.
     
    Amatta … short some WYNN 125′s is my position; have traded them in and out w/ the volatility.
    OPEN … was short 90 & 95 into earnings … those SHOULD be ok; but brokers are pulling out all the stops this morning.
     
    AMZN weekly calls look like a short to me; or buy the 180 puts for a pullback gamble.
     
    Market scamathon continues unabated.  
     
    GL everyone.

  15. Cap

     Ron Paul is bound to disappoint … Ben too savvy to get unnerved by RP’s tortuous monologues.  Sadly.

  16. matt1966

    Yesterday’s close in FAZ was definately a tell for the AH action.  But as usual, the bastards probably made most of the pullback after hours so when the chart gets printed for today it will look nice and green.
     
    So how bout that whistleblower from UBS telling the govt about $18B in untaxed US assets in Switzerland getting locked up in a US prison?  It’s reported Obama plays golf with the CEO of UBS.  You can’t make this stuff up.

  17. lflantheman

    jasu1….let me clarify that…the size of the portfolio is irrelevant "up to a point".  Obviously if you have 5 million to move around you may not want to put 1 mil in a single place.  BUT, there are those who do just that, and are very successful.  Watch JRW here on our site.  If your portfolio becomes huge, then you are going to move some of the $ to stable long term investments and be satisfied with 10%  per year.  But I think for a million or less portfolio that you are trying to grow at a rapid clip then you should limit your holdings to 12 or less stocks or ETFs. 

  18. pstas

     IPhone- just received and set up my new Verizon IPhone- most notable- much improved call quality which surprised/pleased me. (vs. Blackberry Bold). 
    FWIW.

  19. jabobeast

    PCLN??????

  20. drumkeerin

    lflantheman,
    most of my positions are in phil’s vertical spreads and puts sold against the spread. your positions don’t seem long term. any observations on the long term spreads. 

  21. rainman

    lflan / size — I agree with you to a point that the larger the portfolio the more asymptotic to the market it becomes. There are a couple other points to make about statements though. First, you hold more than 7 position in that the you hold XLE which has 41 components and therefore brings your total to 47. There is no difference between shorting XLE and shorting those 41 components except for convenience. Second, a portfolio which is asymtotic to the market but hedged will beat the market handsomely.

  22. lflantheman

    drumkeerin…….Phil is the expert on long term spreads.  I rarely use them.  So I consider my observations on them irrelevant.  I’m mainly a swing trader, holding calls or puts for a few hours to a few weeks.

  23. pstas

     Iflantheman- you are short XLE and ANF? swing trades? If so, I get the XLE but why ANF?

  24. lflantheman

    rainman….Points well taken.    Thanks.   See you all later.  My other job screams out for me at the moment. 

  25. rainman

    lflan / size — your statement that the smaller the portfolio, the smaller the number of positions should be is not consistent. In the purest form, we are only talking about percentages (gains and losses) which has nothing to do with the total of the assets involved nor the what the underlying is.

  26. Pharmboy

    Market goes up, Momos go down, market goes down, momos go up.  Hummm……

  27. Phil

    Good morning!

    Not being rejected at 1,322 would be amazing. 

    • Keep in mind, though, that the Russell blew through 684 last March (up 100% from 342 bottom) and flew up to 745 (up 116%) before pulling back to around 600 (20% pullback, up 75%).
    • The Dow bottomed out at 6,469 so 100% would be 12,938 – quite a way to go there. 
    • The NYSE fell to 4,181 and they are also right on the 100% line of 8,362.
    • The Nasdaq is already over the to, doubling from 1,265 to 2,530 last April before pulling back to about 2,100 (20% retrace) and now well over. 

    So we have the RUT and the Nas over the line with the Dow 5% behind and the S&P and the NYSE knocking on that 100% door.  Keep in mind these are spike lows so not the same kind of weight as our 5% rule lines (which throw out "noise") but spike to spike can be significant for short-term moves and it DID lead to 20% pullbacks of our two leading indexes.  The Nas pulled back right on the button (2,535) but the RUT did not by a long shot (16%).

    As with everything else, it is irresponsible not to take profits on a 100% move up.  It’s hard for me to believe that there can be so many traders who have unlearned this and, as we’ve been watching, today is the day we expect sentiment to change but, if it doesn’t – then screw it and we’ll look for the Dow to pop 100% along with everything else and do some aggressive upside betting there – crazy as it may seem.  

    I’m catching up today but I will have changes for the $25KP by the day’s end.  Once the testimony is over, we should have a handle on the sentiment.  

    Wednesday’s economic calendar:
    7:00 MBA Mortgage Applications
    8:30 Conference: Building the Economy of the Future (Geithner)
    10:00 Bernanke testifies on the economy
    10:30 EIA Petroleum Inventories
    1:00 PM Results of $24B, 10-Year Note Auction
    6:45 PM Fed’s Lockhart speaks to CFA Society of Atlanta 

    Notable earnings after Wednesday’s close: AKAMALLAMKR,ARRSATVICSCOFLIRGSICKIMMETNUANPRURGCSFSFTEX,TQNTWFMI

    Overseas: Japan -0.2%. Hong Kong -1.4%. China -0.9%. India-1%. London -0.3%. Paris -0.2%. Frankfurt flat.

    At the open: Dow -0.15% to 12215. S&P -0.19% to 1322. Nasdaq -0.22% to 2791.
    Treasurys: 30-year +0.13%. 10-yr +0.17%. 5-yr +0.09%.
    Commodities: Crude +0.45% to $87.33. Gold +0.15% to $1366.20.
    Currencies: Euro +0.45% vs. dollar. Yen -0.05%. Pound -0.11%.

     Mortgage Applications: -5.5% vs. +11.3% last week. Thirty-year fixed mortgage rate increased to 5.13% from 4.81%.

    A full 27% of borrowers are now underwater on their mortgages, up from 23% last quarter, according to a new Zillow report. Home values fell 2.6%, the largest quarter-on-quarter decline since the beginning of 2009. 

     If congressional hearings can be seen as a lagging indicator, investors may be right to be worried about the muni bond market: A House panel is holding a hearing this morning titled "State and Municipal Debt: The Coming Crisis?"

    A letter from the World Sugar Committee criticizing the ICE for failing to rein in "parasitic" computer traders seemingly gives ammo to those blaming record-high commodity prices on speculation. An important note: the WSC blames speculators for volatility, not high prices.

    March Corn prices look set to take out the $7 level after the USDA projects lower than expected ending stocks of 675M bushels, just 5% of expected usage – a level not seen since 1995. Premarket: CORN+2.43%. Full report here.

    rength in ag-related issues (MOO +0.5%) out of the gate after the USDA report and recent strong earnings from Agrium (AGU +3.1%), Potash (POT +0.9%) and Mosaic (MOS +1.5%). Also: IPI +3.5%CF+0.8%MON +0.6%BG +0.5%.

    Robert Weissenstein of Credit Suisse Private Banking Americas thinks U.S. stocks are cheap, earnings are growing, revenues are growing and beating expectations, and employment is getting better. Seeing the S&P 500 at 1450-1500 by year’s end, he raises his allocation in large-caps

  28. deano

     Phil – your thoughts on the following pair trade on CSCO – buy the weekly 22 calls, sell the weekly 23 calls, and the weekly 22 puts. No idea how to state the return on this other than its a net credit, and that the 22 puts roll out very nicely in case of a disaster. Also, CSCO is scheduled to announce a dividend sometime this year,

  29. barfinger

    OK, like yesterday, we had our morning dip. Now, don’t we all feel better? Hope you backed up the truck and loaded up for the rest of the day’s rally.

  30. stockbern

    Phil,  I know you said we can’t afford it but …..time for DBA?

  31. matt1966

    More madness.  What a sham this market is-

  32. Pharmboy

    CRIS is moving back into the top of their range, I am expecting them to move in the 3.30 area again (maybe 3.50).  I plan on selling another 1/2 and then, when there is a pull back below $3, then buying back 1/2.  Data is not due until 2Q or later, so they should bounce around until then.  ARRY, is holding the $3 area, and picking up more at 2.90 is my objective.  i have not decided upon puts yet for them.

  33. Phil

    DCTH/DC – Cramer and Motley Fool both pushed them last night.

    And what Aug said! 

    And what Pharm said – Always sell into Cramer-created excitement! 

    8 positions/Iflan – Good plan.  More than 20 is crazy – too hard to properly keep track.  10 active is fine for  most people but I don’t count locked in buy/writes as active positions – the only active aspect is your downside hedge to protect them.  I’m pretty sure that is mentioned in our "Smart Portfolio Management" series. 

    Oil/Terra – They bring this stuff out every time they are trying to goose oil.  Back in 2007, this was how they drove the market higher with "The Saudis won’t admit they are out of oil" and "Mexico’s production is down" – meanwhile, think of how many multi-billion barrel discoveries they have made lately.  The US has been pumping the same wells for 100 years and we still get 75% of peak capacity, the Saudis have only been at it since after WWII.  Peak oil seems logical, eventually we should run out – but it’s not new and is not a big factor as already survived peak wood (yes, there was such a fear) and peak coal so there’s no reason to think peak oil is going to get us.  We already have electric cars – problem solved if it had to be right there – that wasn’t such a sure thing in 2007.

    Iflan makes an excellent point.  Notice he says: "if you ask me a week from now, these holdings may be (are likely to be) entirely different."  There’s a reason we have new trade idea every week (every day) instead of just sticking with 10 stocks.  We go back to the same ones often and last weekend I put up my standard list of favorites that I like to buy any time they go "on sale" but – just like getting a new pair of Levis – You KNOW what they are worth.  You KNOW you need a new pair but that doesn’t mean you just buy them, does it?  You keep wearing them and the hole gets a little bigger and you see new, IDENTICAL, pairs in the Mall but you wait for the sale, right?  

    Stocks are like that but if we call the jeans "worth" $40 and we like to buy them for $30 – shouldn’t we also sell those jeans if someone offers us $50 for them?  We like them, we NEED them but, if someone wants to pay us $50 for $40 jeans that we know that we can buy for $30 if we are patient, then we’d be foolish not to sell.  This is pretty much the entire basis of Capitalism, isn’t it – buy low and sell high.  Why is it we forget to do this with stocks?  Stocks are not puppies – they don’t love us – we are buying them to make money and, once you have made money, you scrap it and move on to the next most likely stock to make you money. 

    Your portfolio should always be changing and you should always examine each trade idea in comparison to the ones you are currently working on and you should cull the weak positions from your portfolio – as well as the ones that have met or exceeded your expectations in favor of a newer, cuter, puppy.  Trust me, your new stock will love you just as much as your old one!  

  34. a6474510

    Why is a hedge fund shutting down with 8% of portfolio in pcln bullishh for  stock? Seems to me if someone is selling alot of stock the price should go down

  35. yodi

    lflantheman , pstas, rainman,
     
    I enjoyed your conversation about positions in a portfolio. Hat to tell you how many positions I hold. Truely I am not a day trader most of my positions are CC, colar, and combinations of CC and short puts, rarely gamble with some strangles etc. My question is only how do you make a living with 8 positions say you have a portfolio over 1 Mill. By receiving a resonable return you need to play with 10 15 25 or even 50 options at the time. Something goes wrong with one of this plays like I had one way back holding HOV jan11 long for some 2.00 lost the lot holding 100 options. Obviously had short puts and calls against them but still a loss of 20,000.00 is still no chicken fee. I like my plays with 2, 3 up to max 5 options. If something goes wrong it is not so big. But here you need to have a lot more plays. Obviously you need to watch them during the day on a daily basis. Looking at them once a week or even once a day is not good enough. So I feel it is how serious you are in making some money. Day trading is like playing the roulet tables on black and red.  

  36. Phil

    KO spread from yesterday up 50% already.  Congrats to those who played.  Now that earnings season is calming down and we have an idea of what sectors are strong and weak, we should hopefully get to play these most days.  

    Ron Paul/Cap – It’s not about Ben, it’s about the impression that Global investors get as to whether or not the free money will continue to flow.  If they lose confidence, they could bolt fast.  We have a $24Bn 10-year note auction today that will be interesting after the testimony.  

    BIDU flying, NYX making new highs, NTAP on fire….

    Oil inventories coming right up.  NYMEX still very barrel heavy in March with 334M, which is at least 300M more than they can have delivered with 9 trading days left.  We’ll watch that $87.50 line in oil but, no matter what, they have a huge amount of barrels to move so hopefully we can short into a pop, as planned all week.  

    EIA Petroleum Inventories: Crude +1.9M vs. consensus of +2.2M. Gasoline +4.7M vs. consensus of +2M. Distillates +0.3M vs. consensus of -1.2M. Futures +1% to $87.9.

    Another MASSIVE build in inventories (more than double expected) but it doesn’t seem to matter as the Dollar is down 5% on The Bernank’s "QE Forever" speech leading into the report!  Oil is still a futures short under the $87.50 line.  

    Ben Bernanke: "We have seen increased evidence that a self-sustaining recovery in consumer and business spending may be taking hold… Improving household and business confidence, accommodative monetary policy, and more-supportive financial conditions, including an apparently increasing willingness of banks to lend, seem likely to result in a more rapid pace of economic recovery in 2011."

    Ben Bernanke still has the best toys in the neighborhood. The 2 year Treasury yield drops and the dollar sinks to new lows for the day as the Fed chief gives no indication he’s considering backing away from QE. UUP -0.4%. UDN +0.4%. FXE +0.6%. Video feed here

    Jim Cramer shouldn’t get off easy with his transformation from “short Exxon” (XOM) to “it has much more room to run” without saying he’s wrong, Todd Sullivan writes. Little has changed at XOM, so Cramer might as well have "just use[d] a coin" in offering his opinion, Sullivan says. Where’s the responsibility of a commentator when changing his mind on a stock? 

  37. etradingsignals

    How do u guys track your portfolio performance? I essentially want to create multiple portfolios in the tracking site and monitor the performance of various strategies I am following.
    In the past I have used Yahoo finance, or google finance to create portfolios under them to track its performance. However, both of them don’t treat options very well. (Yahoo finance, doesn’t deduct the correct amount when u buy a option in your portfolio) Any pointers (to a paid or a free site) will be appreciated.

  38. judy

    Etrade. I use an excel spreadsheet. That uses DDE into the TOS database.  This works really well. Because I can essentially track whatever combination I want. Unfortunately, I have to have assets in many different accounts. This way it is all in one place

  39. shadowfax

    IWM 79.96 80.42 81.19 82.28 I also have SMAs crossing at 80.77

  40. judy

    I’m ready to capitulate all shorts! This is nuts. SPX rising near high, but NYSE adv/dec negative and breadth upvol-dvol negative too and nyse vol. low. 

  41. jabobeast

    How could the market go up every day without pause? Will it ever stop?

  42. jmm12

     Phil, What do you think of a company like MF.  With Corzine coming on last year and now that they are a primary dealer they should be able flip this POMO like all the bigger banks.  They shouldn’t have any balance sheet concerns do to the fact they have never really warehoused any trades up until now.  Is it worth looking at a sept 6/8 call spread vs the 8 puts for around .30?

  43. Phil

    FAZ/Matt – The financials are certainly the place where dips should be bought.  UBS thing is funny.  Way to encourage whistle-blowing, right?

    IPhone/Pstas – Congrats on joining the cool kids.  Let us know if there are any issues..

    PCLN/Jabob – Looks like the fix is in on the testimony today.  Mo free money is the word at the moment.  Thank goodness for CSPAN – you would think that Bernanke testifying on QE2 is no big deal from the way CNBC is covering it.  

    CSCO/Deano – It’s a great way to play.  Your worst case is you own CSCO for less than $22, which is fine.  

    DBA/Stock – I’m not convinced but remind me on the weekend because I do have to dig into the World Food situation in detail to make an overall commodity assessment. 

    PCLN/A64 – In this market, if an asteroid hit the Earth, it would somehow be bullish for PCLN.  I think in this particular case, the logic is that they’ve already had forced redemptions on 37% of the fund and PCLN was a top holding (8%) so, from that, the arb crowd can extrapolate that X percentage of the selling was from an exogenous event and, had that not occurred, then the balance between buys and sells would have taken PCLN X amount higher than it is now.  

    I think this is a great opportunity to grab the PCLN Feb $430 puts for $2.10.  They were $6 yesterday so expecting a bounce back to $3 isn’t too crazy.  

  44. rustle123

     Watching Bernanke attitude and smugness as he testifies reminds me of Nero playing the fiddle as Rome burned.

  45. rj_jarboe

    Phil,
    The breakout play on SSO never filled for me (the 2012 $44 Calls and the June $50′s). The original net was $6.60 and now is $7.10. Any suggestions on a modification to get into this or a similar trade? (I am home on a snow day and can actually make a trade today while the market is open).

  46. ajaytoo

     Phil / NFLX – Short Feb 200 calls. Thinking about rolling to 2x Mar 225s and maybe selling 1x Mar 205 puts to pay for the roll?
     
    DIA – Those $25KP DIAs are almost dead. Anything we can do to save them?

  47. oburlacu

     Waiting for the DIA puts to drop 80% in 25K isn’t against the whole DD or take losses at 20% philosophy?

  48. rainman

    yodi  —  I’m not sure I fully understand your post but I’d like to point out, once again, that absolute dollars are not important. What is important are the percentages. A loss of $20k in a $1M portfolio is 2% which is much different than 20% of a $100k portfolio. That $20k buys the same amount of chicken feed in both portfolios. I’d also like to point out that the amount of monitoring of your portfolio is directly related to the strategy you employ. If you look at many of Phil’s long term trades using LEAPs, you could play those as fire and forget and very little monitoring would be required. If, however, you are going to play swings in oil based on monthly contracts, you are going to have to do more monitoring. Everyone is different. Find your own balance with your own strategy, number of positions, and position sizing. My position sizing and numbers are very dependent on my current market views and current state of individual positions.

  49. hanna5

    ajaytoo – I am also short NFLX now, but in puts, so clearly i think its overvalued! But, shorting calls on this stock is risky in the extreme. With its valuation now, it could run up to 250+ (which is where some technical analyst i read recently said it was headed), and not matter value wise… just be careful and have an exit plan if it keeps going up. with the short puts, at least i have a defined risk…

  50. Phil

    Tracking/Etrad – Try Poweropt.com – they do something for PSW members but it might only be a couple of extra free weeks to try them.  I’ve never found a portfolio tracker I like better but it is $600 a year for 20-minute delayed service and $1,000 for live. 

    Capitulation/Judy – Very rough here but NYSE not making their 100% line yet so we are still 3 of 5 below.

    How/Jabob – Because you are buying stocks with dollars and the market is priced in dollars and the dollar goes down every day without pause because of what is going on right now in Congress.  Ben talks circles around the House Budget Committee and they just give up and let him keep debasing the currency because, of course, the alternative is possibly worse (admitting we have to default) so the charade continues.  

    On the whole, there is no difference to what we are doing now and just printing up a single bill for $3.5Tn and handing it to China to cancel our debts.  The only difference is China would not accept a $3.5Tn bill with the ink still wet on it, nor would anyone they try to give it to in exchange for oil or copper or whatever but, by doing it this way and screwing China and our own people as well, we make the slow-motion default on our debts (through their devaluation) "acceptable." 

    Finally getting a nice move down in XLE (and everything else at the moment).  

  51. matt1966

    …and they wonder why folks are not coming back into the market.  Who wants to swim in shark infested waters?

  52. Peter D

    lflan,
    Good comments.  Thank you.  I only have 2 positions left, SPX and RUT.  Well, that covers 2,500 stocks (500 from SPX and 2,000 from RUT).  I’m willing to add long term positions in solid companies, but there hasn’t been a big dip yet.  My worry with 2013 positions is that there is a high probability that I can get them for cheaper between now and then.  Like Pharm, I’m looking to sell puts on TLT on a down spike.  TNX (10 years) has gone up from 25 to 37, factoring in about 1.2% rise in interest rate already.
     
    amatta,
    Don’t forget to read yesterday comments (close to the end) on your portfolio, if you hadn’t done so.  Thanks for sharing as we have an exciting time discussing it.

  53. dclark41

    ajaytoo
    I agree with hanna5. I have the NFLX Feb $210 puts. Very disenchanted with the action on this stock. I am not interested in gaining a higher exposure to a stock I just can’t figure out. It’s a Cramer fav so be careful. I hope you win, but at this point I am just searching for a way to mitigate my losses.

  54. yodi

    rainman, my point is in the amount of plays one holds. Leaps are OK I hold a percentage as well but the short CC plays one month or up to two month out bring in most of the beef. A leap might bring up to 15 20% as The shorter plays bring in 3.5 to 4% X only 10 brings 35 to 40%. But if you have only 8 plays say on 100K portfolio would bring for my only aprox.
    300 to 400 per play x 8= 3,200.00 max. n the hope there are no loosers.

  55. redlog

     Phil: Positions
     
    Thanks for clarifying that you don’t consider locked in B/W’s as "active" positions.  I was conflicted because I know no more than 5% in one stock for $1 million portfolio was a basic guideline, which I like. My goal is not to "beat" the market but rather to make reasonable gains and generate income of 10%. So I’ve been working towards ultimately 80% in long term postitions (INTC, CSCO,KFT etc) then 20% for cash and short term swing trades.  My timeframe has been delayed since starting last May and things went up so fast after the summer, and starting with 1/4 scale in several stocks just ran away from me, so I’m still 75% cash.  I’m not sure if I’m being patient and disciplined with so little invested after almost a year or just dumb and gun shy?
    Think I’ll go back and watch The Man Who Planted Trees.

  56. matt1966

    The bastards took the market up until folks who sold or were short decided to throw in the towel and then wham.  Down she goes.  Trading against their computers where they can see paths of least resistance is foolish.  Some one stop me!

  57. rustle123

     Rep Gwen Moore who is a Gary Coleman look a like, must’ve had her statement prepared by Ben Bernanke.  I’m an independent as I don’t think you should side with one party rather than look at both candidates as individuals but after watching this testimony, seems Democrats are on the Bernanke payroll.

  58. williex

    Matt
    Actually Matt rather than stop you I would like to give you a hammer and point you toward the computer room.

  59. exec

    Is anybody seeing weird spikes on IWM or is it my system?

  60. tuscadog

    Phil Pharm  /  Abbott looks cheap at 10x and 4% div expected and good emerging mkt push?

  61. rainman

    exec — your system. But I do see a big red downward sloping line on mine so mine might be broken as well 8)

  62. Phil

    MF/JMM – They are interesting but I find it too difficult to figure out their business (same with all the IBanks but MF is worse because they are relatively small) from Q to Q so I never touch them.  I think the spread with the $8 puts is a bit aggressive as you leave no room for error and end up owning them for $8.30, which is where they are now.  I’d rather sell JPM June $40 puts for $1.10 and buy 2x the $39/40 bull call spreads for .80 so that’s net .40 per long and a put-to price of net $40.80 and a $3.20 upside at $40, which is about 10% off JPM’s current price and a break-even at $39.60 thanks to the low calls.  

    SSO/RJ – Waiting for it to come back down is the way to go.  If the NYSE and S&P both hold their 100% lines, then maybe we do a DDM play instead as it’s the Dow that needs to catch up.  

    NFLX/Ajay – Do you want to be stuck in a vertical for 6 weeks?  As I said yesterday – I favor selling Feb puts first (and those short puts already could have come off the table today with a nice profit).  

    DIA/$25KP, Ajay, Obur – Yes, it will cost $1 to roll them out to March $120 puts so the question is – do we want to be in March $120 puts. If you know the answer right now – please let me know but, if not, I’m still doing what I said I’d do not even two hours ago and waiting to see the market reaction to Ben’s testimony.  

    Gun shy/Red – Not too many old gunfighters named "the Kid" right?  Nothing wrong with being gun-shy.  Making good decisions is key.  Plant your trees in the right places and you’ll have fruit the rest of you life…

    LOL Matt – I’m still waiting for you to capitulate.  That has been a great sign of the top in the last few cycles.  

    Dems/Rustle – It’s not just the Dems.  The Bernanke payroll is the Financial lobby payroll and they are, by far, the biggest contributors to pretty much all of these people.  

    IWM/Exec – Crazy up and down action but not really spikes. 

  63. hanna5

    Someone please tell me why NFLX is up another $5? Did a couple new investors just hear about this story and realize they HAD to own NFLX at $222? Sorry! Just frustrated :)

  64. shadowfax

    exec
    Those spikes are normal most days since Jan. If you see a very large, very quick, with volume, and back to the same point take note, they seem to form the zig rue. 

  65. judy

    tusca
    pharmboy did a recent write up on abt. Check it out. He recommended to expect it to move down further so sell puts, scale in or something. They have some headwinds. Citi analyst recent downgrade and target $44.

  66. nicha

     Paul Tonko (NY-D) questions Bernake on how do we get a recovery when the bottom 90% are taxed more than the top 10%. Ben says he has no answer!

  67. judy

    Anybody having their tos screens freeze up for 10-20 seconds? Might be tos, might be internet.

  68. JRW III

    Good morning,

    IWM 81.33, 80.39, 79.98, 79.68, 79.29 and $7Bil of POMO !!

    If we break 77.29, it’s a LONG way down !!

    Support would be at 76.50 then 74.00

  69. Phil

     NFLX/Hannah – We have a lot of people short just on this board so of course they will make every effort to shake you out of the position before letting it go down.  They get their pump monkeys to jam it up a few bucks and they can afford to add 100,000 buys ($22M) to goose the stock up $5 because they’ll just sell 200,000 on the way down and, as long as they average $2.50 more than the average they bought it for – they win!  This game doesn’t fall apart until the retail buyers stop coming late to the party like they need to catch up – that’s a tough (but profitable) turn to call.  

    11:00 AM On the hour: Dow +0.06%. 10-yr +0.11%. Euro +0.6% vs. dollar. Crude +0.03% to $86.97. Gold +0.04% to $1364.60.

    12:00 PM On the hour: Dow -0.21%. 10-yr +0.23%. Euro +0.46% vs. dollar. Crude -0.06% to $86.89. Gold -0.12% to $1362.50.

    Treasurys buffeted as Bernanke talks on Capitol Hill about asset purchases, while up in New York, the Fed executes another step in the program, buying $7.51B in Treasurys maturing 2015-2016, of $27.685B offered by dealers. Bonds trim gains but are still higher on the low end: 10-year yield -0.01 to 3.73%; 5-year -0.03 to 2.38%; 2-year -0.03 to 0.825%.

    The Q&A turns to QE2 as House Budget Chairman asks Bernanke: Isn’t the Fed monetizing the debt? Only if the central bank weren’t planning to reverse its position, Bernanke replies. Also, studies show him that the program is worth 700K jobs.

    More from Bernanke: The dollar’s still the one when it comes to reserve currencies, "attractive" compared to the euro and alternatives. Asked what unemployment rate he’d be "comfortable with," he says 5-6% is the more historical goal, and even with ambitious economic growth of 4-plus percent, it could still take four years to get back to that level. 

    Doug Kass says Paul Tudor Jones has called a top in the S&P 500 (now -0.6% to 1,317), and for a rally in bonds.

    Point. Counterpoint: "Avoid emerging markets like the plague," says Charles de Vaulx, who is holding high levels of cash, but finding bargains in large cap U.S. stocks (large cap ETFs) and small cap Japanese listings (JSC JEQ). 

    There can be only one!  NYSE Euronext (NYX) confirms talks about a merger with Deutsche Boerse (DBOEY.PK +8.7%) into the world’s largest exchange by revenues. Sources say the German partner will have more say in how it goes, holding 59-60% of the new company. Updated 11:53 a.m.: NYX resumes trading up 17.3%

  70. revtodd64

     EDZ/$25KP – I may be too impatient, but couldn’t resist getting out on the down spike for $2.60 on the verticle spread, which I bought for $2.  I also filled the puts at .80 after selling them for $1.50.  After trading costs I had a $948 profit on $2400 margin, which is about 39%.  I know it is a hedge and could go higher, but I wanted to make some money on the downside (for a change!)  I’m assuming someone will BTFD and I can reset EDZ later.  Maybe this is why I may not be cut out to be a short-term option trader.  I hate the volatile fluctuations.

  71. redlog

     PCLN: FYI
    If anyone wants to sell some Mar 550 calls for $2.00 buyers are standing by.

  72. JRW III

    If you are short the Russell, watch for a possible bounce at 80.39 or 80.19; if not TZA should be good for the day !!

    On the other hand the dollar just fell 20 cents in 2 minutes !! (So the PPT is at work)

    0209-peach

  73. raj_c

     Since it’s Wednesday are there any good plays with weeklys?  Maybe NFLX selling the $220 weekly (Delta -.4) and buying the Feb $220 P (delta -.44) for a $2.70 debit?

  74. shadowfax

    exec
    Notice we bounced off the 80.42 level 12:04 a large lower wick down but the body didn’t fill. 2 of them especially with full body would maybe signal a bottom. Half this group believe technicals are BS. Now the reverse happened and to me that means 12:04 wasn’t the low for today, I am not trading this but the levels posted could have made some bucks. Thanks to JRW checking in yesterday I have refinetuned and it is satisfying to see it work out.

  75. revtodd64

     JRW / Monkey Steals the Peach – ROFL!

  76. Phil

    Oil down to $87 – Very nice!  

    TOS/Judy – Both my screens are fine. 

    Long way to get there JRW – Nice Chart! 

    Apple’s(AAPL) New iPad in ProductionApple Inc. has started manufacturing a new version of its iPad tablet computer with a built-in camera and faster processor, said people familiar with the matter. The new iPad will be thinner and lighter than the first model, these people said. It will have at least one camera on the front of the device for features like video-conferencing, but the resolution of the display will be similar to the first iPad, these people said. It will also have more memory and a more powerful graphics processor, they said. The new iPad will initially be available through Verizon Wireless and AT&T Inc., but not Sprint Nextel Corp. or T-Mobile USA in the U.S., according to some of the people familiar with the matter.

    Apple(AAPL) Could Release TV Next YearApple TV is just the beginning. Having revolutionized the way people buy and carry around their tunes, Apple could be setting its sights on the flat-panel TV market, according to a recent report from investment firm Piper Jaffray. As the push towards Internet-ready TVs moves forward, it’s believed that the house that Steve Jobs built has invested $3.9 billion in long-term deals with manufacturing facilities and supply sources for LCD displays, suggesting that Apple will release a HDTV by the end of next year.

    Fed Hawks Wary of Bond Buying. The Federal Reserve’s inflation hawks stirred Tuesday, signaling caution about the central bank’s program to purchase hundreds of billions of dollars of U.S. Treasury bonds as inflation worries again affected bond markets. The Fed still seems likely to complete its plan to purchase $600 billion of government debt by June. It has shown little inclination to even entertain tightening monetary policy by raising interest rates, especially with unemployment still high and domestic inflation below its 2% objective. But the market movements, and the fresh hints of caution from some officials, could signal a changing landscape for the Fed on interest rates in the months ahead.

    ABC Consumer Comfort Index Plunges to Year Lows on Surging Gas Prices. (graph) "With gas now at record high for a February in Energy Department data back to 1990, the weekly Consumer Comfort Index dropped by an unusually steep 5 points to -46 on its scale of -100 to +100."

    "There’s Some Crap Getting Done": BlackRock(BLK) Scared We Are Going Back to "Ponzi Finance Excesses" of 2007. We have now officially gone full circle. Even as CMBS delinquencies are at all time highs, Wall Street’s scramble to generate yield on other people’s money (which will be completely lost once the liquidity tsunami ends) is back in 5th gear, as securitizations backed by commercial mortgages are flying off the shelves. It is so bad, that even S&P (!) is questioning the sanity of all those using LP capital to sign the dotted line in pursuit of a few quarters of yield. “There’s some crap getting done,” David Jacob, an executive managing director at credit-rating company S&P, said today during a panel discussion at the American Securitization Forum trade group’s annual meeting in Orlando, Florida.

    IMF Warns on Europe Debt SpilloverA possible global economic slowdown stemming from Europe’s sovereign debt problems could affect currency and stock markets and weigh heavily on Japan’s growth prospects, an International Monetary Fund official said on Wednesday. Euro zone countries are working on a "comprehensive" package of measures to try to resolve their year-long debt crisis, with the aim of completing a deal by the end of March. But a lack of consensus over details of the package means negotiations are progressing slowly. Increased sign of disagreement in Europe could damage confidence in Europe’s ability to prevent sovereign debt woes from spreading to other countries, potentially pushing up yields on government debt.

  77. shadowfax

    JRW
    I did find a 80.42 and  80.08 support, very close to your numbers but left it out 80.08 as too week. Thanks for the help, now for your lesson in GUTS!

  78. amatta

    Peter D, 
    Thanks again for taking a look at them. Yes I have tried to trim down my holdings to 12 long term buy-writes and 5-10 actively managed ones but it seems there is always one more that Phil comments on that I can’t pass up…But you are right, I can’t manage them well as it takes way too much time. Since I am looking to transfer over to TOS perhaps now is the time to close a lot of them and re-start with a manageable number.
    Regarding your comments about closing positons that are ahead, I have posed that question to Phil in the past (you mentioned the C 4/5 2.50 spread which is right on track 40% there with 11 months to go, and have held it for 8 months), the puts are now showing 80% profit, and you think I should close them. Phil has said that if the position is on track to leave it alone. While they are definitely taking a lot of margin the puts would really be a problem if C falls almost 50% between now and Jan 2012, which I think is highly unlikely, taking them out would cost roughly 7% of the overall profits… so not sure where you draw the line, leaving margin aside.  
    Thanks again!

  79. jabobeast

    JRW—that has been applied to every short since March 2009--myself included ;-(

  80. JRW III

    BEN’S PLAN !!

    SO BE CAREFUL !!

  81. dmci

     The fed stole my peaches more times than I can count

  82. amatta

    Phil, 
    I have the Call side from the calendar spread on AAPL from a few weeks back (short Feb 360 C’s, long Mar 365′s). They are profitable now, not by much. Would you continue to hold or any adjustment? (the 360 Callers are $400 profitable and the $365′s are $150 in the red). I closed the puts with a bit of profit as well.
    Thanks

  83. cnarbais

    PHIL
    PCLN.  I’m considering the Feb11  bear Put spreads:  450/440 for $2.50 (300% risk/return)  or 445/435 for $120 (733% R/rtn) instead of the 430P that you suggested earlier….is it ok with you?

  84. reza99

    Peaches – I am obtaining an extra (spare) pair or two preferably of the enduring kind: brass, glass or steel which would come in handy at the rate things are going; blush

  85. cnarbais

    PHIL
    Disregard the above I was looking at Feb week2

  86. amatta

    Phil, 
    Going back to yesterday’s questions about my short WYNN and CMG calls-- I am leery of going into earnings naked, so would rolling to a higher strike and selling some puts below be a good way to play the volatility contraction? I am currently down $6 on WYNN (short 6 122′s for $5.90) and $8 CMG (short 4 Feb 240′s for $8.50). 
    Thanks

  87. amatta

    JRW, are you saying we are going to the moon?

  88. Phil

    EDZ/$25KP, Rev – Never anything wrong with taking a profit like that.   As it was a pair trade and very much "on track" for March – I haven’t been inclined to kill it yet as it’s a nice, potential $3,700 gain so I’d have to be convinced Emerging Markets are stronger than I thought to pull the plug at $22.74 with a $23 target.  

    XLE/$25KP – Did anyone get the roll-up to the March $72 puts on Monday or it never triggered?  

    I see EGLE coming back, another $25KP play.  They held $4 nicely, now $4.19.  As a regular play on them, I like the sale of the Sept $4 puts for .40 along with buying the $3/4 bull call spread for .65 for net .25 on the $1 spread that’s 100% in the money.

    Dollar/JRW – I’m trowing mine into the fireplace to keep warm while Bernanke speaks!  Also, ouch on the monkey move…

    Weeklies/Raj – NFLX very dangerous (obviously) but, since they are popping again, you can sell the $225 calls for $1.70 and buy the Feb $230s for $2.50 for net .80 on the spread.  Probably prudent to stop out at $1.20 or add more longs in preparation for a 1.5x roll to a vertical.  

    C/Amatta – I said leave them alone unless you have something better to do with the margin!  

    Caution/JRW – Good charts and good point.  

    AAPL/Amatta – I still like it.  Keep in mind those Febs are all premium that expires next week, that’s $4 to improve on a $3.30 spread (over 100%).  Even if the March calls burn off half their premium by next week, as long as you are under $360, you will net out more than $3.50.  Over $360 is a reason to be concerned but not too much as the roll would be to March $375s.  You could get fancy and stop out 1/3 of the March calls at $7.50 (about now) and then set a stop on 1/3 the Febs at $4.75 (over $360) at which point you’d still have collected net $250 (vs net $3.30 now) and then you can decide how to deal with the remaining portion.  

    NFLX/Cnar – I’m not the biggest fan of negative risk/reward spreads and also, I like the puts because you can catch a spike down and get the hell out.  Much harder to do with a vertical. 

  89. matt1966

    My premise for the near term is that the rally isn’t quite done.  I think it’ll continue throughout this month just prior to the election in Ireland.  Then, the voters will finally tell the bondholders and their govt to pound sand.  They’ll try and default, the dollar will surge and the market will come tumbling back.  That is until Ben floats QE3.

  90. cnarbais

    PHIL
    Egle 25kp.  How many contracts for the September play?

  91. chuckerd

    Headline:  Global Warming supports further QE, Bernanke
     
    A spokesman for Global Warming stated this morning, "Snowmageddon was enacted in the United States to slow economic activity and therefore persecution of The Bernank for continuing with QE2.  Without continued market support from the Federal Reserve, Global Warming may lose critical trickle down funding and allowing weather patterns to be created by other entities than Global Warming.  If the entire financial system were to collapse, weather may cease to exist completely."

  92. humvee4me

    cnarbais:  i think Phil called the Sept play  "regular"  not a 25KP fwiw

  93. cnarbais

    humvee4me
    thank you

  94. JRW III

    IWM support now 80.47, resistance 80.96 then 81.28; I had almost forgotten how much fun this is   8-)

    For matt from Jesse…………..

    What if the US gave a bubble, and nobody came?

     

  95. JRW III

    amatta / the moon

    No, I’m saying that’s Ben’s plan !! And here we go !!

  96. williex

    Phil
    I am a little confused on your EGLE statement:
     

    I see EGLE coming back, another $25KP play.  They held $4 nicely, now $4.19.  As a regular play on them, I like the sale of the Sept $4 puts for .40 along with buying the $3/4 bull call spread for .65 for net .25 on the $1 spread that’s 100% in the money.
     
    I bought EGLE puts.  I read this as if the trade was a short put trade? 

  97. bobhu

    humvee4me/cnarbais/EGLE,
     
    "I see EGLE coming back, another $25KP play.  They held $4 nicely, now $4.19.  As a regular play on them, I like the sale of the Sept $4 puts for .40 along with buying the $3/4 bull call spread for .65 for net .25 on the $1 spread that’s 100% in the money."
     
    It’s a $25K play.

  98. humvee4me

    williex: the play for egle calls:  see the spreadsheet when in doubt:
    http://www.editgrid.com/user/pharmboy123/25K_Portfolio

  99. bobhu

    williex/EGLE, the first EGLE $25K play was BUY Mar $4.00 call for $0.50.  I took loss on that one. 

  100. humvee4me

    bobhu, I disagree:  he was discussing another 25K above and he’s merely referring to the current egle position as another 25K play.  The 25KP is aggressive and short term, a sept position wouldn’t fit it with that premise,   imho
    perhaps Phil can clarify.

  101. cnarbais

    bobhu
    EGLE:  Im still holding the March 4 calls in my 25kp.

  102. bobhu

    humvee4mw/EGLE, read it again… I think your are correct.  I did that trade anyway…  Thx.

  103. williex

    Bob
    You’re right I typed wrong I am long 10 calls for .50

  104. reza99

    Phil:
    Weeklies – To confirm the weekly play: NFLX bullish calendar call spread Feb11 225(sell)/Feb19 230 and $1.20 is for the spread value?
    Cheers!

  105. reza99

    Phil:
    Re Weekly – To clarify, the stop out value of $1.20 is for the spread. Right?

  106. JRW III

    matt,

    If your scenario is correct, it might look like this !!   (Click to enlarge)

  107. Pharmboy

    Phil – the roll for XLE never triggered.  Best was 41c that I saw.  I have had the order in for a while.

  108. lvmoda

     Phil –  I’m thinking of putting a loose strangle on NFLX:    Short Jan12 300C/Jan12 150P for 25.5 points, giving it 75 pts (30 %) to wiggle each way.  What do think of the timing and the amount of wiggle room?  

  109. dflam

    Hi Phil :
    welcome back. Last May, I bought GE  at $16.49 and sold $17.50 P & C. I sold off the P for $1.31 profit and my basis in the stock is now $15.18,but the C have gone from $1.52 to $4.20. Although a profiable  position, it’s silly to hold for another year for the remaining 4% potential gain. I’m thinking of selling thestock and buying 2012 $15 leaps for $6.35 to create a BCS with the $17.50 CI sold previously and also selling 2012  $17.50 P for $.89 . I would would then be in the position of $1.39 potential profit on the $2.50 spread if GE stays above $17.50. What do you think? Thanks

  110. samz3700

    Are there any Financial Planners on the board?

    i am looking for some career advice (not a job). If anyone would be willing to speak via phone for 15 minutes, it would be greatly appreciated.

    Thank you,

    Sam

  111. shadowfax

    JRW What fun!
    I think my differences are my vision problem I get 81.30 80.97 80.46 betewwn 1 and 2 100th of a point from yours, but I have another at 80.79, because Phil thinks crossing SMAs are tipping points and you know he is often correct.

  112. hanna5

    lvmoda! NFLX! Im not such a big fan of that….NFLX was $50 14 months ago….and cramer is projecting $400. I feel like its one of the few stocks that could blow out either end of that 30% range…thats why the premiums are sooooo attractive. Scary.

  113. amatta

    Phil, what is your sentiment reading after the hearings? I am trying to rebalance my portfolio as I have been dragging along all these shorts that are killing me… Most pressing one I guess is the Feb SQQQ 26 c’s (rolled from the 24′s a week or so ago) are now down to .50 (Net $2.50 with the roll). 

  114. 1020

    JRW – Nice to see you back…..

  115. 1020

    Some interesting comments from across the pond (England) on Slope Of Hope:
     
     
    Isn’t shattered confidence from bears and falling conviction from bulls at these levels adequately reflected in collapsing volumes? Markets desperately need a corrective phase to restore good health and confidence. Most Long only value managers are being very tentative up here; long / shorts are ready with their fingers on the trigger. We’ve seen a general exit from crowded trades of late eg into DM v EM, it’s only a matter of time before DM equities themselves tilt. 
     
    Moreover, there is little resilience in the system for "events", be they geopolitical, market or financially driven. In stretching equity prices beyond credibility QE2 has removed any underlying valuation support in moments of stress. With food inflation ripping, it’s only a matter of time. 
     
    My view then, is that late Dec / Jan has taken us from correction territory to crash territory. One glance at what those tech genius’s in California are up to tells you that the bubble is back and set to burst; those guys, who probably haven’t seen daylight since Nintendo was invented, should stick to their soldering irons and be banned from making deals.  
     
    Finally, if I were a cynic; I would suggest that very soon the investment banks themselves will want this market down dramatically to produce a flood of volume because I can assure you, they’re not making any money out of secondary commission at the moment and they have a lot of mouths to feed with spending habits that the rest of us can only aspire to.

  116. JRW III

    This range won’t last forever, and the expectation for any trading range is for a breakout to produce a sustained trend move – though you cannot predict in which direction price will break.

    The Range Expansion and Contraction Principle of price teaches us to expect a range expansion move next and the boundaries are drawn:

    Long above $111.50 (actually $112.00) which would break above the “Bear Market” 50% Fibonacci Resistance at 1,121 (S&P 500 index) or

    Short under $109.00 for a play down to $105.00 at least if not to prior support levels.

    Until then, you can stand aside or consider taking advantage of the repeating patterns in the recent trading range.

    Shadow / 80.79

    I’ve got that at 80.81 FWIW !!

  117. matt1966

    jrw, cool!  It might.. but in my scenario it happens sooner then your graph depicts.  And you just know they will pull the trigger before any technician can predict it.  I’m thinking by month’s end..  of course, it will probably be preceded by the mother of all squeezes so when that time comes.. if we are able to see the forest from the trees should be easy to pick up on.  The question is.. just how much pain will I be suffering from at the time to prevent me from seeing the forest?

  118. lvmoda

     Hanna,  yes I hear you.    Haven’t made the trade yet.   I’m going to look at what the earnings and PE need to be to support a year-end price of 300 against current predictions, since that is already built into the price.   The downside is much more difficult since it’s not at all clear how much and how quick the PE will collapse when/if they miss expectations.   Intuitively, I think volatility is reaching a peak and would like to lock in the short call side.   I’m also expecting AMZN and/or others to announce competing service later this year and would likely use that event to close the call side.    The risk is there, yes, and this may not be the moment to pull the trigger but if the stock looks to peak  I want to be ready.

  119. JRW III

    1020

    Nice to hear from you; are you in England ?

  120. shadowfax

    80.79/80.81
    Either number big gap and now I see the BOTS selling on volume!

  121. shadowfax

    matt
    To trade TNA TZA the watch is IWM. What is it for FAS FAZ? Thanks

  122. Pharmboy

    ABT – FYI, they are not my favorite as their drug pipeline is weak.  The biodegradable stint is a big one, and could be a huge driver, but the margins are not nearly as rewarding as drugs.  Much like FRX, PFE, BMY etc. their pipelines need to PRODUCE!  ABT was one company picked by analysts this year to be a favorite.  I tend to pick over their data, and I don’t see ABTs growth…again, what do I know or what do I not have access to.  Patent cliffs are looming all over the industry, and that is why I have preferred MRK, GSK, AZN (some) and NVS.  MRK’s pipeline is still richer than most, and the latest data was a setback, but why did they buy SGP…..pipeline!  PFEs WYE buy was bogus to me, as my writeup explained.  Generic co’s  are good as well, but if people are not going to take their meds (eg.,TEVA), then there will be an industry problem.  Biotechs are my preference, and yes they are mainly binary events, but at least the stock moves and the science can be found, as biotechs publish their data for all to see……big pharma does so WAY after the fact.  Ok, done.

     

    As for TLT, to Peter’s comments, I will go long TLT when it rebreaks the 5d MA.

  123. 1020

    JRW – No, trading on a sunny day in Carlsbad. :)   Will be traveling in Europe June and July.  Can’t wait!….

  124. Pharmboy

    JRW – the SPY graph is from December….just for example sake I assume?  The way I am seeing it is the different gap fills, and until there is a lower low, these gaps will continue to get filled until that wedge U used above is not longer sustainable.  Then it breaks up and starts over or goes down ditty down down….

  125. yodi

    Hi Phil, Any prediction on CMG after tomorrow?

  126. jromeha

    How did oil not fall further!!?!!? I hate this market…..

  127. rustle123

     Cramer is acting shocked that people he knew were guilty of insider trading.  How could they???  He can’t believe it?  Phil, you should get that link up on how Cramer instructed people how he used to manipulate stocks.  When are they going to lock up that nut.

  128. shadowfax

    rustle123
    Please just give the links to the justice department, you really can do it!

  129. rustle123

     @shadowfax
    After seeing the UBS whistleblower in jail, I think I’ll hold off on that.

  130. shadowfax

    rustle123
    Didn’t he also break the law? Plea deal?

  131. matt1966

    shadow, TNA is 3X IWM as FAS is 3X XLF.
     
    Looks like stick bait to me..

  132. Phil

    WYNN, CMG/Amatta – That’s just what I was talking about earlier.  If you can’t afford to lose the money you bet on volatile positions like that then shut them down!  These are the positions that are not strong enough to keep in your portfolio.  I know I answered this already as I explained that there is no volatility contraction on naked shorts – just lucky or not in your choice of direction.  

    Dollar bottomed out at 77.58 with less than 1/3 of the 10-year note sale going to real people (direct bidders) and, presumably, the rest (71.3%) being the Fed:

    The Treasury sells $24B in 10-year notes at 3.665% (.pdf). Bid-to-cover ratio of 3.23, vs. a recent 2.87; indirect bidders take 71.3%, vs. a recent 44.4%. Direct bidders take 0.5%, vs. a recent 16.6%.

    Cool S&P chart from Jessee, thank JRW. 

    EGLE/Willie – Yes, selling the puts is a short put trade.  Then there’s that thing with "buying the $3/4 bull call spread" – that’s not a short put, you know…  And no, it is not a $25KP play.  ", another $25KP play." was a descriptive adjective describing EGLE whereas, two sentences later, the fact that I preface the statement with "As a regular play on them," would indicate we are no longer on the topic of the $25KP, which was only mentioned incidentally in the context of following two other comments on trades that WERE from the $25KP.  I promise to write more slowly in the future…

    Good job using logic Humvee!  

    NFLX/Reza – The trade was "sell the $225 calls for $1.70 and buy the Feb $230s for $2.50 for net .80 on the spread."  That would mean you are SELLING the weekly $225 calls for $1.70 and BUYING the Feb $230 calls for $2.50 and .80 is the spread value – hence the use of the term "net .80," which happens, not at all coincidentally, to be the difference between $2.50 and $1.70.  So, when I then say that it would be "prudent to stop out at $1.20…" that would again be the net of the two positions, making .40 the intended risk on the trade. 

    XLE/Pharm – That’s ridiculous.  I think that’s because we (as a block) have too many offers to buy and sell as that spread should not have been supportable on a $2.50 move up with a .14 spread in the deltas.  That is a very clear case of the MM ripping us off and will have to teach us not to call for a roll so far in advance. 

    NFLX/LV – I like it because I don’t think they are in any way worth $300 but it’s a long way out and you may get stuck with them below $150 so just make sure you REALLY want to be a long-term holder of this naked Emperor AFTER some little boy points out they have no clothes.  

    GE/DFlam – I’d buy the 2013 $20 calls for $3.15 and put a stop on the stock at $21.  If they keep going higher, you can roll the calls to 2x the 2012 $20s (now $2.40) and you are still well protected with much better leverage.  If you want to get out at any time, you can flip the stock to the 2013 $15s (now $6.55 with .50 premium) and you’d still have loads of time to roll the callers with $12 off the table out of $16.88 you could liquidate now and you’d still have the 2013 $15s ($6.50) and $20s ($2.40), fully covered by the 2012 $20s ($2.40) with a year to roll ‘em.  

    Sentiment/Amatta – Certainly they didn’t help the dollar and that soft-ball hearing with no Ron Paul, isn’t going to scare anyone off expecting the Fed to bail out everything.  Thus the relative market weakness in the face of a very weak dollar today is, in itself, interesting but, of course, we could just say the S&P was naturally rejected at 1,332 and it’s all about the follow-through now.  I’ve been looking over the $25KP and very indecisive, which manes I don’t think I’ll do anything until tomorrow.  Volume is super-low for the second day – as if something big is about to happen..

    Across the pond/1020 – That’s what I’m thinking too. 

    SPY/JRW – I don’t get it, we’re at $132 now…

    Nice touch on oil at $86.50!  Closed at $86.25 – was worth the wait for inventory day!  

    TLT/Pharm – I will go long TLT when Bernanke retires.  

  133. amatta

    Here comes the gdamn stick save 

  134. roma_

    Phil, what do you think about spread UGA/USO?  I bought 38 mar C USO and sold 42 mar C UGA

  135. matt1966

    GO BUCK GO!

  136. Phil

    CMG/Yodi – I thought we were playing them short on food cost issues?  

    Oil/Jrom – They were able to ditch 40M barrels today!  March count down to 293M so a "good" day for the NYMEX crooks as they sold into the inventory.  Only 177M in April, 132M in May and 112M in June, which is summer driving season when they look forward to rising demand so figure they have to ditch 260Mb in 7 or 8 more sessions is back to just over 30M a day we’ll need to watch them closely.  Super-weak dollar is a big help today too. 

    Gold back at $1,383 but copper hit $4.49 today, now $4.511.   Silver testing that $30 line and makes a nice short below it on the futures (/SI) with tight stops above.   

    Cramer/Rustle – Yes, good idea! 

    Damn, getting that 3pm stick – let’s see what they can make out if it before sellers take advantage….

    SPY Weekly $131 calls are $1.23, not a bad way to play the stick with a stop at $1.20

  137. matt1966

    Phil, I haven’t been watching.  Why wasn’t Ron Paul at the hearing today??

  138. roma_

    And
    Phil, what do you think about 15 $ spread between brent and wti?

  139. exec

    Hi All,
     
    Was listening to Bloomberg this afternoon and they had a analyst speculating that there would be no POMO 3.
     
    Matt,
     
    Good call on the stick.  Please explain your 3X logic.

  140. ajaytoo

    Phil / nflx. I think you misunderstood or maybe I misunderstood you. Currently have naked nflx Feb 200 short call. Wed week before exp is usually when we adjust. Thanks.

  141. reza99

    Phil
    Thanks  – Wow! -Such  great explanation a 6 yr old. would also understand not at all coincidentally that is!
    Since I caught you in such a good mood coincidentally that is . . .  rather than pestering you, I let you update us on your market reaction and what to do about those pesky DIA Ps.
    Cheerio!

  142. Phil

    UGA/Roma – Should be a good trade into summer driving but I thought you meant the other way, buying UGA and hedging with short USO.  I wouldn’t go long on oil (at all) and short on gas right now.  

    Ron Paul/Matt – This was the scam today.  Ron Paul did indeed chair the first meeting of the Subcommittee on Domestic Monetary Policy & Technology in the Financial Services Committee and Bernanke was "too busy" at the House Budget Committee meeting to walk two buildings over and talk to Ron Paul.  So basically, they took the crazy Uncle and put him in charge of something important sounding and locked him down in the basement so he wouldn’t bother the guests at dining-room table!  

    From Business Insider:  

     

    At 10am today, Ron Paul will convene a sub-committee hearing with the topic “Can Monetary Policy Really Create Jobs?“.  It really is too bad that Ben Bernanke will not be at this hearing.  But if he was, we have a feeling the hearing would be like a scene right out of “The Godfather II” with Bernanke playing the part of Frankie Pentangeli.  In fact, we just happen to have a transcript of how that hearing would have sounded:
    CHAIRMAN:
    State your name, please.
    BERNANKE:
    Ben Bernanke
    CHAIRMAN
    And where were you born?
    BERNANKE:
    Augusta, Georgia
     CHAIRMAN:
    And where do you live now?
     BERNANKE:
    I live — uh — in Capitol Hill with the Fed guys.
     CHAIRMAN:
    We have here finally a witness that will further testify to the fact that the Federal Reserve has been manipulating the currency of the United States.  This witness will confirm that the Federal Reserve, for the past two years, has been operating a Ponzi Scheme known as Quantitative Easing or QE.  This QE has effectively stolen billions of dollars from the savers of this country and transferred that money to the big banks. Only the Federal Reserve can inflate the currency, creating new money and credit out of thin air, in secrecy, without oversight or supervision.  Inflation facilitates deficits, needless wars and excessive welfare spending.
     CHAIRMAN:
    Mr. Bernanke — Mr. Bernanke  Are you the boss of the Board of Governors of the Federal Reserve? 
     BERNANKE:
    Yes
     CHAIRMAN:
    There is something fishy about the head of the world’s most powerful government bureaucracy, one that is involved in a full-time counterfeiting operation to sustain monopolistic financial cartels, and the world’s most powerful central planner, who sets the price of money worldwide, proclaiming the glories of capitalism.
     Has the Fed been actively engaged in so called “quantitative easing”  which essentially means you are just “printing” money?
     BERNANKE:
    I-I-I never know no money printing.  I’m just an academic, Mr. Chairman.
     CHAIRMAN:
    Mr. Bernanke you are contradicting a sworn statement that you previously made to “60 Minutes” and signed. I ask you again sir — you are now under oath – are you engaged in money printing?
     BERNANKE:
    I don’t know nothin’ about that.. Oh — I was a professor at Princeton but that was a long time ago that’s all.
     CHAIRMAN:
    We have a sworn affidavit — we have it — your sworn affidavit that you printed money because you couldn’t lower interest rates any further.  Do you deny that confession, and do you realize what will happen as a result of your denial?
     BERNANKE:
    Look the bankers promised me a deal. So I made up a lot of stuff about the money printing ’cause that’s what they wanted — but it was all lies — uh — everything. And I kept saying  the Federal Reserve did this and the Federal Reserve did that — .uh — so I said yea sure, why not.
     SENATOR #2:
    Mr. Corleone would you kindly identify for the committee the gentleman sitting to your left.
     TOM:
    I can answer that. His name is Timothy Geithner
     SENATOR #2:
    Is he related to the witness?
     TOM:
    I believe he is was the President of the NY Federal Reserve when the financial crisis hit in 2008.
     SENATOR #2:
    Will he come forward and be sworn sir?
     TOM:
    Senator, this man does not understand economics.  He has been a lifelong bureaucrat. He came here at his own expense to aid his partner in his time of trouble. He’s not under subpoena.  And due to his past tax cheating problems, he is afraid of incriminating himself if he speaks.
     SENATOR:
    Are you saying that he knows nothing about these matters?
     TOM:
    To my knowledge, nothing.  This man is clueless on the workings of an economy.  All he knows how to do is to orchestrate large government bailouts for his banker friends. His only strategy now is to just hope things get better.
     CHAIRMAN:
    I’m gonna find out what the hell happened here! Alright this committee is now adjourned. The witness is now excused.
     TOM:
    SENATOR! SENATOR! This committee owes an apology, this committee owes an apology — an apology SENATOR!


  143. rdn4evr

    Phil, re the Treasury auction, Tom Graff over at Real Money claims that Indirect Bidders were mostly foreigners, calling it a "foreign buyer blow out" and that         " As far as I can tell, that is the highest percentage purchased ever. (Or at least, since they have been keeping stats in 2003). That group put bids in for 101.7% of the auction."
    If correct, wouldn’t this be supportive that "something big" was about to happen?  TLT spiked over a dollar initially.

  144. amatta

    Phil, I am sorry to keep on with these (CMG, WYNN), but back when NFLX reported I was short the 170 puts (leftover from a bull put vertical in which I sold the higher puts as NFLX went the wrong way). In that case I asked the same question and you recommended that I sell the June 205 calls, which I hold now (I since bought back the short puts for close to nothing and I am hoping that NFLX goes down or at least doesn’t go higher than 220 where I would break-even on the overall trade).
    So I was hoping for some advise such as that… was thinking of rolling the CMG to 1x Mar 280′s for $5.60 and Selling the 1 x Mar 220 P’s for $6.
    WYNN I might just hold my breath and hope they dissapoint as LVS did (and was your general feeling that they would do the same)
    Thanks for any input. 

  145. shadowfax

    Thanks matt!
    Will track that and see if something clicks.

  146. JRW III

    1020 / June

    I will probably be in California for the summer; but if I’m here, look me up !!

     

    Pharm / chart

    Yes, just move the lines a bit, same principle and advice !!

    But I like your chart better  8-)

  147. jromeha

    lol, oil now up 30 cents over its closing price, what a joke. Im short and will double down if it goes up tomorrow. Hoping for 84 or less sometime within the next week….

  148. tuscadog

    Phil / Ben    Don’t forget he’s very smart.  What he really said was "You ignorant plebs, stop wasting my time.  I know what’s best for you.  Since you idiots have no intention of fixing the unemployment and deficit problems with trade and fiscal initiatives, I’ve got no choice to print money indefinately to fund your stupid deficits and side step another Depression.  And, anyway you fools will all be long out of office before we ever get back to 6% unemployment (my tightening trigger) with the boneheaded legislation you porkbarrel twits are passing.  Climate change is the blame for inflation and the riots, so f..k the worlds starving peasants, I’ve got enough to worry about trying to keep my parent banks solvent.  A pox on your House!"
    So, the Bernanke put is now moving towards QE3, market remains underpinned.  Don’t understand why gold is down today? Dollar slide continues. Pomo supported 10 year today, but TBT looks pretty safe based on the arrogance (or is it fear) of the Bernanke.  Accelerating global inflation guaranteed.

  149. roma_

    Phil,
    uga/uso spread never was as big as 7 $

  150. matt1966

    So let me get this straight-  Bernanke says we need to print money now but definately worry about the defecit later.  In ohter words, at the moment, it’s more important to print money then control the defecit.  BUT, he chose to attend the meeting in the House that deals with the budget, ie. defecit, over a meeting in the House with the committee that oversees money printing?  How is this stuff allowed?  Oh yeah, because the entire system is broken!

  151. matt1966

    ….you’d think I’d know how to spell deficit by now.  Geeze.

  152. yodi

    Phil, CMG I know we got them short P & C but will they drop after tomorrow’s earnings report They gone up nicely today in the excitement will the drop after the news?

  153. kustomz

    JRW …do you follow Cory?

     

  154. matt1966

    Checks and Balances:
    Legislative Branch:  Bought and paid for.
     
    Executive Branch:  Bought and paid for.
     
    Judicial Branch:  Are the ones that allow the buying and the paying for!
     
    The way I see it:   Broken, Broken, Broken!!!!!!!!!!!!!!!!!!!!!!!!!  There are no checks and balances anymore.  All there is, is a power struggle between the branches to see who can reward their constituents the most.  The concept of greater good has been completely lost in our government.

  155. Pharmboy

    Phil – those bid to covers are moving in the direction of a bond buying spree.  High yield funds are getting bought like crazy (mine are up big time over the past month).  TLT should be fine for a net long position (4-6 mo is long in my terms now).  Just my thoughts.  Long, long term, sure, TLT will suffer but for now, the bond boys are pricing in the ‘inflation’ problems, but if the EU or Asia for that matter has a hiccup….then TLT will be a GOOD by.

  156. shadowfax

    mat1966 greater good!
    It is for the few, foget the rest, this is the 21st century!

  157. 1020

    JRW/June  Thanks!

  158. Phil

    Now CNBC is going to run a little show warning people how screwed they can get if the become whistle-blowers.  

    Brent/Roma – Another factor of a weak dollar.  We don’t buy Brent and Europeans don’t buy WTI.  If anything, it’s an indication of how the US consumers are now in worse shape then EU ones and that makes sense as our safety net is failing faster. 

    POMO 3/Exec – People will be outraged but what are they going to do to stop it? 

    NFLX/Ajay – The $200 calls are $22.25 I would roll them up to 2x the $220s at $6.30 as they are almost all premium and those can be rolled to 1x the March $220s ($12.50) or June $240s ($16) but first, going for max premium burn is the smart move.  If they head over $225, then you can sell the $230 puts short to stop the bleeding.  

    DIA/$25KP, Reza – No conclusive direction so, lacking better information, I will defer my decision for another day.  We are in at .90 avg on 9 and they are now .30 so down $480 is no reason to make rash decisions based on arbitrary deadlines with insufficient information.  I would rather lose the last $240 than spend a fresh $800 rolling to another losing position, wouldn’t you?  

    Highest pecentage ever/Rdn – Yes but foreign buyers include IBanks like BCS and CS and DB who have access to POMO as well and why on earth would we celebrate 70% of the auction increasing our total foreign debt load?  Possibly it’s good old China and Japan, propping us up secretly the way they have been propping up the EU publicly for the last month.  

    CMG/Amatta – Don’t you think you should wait for earnings before rolling so you are not just wildly guessing and making moves blind?  Other people have guessed earnings up and run them up $30 in the past 6 sessions.  You didn’t stop out or roll then so why do so now when they seem to be topping finally?  Selling puts now could be a disaster if they get a big sell-off and it looks like you are now rolling, or wanting to roll out of fear, which indicates you have no idea what CMG will do and no ability to make a calm, rational decision if they do pop up on you.

    • On 2/8 I said:  CMG/Amatta – You are not playing the "volatility crush" with a naked short – you are betting on poor earnings.  Playing volatility crushes is taking advantage of the high-premium, front-month options and using them to hedge longer positions in the same direction.  So you are betting CMG to miss earnings pure and simple ($240 short calls, I hope!) and the same with WYNN.  The only play here is what you do AFTER earnings if you are wrong but if  you are not willing to risk a big upside move and roll with it long-term  - now would be the time to get out. 
    • On 2/4 I said:  CMG/Amatta – I’d make them "show you the money" before bailing.  Rice is so expensive they are selling fake plastic rice in China – I don’t see how CMG can possibly not be suffering from input costs and, even if it didn’t hit them last Q – they have to mention it in guidance.  Of course they used to be MCD so maybe they hedged it out but now a diff company and they can’t have as good a hedging operation as MCD.  
    • On 12/29 I said:  CMG/Amatta – LOL, I would think you would be glad to be done with them.  See I like to short stocks when they are ridiculously overpriced, not when they are just overpriced.  I was gung-ho shorting CMG from $240 up because it was a solid 33% over the $180 line I thought it should have topped out at and I was willing to discuss shorting and rolling for as long as it took at that point.  Now we’re down at $222 and I’d rather see them make another run to $240 first.  Also, the VIX is lower now so short selling calls isn’t as much fun and I don’t like buying puts at the best of times BUT if you want to go short.  I’d sell the 2012 $260 calls for $23 and take the Feb $220/200 bear put spread for $7 and if you make $3 then nice and you can do it again or if you get popped, you can roll to a longer, higher put and sell more, working your way into a a strong short position over time.  I will tell you in advance though, you need conviction to play this!
    • On 12/6 I said:  CMG/Amatta – It’s just that same script they keep using to pump up the markets when they are trying to break higher.  The waves come and the waves go – just keep an eye on the shoreline to see if they are advancing or receding.  
    • On 11/26 I said:  CMG/Amatta – You need to pick a roll you can live with.  You need to track the net cost of the roll.  You need to have a tolerance for a price at which you no longer want to pay more for the roll and you have to execute the roll at that price.  As I just said to DClark above – there are no "rules" here other than try to roll while there is still 1/4-1/3 premium left or you’ll end up buried too deep to get out.  Meanwhile – the main point is you MUST, MUST, MUST have an actual investing premise going forward and you must have a trading plan you intend to follow through – not one that changes every time a stock moves 5% ($12.50 on a $250 stock), which is something stocks can do often on their way to completing major 20% moves.  
    • On 11/26 I said:  CMG/Amatta – What is everyone’s fascination with this one?  Anyway, yes, they are mostly premium so you let it wear out (hopefully) and you can see that the $250s can be rolled to the March $290s ($10) and as you have $7 premium in the Dec calls, it’s very reasonable to assume that should at least become an even roll.  The March $280s are $13.30 so your "risk" is that you let the $290s get away from you but then you make damned sure you make that $280 roll before it costs you money.  So there’s a plan and a back-up plan and you can add to that the idea that if you have to do that roll, then you could sell a March $180 put for about $3 (now $3.80) as you can see $3 makes more than a $10 difference in your next roll. 

    Pehaps you can understand my frustration on this one with you???  STOP PLAYING WITH VOLATILE MOMENTUM STOCKS!!!  PLEASE!!!!

    TM making new all-time highs on news of fresh recalls and earnings disappointments.  Uncle Ben does not discriminate – he pumps money into any company that does business in the US.  BWLD has gone wild too at $53.50!  UTX at $84 – I remember trying to explain to people why I thought they would survive at $40. 

    SPY calls good for a dime – not meant for an overnight trade. 

  159. jromeha

    Matt- what blows my mind is him commenting positively on the unemployment rate falling from 9.6% to 9%!? I can’t believe he could even say that with a straight face considering it wasn’t hiring but our BS way of tracking statistics which caused the drop.

  160. Manimal

    Nice SPY stick play, thanks Phil!

  161. exec

    Phil,
     
    I think you misread my post.  They were saying that there would not be POMO 3.

  162. shadowfax

    DOW up .06%
    The rest don’t count, why. wrong color!

  163. exec

    Nice last minute spike in IWM.  There’s no manipulation.

  164. oburlacu

    The DIA avergae is 1.21 not .90

  165. rainman

    Ahhh, who ruined the 6.66 on the dow? Fi

  166. achou

     So can we expect an up day tomorrow since the pomo pump returns to $6-8B?

  167. Pharmboy

    Come’on in AH trading…..Jack it UP! 

  168. rainman

    Wow! Look at WFMI go! Beat by 0.06 and raised guidance.

  169. Phil

     WTF!  The SPY $131 calls jumped to $1.50 in the last seconds.  Crazy considering we were exiting.  

    WOW and I mean WOWOWOWOW!  They popped the Dow green again.  WTF are they trying to prove other than the fact that the market is a total and complete scam?  50 points since 3pm with a HUGE stick in the last 15 minutes.  That is amazing. 

    Good summary Tusca but still much is based on a weak dollar 

    Meanwhile, the rich get riches as WFMI goes through the roof (reminds me I need to go shopping!). 

    CMG/Yodi – Not if they sold like WFMI!  

    Greater good/Matt – Depends on who you are trying to do the greater good for.  

    Bonds/Pharm – That’s true, money can still fly into TLT if Europe or Asia stumble and that will also strengthen the dollar and TLT is a poor man’s FOREX bet on the Dollar as well so there’s the case for them.  

    Statistics/Jrom – Are you kidding?  He also had the nerve to say that inflation was 1.2% last year.  It’s just sick!  

    No POMO 3/Exec – Well, same thing – who is going to stop him?  Certainly not the committee we just saw him testify in front of!  

    DIA/$25KP, Obur – MY mistake, I was looking at the .90 they were on Friday.  Either way, money lost is lost and it doesn’t make sense to go into a frenzy trying to "protect" the $240 that’s left.  If the Dow is going to go up every day no matter what – then we just need to say we made a mistake shorting it, be glad it was "just" $720 lost and walk away.  

  170. dflam

    Phil :I wasn’t clear on my intentions on GE. Your recommendationd is good, (took me 20 minutes to figger it all out),but I want  to take stock off the table and sell puts (lots of margin in this account) to buy it back if market goes down,so how about this:
    Sell stock,buy 2013 $15 C for $6.55,roll exisitng 2012 $17.50 C at $4.20 to 2013 $20 C at $3.20 and sell $ 2012 $17.50 P at $.91 for net of $2.44 on $5 spread with another roll of puts in 2013. If stock goes below $17.50,I’ll be happy to buy it back. Thanks again.  

  171. JRW III

    kustomz / Cory

    I do, one of many but we share the same philosophy !!

  172. 1020

    Dillon is on FIRE on MSNBC!

  173. 1020

    That’s DYLAN…

  174. 1020

    Loving those GOP cuts!  But First!  Let’s Start with Abortion.   Way to stay on point Boys!
     
    Where’s the jobs Mr. Boehner?

  175. 1020

    We are sooo screwed….. :(

  176. williex

    DIA / 25KP
    Would you close the position or hang wait to see if it falls further?

  177. 1020

    Sorry for my pessimism…. Just call me Mr. Sunshine….. :)

  178. jabobeast

    CSCO getting crushed AH! wow

  179. kustomz

    Look at WFMI, one of the benefactors from no one paying their mortgage.

  180. reza99

    DIA/$25KP – not if I were SURE that the new position would be a losing one.
    But, one never really knows, does he? OR Is that how capitualtion smells like?
    Now why/when would you stop out of a winning trade ($1.20)?

  181. stjeanluc

    Glad I covered my short CSCO put on Monday! We’ll be able to reload soon! 

  182. stjeanluc

    CSCO reaction after the last 3 earning report – average -10%… Need to take notes! 

  183. Pharmboy

    That’s 2 in a row for the bellweather of tech.  When they did that last time….remember what happened.

  184. amatta

    Phil, 
    I know it must be frustrating sometimes to be teaching this trade over a distance and informally… I apologize for that. 
    In any case, I think I have learned a bit during these few months, and one such thing is precisely what you said on the 11/26 comment:
    "there are no "rules" here other than try to roll while there is still 1/4-1/3 premium left or you’ll end up buried too deep to get out"
    Is what I am concerned about. Currently the position is about 40% premium, but tommorrow if the stock jumps 20-30 points the premium will be all gone and thus make the roll a lot more difficult. So I figured I’d better roll them higher and further out and sell enough in order to cover the losses. You also mentioned on the 2nd 11/26 commentary to sell some puts below to fund the roll. That is what I was thinking now, while also that if as you say it is not specifically the play to take advantage of the volatility crush, having short puts and calls will indeed help as both sides will lose value in response to this.
    I went ahead and rolled to 1.5x the March 280′s for $5.15 which would recover 85% of the losses if they fail to breach 280 in a month and a week’s time. I am tempted to sell the 220′s for another few bucks, but I will defer to your recommendation not to do so.
    Thanks and sorry again…   

  185. amatta

    StJeanluc,
    Wow they disappointed huh… I am sure the market will shrug it off tomorrow. Damn and that is one of the longs I do have!! The market is not treating me nicely these few days…

  186. shadowfax

    1020
    You must be young if you want abortion stopped, it was very ugly, and too many people are already having babies that can’t afford them. Abortion = cost cutting X any pos #.

  187. stjeanluc

    Pharm – That CSCO chart doesn’t look good! Since the beginning of 2010 they are making lower highs and lower lows! QQQQ is up 26% in 2010, CSCO down close to 20%… Not a good sign! 

  188. dsheara

    Hi. I am a completely new basic member just barely able to follow the comments. Based on the TLT talk I read here, I would like an opinion on an option position I took yesterday. I’m in call spread, long the Feb $94 and short the Feb $92 for net .08. My thinking was no spike past $92 before next Friday. I am now questioning that based on posted comments.  Thanks.

  189. shadowfax

    amatta
    2 cents worth, I think the market tanks tomorrow 60/40.

  190. Pharmboy

    StJ – the margin SQUEEZE is on!  They can only get so much out of manpower (hence the layoffs and decreasing pay), but those pesky little commodities are gonna eat into tech IF they use any commodity in their manufacturing!  Go Ben GO!

     

    Shadow – regardless of the abortion debate, not sure that’s what 1020 is saying……I think it has to do with what we should be focusing on as an economy.

  191. deano

     Wow – looks like I’ll own some CSCO. The good news – if the market doesn’t tank tomorrow, it looks like it isn’t going to and then we can get bullish.

  192. rj_jarboe

    CSCO
    It appears they are being penalized some for spending almost 1.5 billion on R&D. "Research and development costs climbed 19 percent in the quarter". Those of us that invest for the future see that as a good sign. We will see 5 years from now whether the better stock to buy tomorrow was Netflix or Cisco.

  193. 1020

    Shadow – Hey, I believe in a Woman’s right to choose, but that’s for another day. What I am saying, is that there are some on the right who will bring up any distraction, so that they won’t need to discuss what the public is most concerned about, Jobs and Spending.
     
    It’s like this: You say: I need a Job.  They say:  Abortion  You say: Spending  They say:  Abortion  You say: Obama  They say:  Muslim  You say:  Democracy for Egypt  They say:  What’s wrong with Mubarak?  You say: Potato  Some dumb azz says:  Potatoe……  :)

  194. 1020

    Pharm,  Thanks for having my back…. :)

  195. shadowfax

    1020 pharmboy
    We have a few very twisted people on this site that have no clue on real costs or real cuts. I did not take your comment as anti-woman rites. To me it’s a republicant cost cutting BS story. Babies cost a pile of money and most are born to can’t  afford but have to have one for a BS unable to provide reason. The religious right  that want to stop abortions are the problem, real  conservatives are not.

  196. zeroxzero

     No one should be surprised that Saudi Arabia might be overstating its reserves, as the topic has received lots of press for a number of years. According the the Oil Drum, which has posted extensively on the matter over the years, Saudi’s recent production is less than it was in the late ’70s – early ’80s.  http://www.theoildrum.com/node/7465#more
    A depreciating dollar, yen and euro, measured in oil and gold, has placed oil majors / drillers in investors cross-hairs as a store of value, tending to buy oil majors rather than rolling into the persistent contango.

  197. shadowfax

    zeroxzero
    Good point. The US has a similar problem which is simply stated distribution of wealth. It bugs me when I find out where the $100,000 to $5,000,000 cars and whatevers are going and they have 17% unemployment!

  198. 1020

    Just Out….Arizona outlaws Karma!!!  (seriously)  So much for my winter vacation…..  ;)

  199. shadowfax

    1020
    Arizona is a nice place to be FROM!

  200. 1020

     A song for Arizona…..http://www.youtube.com/watch?v=EqP3wT5lpa4

  201. 1020

    Check out Yoko knitting in the background….too cool…. :)

  202. shadowfax

    1020
    Yoko reminds me of my older sister, knitting, wanting to move to Arizona, karma, and same outcome. Sorry if I missunderstood your view.

  203. Phil

     They’re back!

  204. 1020

    Shadow – I have many views, which one?  ;)

  205. 1020

    "It makes me Hot"  LOL!!!  Nice Job Phil!   :)

  206. shadowfax

    Back our troops!
    Chase says Fu    them!

  207. shadowfax

    Phil
    Great ending video but the bankers, CHASE, have screwed our troops, tip of an ???????? Banksters rule today, hey, they know how to #%&*()@%&*$$$ us and the USA!

  208. 1020

    Moneypenny needs a boyfriend….. ;)

  209. shadowfax

    1020
    Moneypenny has a boyfriend named tradeabot 3000, typical boy/girl problems.

  210. Pharmboy

    Interesting take…..

  211. Pharmboy

    Link….

  212. 1020

    Moneypenny may have some other love interest – http://gawker.com/#!5755071/married-gop-congressman-sent-sexy-pictures-to-craigslist-babe  :)

  213. amatta

    Phil, 
    Hilarious! Very creative…I can’t wait to see the closing show every day now…That moneypenny is a hottie… 

  214. cnarbais

    DIA/25kp.   Feb 119.75 Puts
    I,m confuse. Should we close this position tomorrow at the open  or we wait for further instructions. 

  215. jromeha

    1020, I’m just surprised the congressman was caught in a NORMAL sex scandal…. I’m so used to Republican congressmen being implicated in sex scandals with younger boys…

  216. Kwan

    Funny stuff Phil.

  217. scottmi

    Gold – for the late night trolls and goldbugs: Why Technical Analysis Fails for Gold  ;-)

  218. calch

    Phil, what is the target pullback for XLE off of the $75 line?

  219. jromeha

    Covering my oil shorts, not feeling good about relatively small drop in oil after yesterday’s supply data and today’s soup du jour European troubles. If this is all we can get then i’m thinking oil they still have some shenanigans left to pull. Now it will probably drop like a rock since I covered! Lol. Oh wells, I’ll keep on hitting singles until the pitcher gives me one I can send into the stands….

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