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Turnaround Tuesday – Greece is Fixed (again)

Yay!  Another crisis averted

Well until next quarter, at least, when we can begin the "crisis" cycle all over again.  As it stands, after much hand wringing yesterday, Greece will get the $11Bn they need to fund their nation for another 3 months.  Yes, as I noted yesterday, this is not a typo – Greece needed $11Bn and the global markets gave up $1Tn in value because we weren’t sure if they were going to get it on Monday morning

To meet their budget goals in a declining economy, Greece is being pressure to cut 100,000 public jobs by 2015.  With just 11M people in Greece, cutting 100,000 jobs is like asking the US Government to cut 3M jobs – isn’t that insane?  And by insane, of course, I mean – isn’t that the Republican platform?  Yes, nothing say "economic recovery" like firing 3M people in this topsy-turvry World. 

We expected this, of course, and we got very bullish with our picks yesterday morning and were handsomely rewarded into the close and hope to be even more handsomely rewarded this morning as QE FEVER once again takes over the nation (see November’s "POMO Fever" article to review the scam).  

Interestingly, my main suggestion for playing QE2 last year was: "We can bet on inflation with our gold plays with potentials for 923%, 309%, 3,900%, 567%, 276% and 46%."  Gold was "only" $1,300 last November and I was still enthusiastic about it at the time.  Yesterday we shorted it with the GLD Nov $180/174 bear put spread at $3.30, selling $193 calls for $3 for a net .30 trade that bets gold won’t hold $2,000 through Thanksgiving.  

Also different this year is that we are betting against TLT (also in yesterday’s main post) and we got fabulous prices for our short play yesterday as TLT ran all the way up to our goal at $115.  As we got a nice sell-off at the open, my morning Alert to Members had trade ideas to go long on Oil Futures (/CL) off the $85 line (now $87, up $2,000 per contract) and we sold some DIA Oct $111 puts for $3.10 in the Income Portfolio, which are already down to $2.70 (up 13%) – simply following our rule of ALWAYS selling into the initial excitement.  

At 10:08 we got aggressive with a TNA Oct $41/45 bull call spread at $2, selling the $29 puts for $1.70 for a net .30 spread with 1,233% upside potential if TNA finishes over $45 in 30 days.  DIA 9/30 $115.75 calls were bought at $1.05 in the $25KP and those shot up to $1.35 (up 28% in a day) but we decided to be greedy and hold them overnight.  HOV got attractive again for a long-term play at $1.23, USO was the subject of a complex and very aggressive spread as they hit $33, AAPL caught our attention on the sell-off and we played them long-term bullish to $500 in 2013 and then we went for TNA again as it was still sexy at 12:14.  

We weren’t done being bullish at lunch as we found a FAS weekly $13/14 bull call spread for .40 with bullish offsets to make it a free trade that was good enough for the $25KP and we discussed which of our September’s Dozen were still playable into the Fed and our last play of the day was adding 10 BCS Oct $10 calls at .85 to our $25,000 Portfolio on the very simple logic that Greece was "fixed" and that should be good for Barclays.  See, investing isn’t that complicated – you just need to pay attention!  

We haven’t been this bullish since way back to last Monday, when we also got very aggressive into the sell-off but that was 500 points ago so yesterday was a bit riskier and based less on our chart range and more on the fundamentals – which I maintain are not as bad as we have been led to believe by the MSM, who are controlled by the Banksters who compete with us to bid for equities and want nothing more than to get you to walk away from the auction or, even better – to put your equities up for auction and increase the supply, lowering the price for those few of us who are buying.  

Turning a minor incident like Greek debt into a World-shaking economic crisis is BRILLIANT!  It’s as if a used car salesman convinces you that your lost cigarette lighter will force him to knock 30% off the Blue Book on your trade in.  You may think you would never fall for that but what do you think you are falling for when you sell your stocks at 30% off the top because Greece may or may not get a $11Bn loan in a $60,000Bn Global Economy (0.18%).  That’s right about the equivalent of losing the cigarette lighter in your car….

Above is the interlinked debt chart we are used to seeing in the media.  The media are controlled, of course, by Big Business and their Financiers and they are all buyers of other businesses.  Big Businesses want low borrowing rates to run their businesses and to wipe out their competition, who they ultimately crush or buy out at the lowest possible price.  They love a good crisis as they gain market share and get Government to dismantle regulations while labor costs are driven lower and lower as the jobs pool collapses.  Financials love it too because the get FREE MONEY from the Government (actually from we, the People in the form of never-ending debt) AND they get to collect massive fees from all the M&A work.  

So of course it is in the interest of the MSM to blow this crisis as out of proportion as possible.  Even now, at 8:20, on CNBC, Mark Grant and the Gloom and Doom crew are advising their retail sheeple to dump out of equities and buy bonds.  Before you do that, however, perhaps we should take a look at the same chart as adjusted by the ESCP Europe Business School in a study that simply cross-cancelled the debt obligations from Nation to Nation – to cut through some of the noise that is present in the standard debt views:  

Notice anything different?  64% of the debt is reduced through cross cancellation of interlinked debt, taking total debt from 40.47% of GDP to 14.58%.  Even Ireland’s debt is reduced from 130% of GDP to just 20% and Frances debt disappears entirely.  This is why France is Germany’s partner in STRENGTH in the EU.  Unlike the American media, who are quick to stereotype and denigrate the French, the people who actually understand the economics of the EU do see the French in a very good position.  This is why Americans don’t get the relationship between Sarkozy and Merkel – they are grossly misinformed as to what the underlying economics of the situation are.  

I don’t fault American investors, they have been trained from birth to accept whatever propaganda is broadcast to them through the little boxes they watch all day.  Orwell thought the government would have to pass laws to force people to put monitors in every room in the house that are kept on all day – telling people how to think.  The reality of America is that the people are so addicted to what was once properly known as the "idiot box" that they feel the need to have TV on their phones – that’s very sad…

Of course, the same way we can’t take the MSM for granted, we can’t just go by one study and decide there is no debt crisis.  As pointed out by Lisa Pollack in the Financial Times, "Even if one were to focus on sovereign debt, could the magic compression wand be waved in order to reduce the burden? There are many, many issues one could raise, so let’s just look at a few niggles" citing: Fungibility, Agreeability, Desireability and Opacity – all factors one has to consider before simply cancelling out one debt for another.  Still, somewhere between 100% and 36% lies the real debt levels and they quite simply ARE NOT AS BAD AS YOU THINK.  

Unfortunately, what you (Investors) think is what drives the markets and the worst thing a fundamental investor can do is get so confident in a conclusion that they are willing to bet against the stampeding mob because that mob will trample you long before you get to be proven right!  That’s why we continue to ratchet up our technical levels and every day we expect to see signs of strength or we will be happy to commit more of our sidelined cash to the bear side.  Our bearish covers yesterday were gold and TLT – for reasons I out lined in the morning post.  We also have many, many bear spreads that are neutrally covered by bullish offsets which hedge us for a small break below our -10% lines on the Big Chart.  

As I mentioned last week – we are not going to be "bullish" until we break over the rising green channels so, every day, our expectations are raised.  At the same time, we’re not going to be panicked out of positions by moves down that remain inside the channel UNLESS we make a low again without first making a new high.  This is a very dangerous spot because the Nasdaq may top out here and head down before the other indexes get a chance to complete their up cycle so what we NEED to see today and tomorrow is the Nasdaq breaking clearly over the green line and holding it – which would be sort of an invitation for the other indexes to come and join it.  

Weakness in the broader (and harder to manipulate) Russell and NYSE is a huge concern.  At the moment, we are playing the Russell bullish as a lagger and the the Nasdaq bearish as a leader.  We’re watching the Dollar on the 77.50 line and over is bearish and under is bullish – what can be simpler than that?  

It’s going to be a bumpy ride into tomorrow’s Fed announcement so let’s be careful out there.  

 


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  1. exec

    Phil
     
    You talk a lot about the 3am trade and infer that there is a pattern in which depending on how the 3am trade goes, give some indication of how the market will react that day.
     
    Would you mind explaining the trade and the impact on the market.

  2. lapper

    exec, it’s simple.  When ‘they’ want to jam the market higher they will drive the dollar and the futures in unison starting from around Europe opening.  Since ‘they’ rarely fail, there usually is continuation trade in the US markets.  In rare instances 3am trade is moved to 7-10am window, but that’s 1 out of 15-20 times.  On the contrary if there is no jam ‘gravity is a bitch’ trade is on and everything goes south for the whole day.  Basically the thing to do is to short ES and eur/usd on any stick or flattish close in NY, reverse on any signs of the $ jam, reduce positions on the second /dx level hit, and massage the rest out by NY close.  wash rinse and repeat.

  3. lapper

    oh, and, Exec, forget sleep btw :)   I live on 3 hrs per day :)

  4. Pharmboy

    Fixed again.  Seems it it every other day.  The market is still overvalued up here…and I think they are setting it up for a massive short…..PP for today:

    Have a good one.  Looks like it will be a range day until tomorrows EPIC announcement.

  5. stjeanluc

    Oil Lines:
    R3 – 89.84
    R2 – 88.66
    R1 – 87.26
    PP – 86.08
    S1 – 84.68
    S2 – 83.50
    S3 – 82.10
    Yesterday’s high and low – 87.48 / 84.90
    Breakout lines – 91.65 / 78.14 

  6. Pharmboy

    VIX (daily chart) bounced right off the MA I noted Friday (50d), and hit the 20d MA yesterday.  That is my premise for being range bound today.  Shorts are loading up on the SPY, as the ratio is 2.4, was 1.5 on Friday (cheeky bastards).

  7. exec

    Lapper,
     
    Just so I’m clear. 
     
    They drop the dollar which raises the futures at 3am.  Phil’s point is when they drop the dollar at 3am to goose the market, it typically carries through into our trading day.  On the other hand, if they don’t drop it, then we typically have a tough day ahead of us.
     
    Is that about the gist of it?

  8. lunar

    pharm, could you explain what you mean by ‘they are setting up for a massive short"  how does the movement of vix between 50d and 20d MA tell you this?

  9. stjeanluc

    FAS Money Recap 
     
    Long Strangle –Jan 12 Puts (3.01 average now 2.56) and 15 Calls (2.75 average cost now 2.34). 
     
    Weekly – Full Cover October 13 Puts (1.98 average now 1.57 – 21%)
    Monthly – Full Cover October 13 Puts (1.98 average now 1.57 – 21%)  

  10. stjeanluc

    Another cartoon for the vault Phil…
    http://www.ritholtz.com/blog/wp-content/uploads/2011/09/Job-creators.png 

  11. txchili

     Great comment from Kevin Ferry on CNBC about FED policy -
    Its the Kim Kardashian of Fed Policy. Popular because it is. Doesn’t really do anything. Alot to do with the back end.

  12. tchayipov

     Pharmboy
    I still holding positions on CLDX, DCTH, PLX, SVNT
    do you think it is better to close them and cut looses, or hold on (is it any chances they will go much lower?)

  13. stjeanluc

    The size of the tax loopholes is unreal:
    http://economix.blogs.nytimes.com/2011/09/20/the-biggest-challenge-for-todays-tax-reformers/
    Well, when you call it tax expenditures it doesn’t sound as bad – but it’s $1 trillion this year! Deficit problem solved…

  14. lapper

    Exec, as a rule of thumb, yes.  Obviously it must be watched and stopped when wrong

  15. jabobeast

    PCLN???

  16. jcaesar

    pharmboy
    Do you follow development of sleep/insomnia drugs?  The FDA seems to have gotten tougher on this group (and all drugs I think).  There were a couple promising ones out there that they nixed over the past decade.  For now it looks like generic Ambien has a lock on the market.  Let me know you if you think/know otherwise.

  17. jromeha

    Pharm- what do you think of clsn?

  18. stjeanluc

    Some stocks have not yet recovered from the lows of 2009:
    http://www.bespokeinvest.com/thinkbig/2011/9/20/sp-500-stocks-down-since-3909.html
    Some interesting names on that list! 

  19. rustle123

    This is the first time I have ever seen NFLX oversold, it’s an 18 on RSI.  And I still wouldn’t buy them.

  20. Phil

    Good morning! 

    There is no volume to this sell-off (except in NFLX!) so far and mostly it’s driven by the Swiss, who are rumored to be pressing off their peg to 1.25 (4%), which is propping the Euro and the Dollar.  It has nothing to do with Italy’s downgrade, which was announced last night, 20 hours before the EU opened up 1.5%.  

    TLT is on the rampage again at $114.67 so yesterday’s play is still doable but let’s make sure we find a bottom before bottom-fishing today as yesterday’s sell-off was expected while today’s is just annoying.  Notice the VIX is not moving on this sell-off so no one is really panicking just yet but someone is certainly selling a lot of stuff.  

    For the record, at 9:45 we have Dollar 77.67 (need to get under 77.50 to go bullish), the Euro is $1.367, Pound at $1.568 and only 76.58 Yen to the Dollar so a bit low for the BOJ (77 is current fixed target).  That means the BOJ wants the Dollar stronger than 77.50 and the EUR/CHF is $1.215 so the Swiss are on the same page as the BOJ.  That’s not good because the strong Dollar fights the PRICE of our indexes and commodities but, don’t worry, Uncle Ben is going to light the fuse on QE3 tomorrow and all that nasty Dollar strength should be flushed right out the window.  

    Up in smoke is where yesterday’s gains are going if you didn’t stop out at the open – which I hope you did in the $25KP as I am usually writing my post in the morning and can’t always say "ALWAYS sell into the initial excitement."  That’s why it’s Rule #1 (of 2) and that’s why the word ALWAYS is there in big letters – so I don’t have to say "yes, I do believe it’s a good idea to take profits off the table" every time we have a big open.

    Of course, Rule #2 (of 2) is "When in doubt, sell half" which means (in case it is not obvious) that EVEN if you think you should ignore #1 because you are smarter than the markets – at least take half the profits off the table so you don’t look like a total fool when it turns out you are not smarter than the markets.  

    Our goal today is the same as yesterday – Hold S&P 1,200 and RUT 700.  Failing those would be bad and we’ll look for more covers – we didn’t need to yesterday and hopefully we won’t today either.  My guess is the morning action is a combination of the Swiss announcement and some EU funds taking profits off the table after a 12% run-up since Sept 12th.  

    The same upside trades we got out of this morning are good for reloads if we get our prices and 1,200 and 700 hold up this morning.  Nothing has changed and, if you are not a day trader, then this is just a typical, silly morning with the usual flush job being pulled on the day traders before the next leg up.  

    Now it’s 10 so I’m not going to do the news but it does look like we’re holding so  I like the DIA Oct $110/115 bull call spread at $3.20, selling the $108 puts for $1.85 for net $1.35 on the $5 spread that’s a bet the Dow holds 10,800 (and if you get out of the bull call spread at $1.60, then you are net .25 credit at $108 on the put side!).  

    Oil bounced too fast but held $86 – spreads are still good, of course, it’s the directional plays we take the quick profits in. 

    TLT is, of course, game on at $114.50 and the weekly $115 calls can be sold for $1.15 and that pays for the weekly $116/114 bear put spread at $1.25 for net .10 on the $2 spread.  

    To get really bullish, we need to pop the green lines on the big chart – anything else is just our trading range but a good word from Dr. Bernanke and we’re off to the races again.  

  21. stjeanluc

    It’s not in the news anymore (short attention span I guess) but things are not getting better in the Japanese nuclear accident:
    http://www.nakedcapitalism.com/2011/09/guest-post-will-tokyo-be-evacuated-due-to-fukushima-radiation.html

  22. flipspiceland

    @iflantheman
    Many thanks for your persistently confident bullish plays on AAPL
    Would you now roll the BCS 390/405 that you mentioned last week to higher strikes?  Your bet last week to pay $2,000 to the poster— if that trade didn’t work —-is now history.

  23. morxlntway

    TLT – Phil, re the 115 short puts, if tlt stays below will you be rolling these lower next week?
    thanks

  24. lolobear

    lflan… what’s the play on AAPL now? 

  25. angelcur

    lots of people saying they wouldnt buy nflx coz they are oversold…too bad those guys didnt feel that way about shorting it when it was overbought…the news flow in that one is so negative..i am almost believing that mgmnt got short themselves with their unecessary ‘strategic’ bungles..good lord..that one is still so over valued

  26. David Ristau

    Phil -

    What do you think of a bear call spread or selling calls on the VXX above 55…

  27. dclark41

    Phil:
    I hold AA trade Oct 12 calls long in at (1.08/now .44)/ Oct. 13 calls sold (.56/now .18) with sold 11 puts .37/.45. If QE3 is inevitable is it worth the risk to buy back the callers and just go naked with the Oct 12 calls? Or should I move the whole trade further out? I think its a good chance that the trade may be back in the money at the end of the week. Thanks.

  28. Phil

    Good morning! 

    $1,780 held yet again on gold.  We need to start playing that line in the Futures (/YG).  

    Check out NEM this morning – Zacks says their gold output is going to double and their CEO is predicting $2,300 gold in 2012.  Not that he’s what you would call an objective observer with 250,000 shares ($16.7M) but, for some insane reason – that is not considered market manipulation…  

    Dollar at 77.68 and all we had to do yesterday was watch the Dollar, which consolidated at 77.75, where it was rejected this morning and when we failed 77.50 we finally got our stick in the afternoon.  Same deal today, should be easy to follow.  

    Tuesday’s economic calendar:
    FOMC Meeting, Day 1
    7:45 ICSC Retail Store Sales
    8:30 Housing Starts
    8:55 Redbook Chain Store Sales 

    Notable earnings after Tuesday’s close: ADBEORCL

    At the open: Dow +0.49% to 11457. S&P +0.49% to 1210. Nasdaq +0.52% to 2321.
    Treasurys: 30-year +0.02%. 10-yr +0.05%. 5-yr +0.02%.
    Commodities: Crude +0.37% to $86.12. Gold +0.09% to $1778.35.
    Currencies: Euro -0.07% vs. dollar. Yen -0.01%. Pound -0.07%.

    10:00 AM On the hour: Dow -0.03%. 10-yr +0.06%. Euro -0.03% vs. dollar. Crude +0.46% to $86.2. Gold +0.9% to $1792.75.

    Market preview: S&P futures +0.4% on hopes that policymakers on both sides of the Atlantic will come to the aid of their respective economies. The EU and IMF will try to wring more austerity out of Greece in exchange for a new loan installment, and the Fed begins its two-day policy meeting. European markets shake off S&P’s downgrade of Italy’s credit rating.

     August Housing Starts: -5% to 571K vs. 590K expected and 601K (revised) last month. Permits +3% to 620K vs. 590K expected and 601K (revised) last month.

    Consumers still not dead yet:  Redbook Chain Store Sales: +4.1% Y/Y vs. +4.5% last week. ‘The back-to-school season is now winding down and fall apparel is getting a boost from cool weather in many parts of the country’.

    Small business still sucking wind:  ICSC Retail Store Sales: -1.2% W/W, vs. +1.3% last week. +3.4% Y/Y, vs. +3.3% last week.

    German investor sentiment drops to its lowest since December 2008. ZEW’s index fell to -43.3 from -37.6 in August, slightly better than consensus (-45). "The ongoing debt crisis in some countries of the eurozone as well as the fear of a global economic downturn may have caused economic expectations to weaken," ZEW said.

    The IMF downgrades its growth forecasts across the globe, particularly in the U.S. (from 2.5% to 1.5% in 2012) and the EU (from 1.7% to 1.1%). The agency calls on the ECB to continue intervening "strongly" in debt markets and to cut interest rates. So Christine Lagarde is giving instructions to Jean-Claude Trichet? - Notice how all roads are bending to DSK’s convenient replacement…  

    "Just do it," says Josh Brown of Greek default, noting aWSJ report of a surge in Greek suicides amidst a rapidly contracting economy with massive government austerity still to hit. "It’s time to just get down to brass tacks and accept the medicine, not the bandaids that prolong this for another 6 months or a year."

    I guess Josh wasn’t one of the buyers:  Greece sells €1.625B in 13 week bills priced to yield 4.56%, 6 basis points higher than last month’s auction. Demand was strong, with bid/cover of 2.84. The country also makes 2 coupon payments of €769M that were due today. 

    Greece denies it’s considering a stay-or-leave referendum about the euro. “It’s a no-go area for us. We are members of the euro and this is not going to be put to a referendum,” spokesman Ilias Mosialos says.

    Spain sells €4.46B in short term bills, paying slightly higher yields than August, but with robust demand – the bid/cover ratio about 2.7:1. In contrast to Italy, Spanish bond yields are unchanged today. Spanish shares +1.2%

    Italian bond yields rise in the wake of the S&P downgrade. The 10 year note up 8 bps to 5.67%, the 2 year higher by 12 bps to 4.31%. One thing downgrades often seem to assure are higher equity prices. Italian shares +1.3% after opening sharply lower.

    Peeved at last night’s S&P downgrade of Italy, Berlusconi says the move was "dictated more by behind the scenes reports in newspapers than reality." The PM also notes his government has a solid majority in Parliament, making the possibility of passing needed measures a high one. 

     "Concerns over the risk of a break-up of the euro zone are greatly exaggerated," says David Riley of Fitch. While expecting a Greek default, Fitch does not expect the country to leave the euro. Fitch further expects no systemically important sovereign or financial institution will be allowed to default.

    The dollar and the euro momentarily soar against the Swiss franc as a rumor makes the rounds that the SNB is going to raise the floor on the franc/euro rate to CHF 1.25 from CHF 1.20. Earlier news that Swiss exports plunged in August make this morning a convenient time for such chatter.

    Swiss exports dove 7% in August from July as the rocketing franc took its toll. Goldman notes it was the sharpest decline since December 2008, and marks a big shift from just 2 months earlier, when exports were still rocking. This won’t be the last weak print, says Goldman, as the EU slows and the lagged effects of the franc’s rise continue.

    Japan’s interim plan to deal with the strong yen includes a corporate tax cut and support for small and medium businesses. The government didn’t close the door on direct currency intervention, saying it remains ready to take "decisive" action as needed.

    More manipulated news:  Bank of China has halted foreign exchange swaps with several European banks, including SocGen (SCGLY.PK), Credit Agricole (CRARY.PK), BNP Paribas (BNPQY.PK), and UBS. Reuters reports the move is due to fear about the banks’ creditworthiness, but DJ says the halt is because credit line limits were hit.

    Art Cashin and his financial industry drinking buddies wonder why Treasury isn’t taking advantage of historically low rates to issue 100 year bonds – giving the country plenty of time to get the debt situation in order. Politics is the answer: yields on such paper would be higher than shorter-dated debt, giving someone, somewhere an issue to run on. 

    Yield-chasing institutional investors have been gobbling up emerging markets debt, bidding up prices to levels implying safe-haven status. Fund manager Mike Riddell sees this as a very risky gambit, one that could prove disastrous now that the dollar’s rise is sparking a selloff in the asset class, and threatening its liquidity.

    "U.S. banks are using a pocket knife when what they really need is a machete," says Mike Mayo, calling for more job cuts to bring costs under control. Of the axis of ratings agencies, auditors, and their clients, Mayo says, "Nothing’s changed in the past three years since the crisis. It’s disgraceful and it’s shameful." 

    The SEC seeks more offshore disclosures from companies, as more interest kicks up about how much money U.S. firms stockpile abroad to avoid taxes. Though there no disclosures rules are in place, the SEC can raise questions through public comment letters when it believes information is material – as it has done with Caterpillar (CAT), Dow Chemical (DOW), Fortune Brands (FO) and CIT Group (CIT).

    Airline stocks are mixed after IATA raises its outlook for profits in 2011 to $6.9B from $4B. Investors may be digging deeper into the report, where the outlook for 2012 looks grim. NYSE Arca Airline Index +0.5%. 

    Airline profits next year will be "in the doldrums," according to estimates and commentary from the IATA. Asia-Pacific airlines are expected to be close to 2011 profit levels, but the rest of the industry will likely see a struggling economy knock profits lower. "With business confidence declining, it is difficult to see any potential for significant profitable growth."

    Chinese airline stocks are taking it on the chin in premarket action even as domestic carriers look to keep up with competitors that are adding flights into Asian markets. China Eastern Airlines (CEA) is down 4.4% and China Southern Airlines (ZNH) is off 5.7%.

    When "momentum all-stars" like LULUAAPL

  29. Phil

     

    When "momentum all-stars" like LULUAAPLCMG andGMCR are all that’s moving, it’s a signal for investors to get cautious, not aggressive, Josh Brown writes. With many managers underperforming their benchmarks as Q3 nears an end, Brown thinks the move amounts to nothing more than "performance chase" and "window-dressing."

    This is getting to be a soap opera:  Just 2 weeks ago, long Silvercorp (SVM -1.3%) and defending the company against fraud accusations, Adam Gefvert reverses as new information emerges. While he doesn’t believe the firm is completely illegitimate, he calls for SVM to hire an outside geology firm to confirm the "grams/ton," or purity of its SGX mine.

    That’s why they are my favorite!  JPMorgan Chase (JPM +0.2%) shares inch ahead after Evercore initiates coverage of the bank at Outperform, calling it a "port of strength amid ongoing uncertainty." Industry problems are well documented, but JPM has enjoyed more success than its peers at deploying capital, which Evercore sees as "increasingly a differentiator among large-cap banks."

    Netflix (NFLX) shares continue their descent, -4.2% in addition to yesterday’s 7.4% shellacking after its "panic move" insplitting its DVD and streaming businesses. Morningstar says the July price increase was "necessary to help Netflix invest more in the streaming business, but it was a mistake to not offer a discounted price to customers taking both DVDs and streaming."

    As Apple (AAPL) hits a new all-time high following its addition to Wedbush’s Best Ideas list, Taiwanese supplier TPKprovides more evidence of booming sales. TPK, which provides touch panels for the iPhone and iPad, saw its August revenue grow at a better-than-expected 101% annual clip, and hopes sales will rise higher still in Q4. 

    Bespoke’s list of stocks in the S&P 500 that are down since March 2009′s epochal bottom: In the lead is Dean Foods (DF), off 55%, but nearly flat since being purchased by David Tepper near the end of 2010. Hudson City Bancorp (HCBK) - a favorite of some for its conservative operations – is off 32%.

  30. palotay

    Phil/NFLX – What a difference a week makes! I’m holding a 2013 $250 Puts position, that I paid for by selling 2013 $250 calls. The position, which I knew was aggressive, has been a crazy roller coaster, but I stuck with it, and now it has a gigantic gain. My question is what would you do in this position? I think it can probably still go down further, but I don’t want to risk this huge win. I could obviously sell half, but is there something better to do? Like roll the puts way down, along with the calls, to pull a bunch of the gain of the table? My basis on the put side is $56 (now $126), and $55 on the call side (now $10). Thanks.

  31. rainman

    Watch the $, just broke below 77.50 again.

  32. Phil

    3am/Exec – Lapper has it right but I don’t consider it an absolute – just an indicator of the intention of manipulators.  If you see them jamming the Dollar down at 3am and goosing the futures – you can assume that the intent is to goose the EU and US markets that day and, if the EU is still up when the US opens, then their chance of success is very high.  The main point of the 3am trade is you can pretty much go long on any futures contract at 3am and, as long as it’s one of the many days that they push down the Dollar around that time – you can do quite well for yourself.  Like Lapper, when it’s back in vogue (and it hasn’t been for a while) then I too find myself waking up in the wee hours looking for a quick profit before breakfast.  

    CELG making new highs along with FAST and PNRA and CL still going up and up.  SBUX making new high despite rising coffee prices.  Might make a good earnings short…

    Oops, Dollar 77.49 – no wonder we’re flying.  See, easiest signal in the world to follow..  

  33. angelcur

      3m euro basis swap…which soared after liquidity measures last week is weakening substantially last 2 days..given back half its gains….at -98.58

  34. angelcur

    unless europe starts improving we will wake up to another big gap lower next few weeks…no sustainable equity rally unless that situation at least stabilizes…which it isn’t as of now

  35. lflantheman

    flip….yes, time to move the bull call spreads  to higher strikes.   Safe play is January or further out.  More risky but quick double would be Oct 420/440 bcs , which could pay 130% if AAPL above 440 by Oct expiration.  And, I don’t think that’s unreasonable.

  36. button

    Phil,
    My portfolio is a little too bullish heading into the FOMC results tomorrow. What hedges do you like right here? I would prefer to stay away from the ultras as I have had trouble getting out of them because of terrible liquidity on the options.

  37. nicha

    Iflan – if you are coming to Vegas, a non alcoholic beverage is on me. Thanks for the AAPL spreads.

  38. angelcur

     sbux doesnt seem like a great short…it is one of the consumer growth stocks that people are giving multiple expansion due to view economy stagnant but no recession..b but i think whole market falls apart again if europe keeps deteriorating…

  39. pentaxon

    I have updated my stock options volume indicator, and to me it looks like not everbody is that optimistic regarding the coming floods of money.
    http://www.pentaxon.com/psw/viyindicator.html
    Maybe the indicator is not right this time, but it should at least be considered as a warning sign that the outcome could be different…

  40. lflantheman

    nicha…thanks for the offer.   I had thought about coming out but I’ve got so many irons in the fire I may not be able to pull it off.  But sure would be nice to meet some of you guys.    

  41. David Ristau

    Hey all,

    From yesterday, we closed DFS at the 27.00 line this morning for 3.5% gain…could head higher but rather take gains before Benny.

  42. lflantheman

    Incidentally, for you AAPL players, there is another play  I may use depending upon what happens this week and up to earnings.  Right now I like bull call spreads, as noted above, and as noted in Phil’s post from yesterday.   But some straight-up at-the-money calls using money you don’t need, and a small portion of your overall portfolio, could be purchased a few days just before earnings and might pay off huge.   Depends on how much further AAPL runs up before earnings, but I suspect they are going to blow earnings out of the water using a nuclear device. 

  43. David Ristau

    Just made 110% with OTM 425 calls from yesterday…loving AAPL!!!

  44. lflantheman

    Hi David……Sorry I missed on that AAPL call 2 weeks ago.  I thought they would hit 400 that Friday, but it took another 7 days.  Keep some longs on AAPL!!!

  45. David Ristau

    I closed em out this morning, but I am going to reload on their next down day like yesterday…20% in 6 days…woo!

  46. qcmike

    IFLantheman
     
    When is AAPL earning date ?
    thanks

  47. lflantheman

    qcmike
    I haven’t looked for it yet.   I’ll get on that.

  48. stjeanluc

    AAPL / Iflan – I am tempted to agree with you on earnings this time. I would think that they want to make sure that the first earnings announcement of the Tim Cook era is a great one to quash any doubts on the succession plan! That would be a great time to push anything they have forward and as usual, they will downplay next quarter so reset expectations to a more reasonable level that they can beat anyway! 

  49. Phil

    See how well behaved oil futures are if you use stops.  Up to $87, down to $86, back over $87 ($87.50 should stop it).  These lines are not that hard to follow.  We’ll get a chance to do these live in Vegas.  

    FAS Money – Is, at the moment, a very bullish bet on the Fed.  If you do not believe in Father Ben, don’t risk it!  

    Good one StJ:  

    LOL Tx!  

    Loopholes/StJ – Excellent article, all should read (or Conservatives can have someone who can read it to them…):  

    PCLN/Jabob – They are flying along with US airline stocks but they should be diving with the Chinese airline stocks as well as Google’s new flight search system, which is still just being tested. 

    If you want to play PCLN bearish – it’s very risky but the weekly $565/555 bear put spread is $6 and you can sell the $565 calls for $4.70 for net $1.30 on the $10 spread.   Oct $620s are $4.10 so your bet is that they don’t go higher than that (and again, if you take a 50% loss on the bear put spread, that’s $3 so your net on the short puts is $1.70 credit if it moves against you).   

    Bespoke/StJ – Thanks, I used that one.  Notice how many of those are our recent value plays.  

    COST making new highs, PEG, FE, PGN, AEE, WEC…  Looks like a rally to me!  

    Fukushima/StJ – Yawn….

    Yes Iflan – Fantastic job on AAPL!  

    TLT/Morx – Those are short CALLS, not puts!  We are BEARISH on TLT and selling calls and we would roll them higher if TLT goes up but we WANT it to go down. 

    VXX/David – Absolutely I like that but it’s been a while since they were that high.  We did a short play on them in the last panic from 50 to 45.  

    AA/DC – I would buy back the $13 caller, where you made .38 profit and spend .53 to roll down to the $11 calls ($1.02) and the puts are right on track.  You are buying .60 of intrinsic value for .53 so a good deal there and your net on the trade is .68 so you pretty much make every penny of AA’s move up and, if they go down, you can roll the puts to the Jan $10 puts (now .62) and try again.  

    NFLX/Palotay – Oh come on, you are asking me what I would do with puts that are $120 in the money???  I would take it off the table (duh) and, if you feel compelled to gamble your 11,500% gain away, you can buy the March $140/90 bear put spread for $20 (2,000%) of your gains because, you know, money grows on trees so why not keep gambling, right?  If you want to stay super-bearish, you can sell the March $180 calls for $10.60 to drop the net to $9.40 and then you are back to 100% short but you risk just the $9.40 and, of course, the possibility that NFLX pops over $180 but you can always roll back to the 2013 $250 short calls.  

    S&P needs to get over 1,220 but, if not, SDS is going to be our friend again.  

  50. lflantheman

    AAPL earnings Monday Oct 17th, time not yet specified.

  51. morxlntway

    TLT – I did think it was a weird thing to do but i figured you had a secret plan. I will adjust.    
    "The other nice opportunity is TLT back at $114.25 this morning and that means we can sell the Sept 23 $115 calls for $1.20 and buy the $117/115 bear put spread for $1.40 for net .20 on the $2 spread but we’ll probably go higher so a very small entry that you will roll up and double down would be prudent.  Since it pays 1,000% in 5 days if it works, you don’t need to play with a lot of money to have a good week! 
    TLT/Jercon – No it’s bearish, you are buying the $117 puts and selling the $115 puts and the $115 calls so the bet is they finish the week below $115.  The assumption is that $115 is assuming QE3 but we have been to $122 so it’s possible this trade gets burned on a bad spike and we have to roll up and DD but I would like shorting TLT more at $122 than $115, of course BUT – maybe we never get past $115 so now’s the time to take a small stab at making $2 but saving the big guns for an even more ridiculous move up.   Up means over $115, which is down in rates but that’s very confusing so we try to stick to discussing the direction of the thing we’re trading. 

  52. Phil

    I may have to slap a red box around Angel, Mr. Euro-Bear!   8)  

    Actually the EU is finishing at the day’s highs with the FTSE up 2%, DAX up 2.75% and CAC up 1.4% but still can’t get back over 3,000.  

    NEM broke $70!  

    Hedges/Button – I like PCLN above but risky, of course.  Here’s a couple of hedges off this rally:  

    SDS Oct $20/22 bull call spread at $1.05, selling VLO Nov $20 puts for $1.15 for a .10 credit on the $2 spread.  Other offsets I like are short SPX weekly 1,140 puts for $1.05 (a 6.5% drop) or short SPX 9/30 1,045 puts at $1.15 (14% down in 10 days).  SPY Oct $109 puts (10% drop) can be sold for $1.08 or HPQ Oct $22 puts can be sold for .84.  

    LVS is pretty high at $50 with a p/e of 42 so I think they make a good short and you can sell the Oct $52.50 calls for $1.50 and buy the $48 puts for $1.80 for net .30 or, less aggressively, you can sell the Nov $57.50 calls for $1.27 and pick up the Oct $52.50/49 bear put spread for $1.90 for net .63 on the $3.50 spread and if you stop the short spread out at $1, you are break even at $58, which is 16% up from here in 2 months.  

    GLD still makes a lot of sense to me and let’s say they don’t pop $180 next week (10 days), which is about $1,860 gold and selling the 9/30 $180 calls for $1.88 and buying the 9/30 $180/176 bear put spread for $2.40 is net .52 on the $4 spread is INSURANCE and the plan would be to stop out the short calls at $2.60 (50% loss) and stop out the bear spread at $1.20 (50% loss) for a net loss of $1.92, which is what you are then risking to make $4 if the Fed fails us and gold tumbles or if the Fed succeeds and gold tumbles.  

    If the S&P holds 1,218 and the Dow holds 11,500 – I don’t think the hedges are necessary as we’re still in the pre-Fed run-up but, by tomorrow, it would be prudent to hedge for some disappointment – just in case.  

  53. kurtww

     GDX (gold miners) way up today… prelude to a bigger move higher in gold? The reverse usually works… Been holding an Oct 65/69 spread for a couple weeks that’s finally coming around. 

  54. palotay

    NFLX/Phil – Haha.  Fair enough.  Never had a position work out this well, and I was pretty locked into the idea that NFLX is eventually going out of business.  Thanks for the tough talk, I needed it.  

  55. rustle123

    Reid Hastings doesn’t really care about the drop of stock price in his portfolio because:
     
    Netflix CEO Reid Hastings doesn’t even own any direct shares explains Tony Wible, an analyst with Janney Capital, to The Wall Street Journal. In fact, all of the company’s top employees have been making money "at the expense of shareholders": 

    Insiders have sold $67.6 million of stock over the past six months with much of this funded by options that were exercised at a $1.50 per share. The CEO has sold $1.0 to $1.5 million of stock on almost a weekly basis (total of $32 million) and continues to not own any direct shares. The Chief Product Officer, Chief Content Office, Chief Marketing Officer, Chief Talent Officer, and various Directors have also sold. We believe this activity is tied to NFLX’s unique compensation policy that minimizes the cost of options on the income statement but essentially allows NFLX to fund some compensation through the balance sheet at the expense of shareholders.

  56. cjji

     Phil,
    What’s your view on CLF?

  57. Phil

    No ultras/Button – Sorry I missed that when I said SDS but they are pretty liquid.   Its the 3x ultras you need to stay away from or, as a rule of thumb, any contract that doesn’t have over 1,000 open interest and more than .05 bid/ask spreads.  SDS has thousands and .01 spreads.  

    Indicator/Pentax – You have to consider how much event manipulation like QE3 can wreck the signals.  Look how bearish it was in March of 2009 – the best buying opportunity of the Century (so far).  It flipped right to bullish but a bit late for bargain hunting.  Again, my premise is that the Banksters and their pet media mavens are doing their best to keep retailers terrified to invest – even though, logically, the Fed is TELLING YOU that they will be supporting the markets for another year.  The propaganda machine is so relentless that even a smart guy like Angel is reduced to doing nothing but spouting out the latest rumors from half a World away as if that should affect my decision on whether or not to buy RIMM for 3.7 times their current earnings or HPQ at 5.3 times earnings. 

    DFS/David – It is good to be quick to take profits in this crazy market. 

    V making new highs – someone believes in the consumers. 

    Speaking of ultras – SQQQ making 52-week lows!  That makes them good for a toss:  

    SQQQ Nov $21/25 bull call spread at $1 is a good hedge all by itself with a .50 stop and you can offset that with one of the above hedges or short USO Oct $30 puts at .52 (oil at $80) or INTC Jan $19 puts at .65 (INTC currently $22.30).  

    AAPL/Iflan – How about buying 4 AAPL Oct $410 calls for $22.50 ($9,000) and selling 3 Nov $425 calls for $20.10 ($6,030) for net $3,030 ($7.58 per long call) on the $15 spread that’s $10 in the money?  Figure if AAPL does well, you will far out-gain the longer calls as their premium collapses after earnings and, if they disappoint, both get crushed and hopefully losses are minimal.  

    TLT/Morx – Not sure what you are saying there as there is nothing in either of those paragraphs that says anything about selling puts in TLT other than the $115 puts that are PART OF THE $117/115 BEAR PUT SPREAD.  That is 1,000,000% different than just selling naked puts!  

    GDX/Kurt – See above – just the rumor mill.  All stops are being pulled out to keep gold over $1,780.  I’m sure the end game is to dump gold on the Chinese on the Fed announcement and, sometime after that, it collapses.  

    You are welcome Palotay.  When you make 11,500% on a stock, think what a good story that is to tell and then think of comparing that to the time you lose a 11,500% gain because you were too greedy to take a profit.  Which story do you want to be remembered for?  We run a funny site here because people make stunning profits like that often enough where you think you can do better but there are many people on TV right now who would make a whole career out of having just one trade their whole lives make 1,000% – keep that in mind…

    NFLX/Rustle – I’m sure they care but I’m also sure they all know it’s just a scam and the set-up of the options program is a good indicator of that as it’s designed to take the money and run.  If they really believed the company was worth $10Bn, they would want a long-term stake to vest over time.  It’s just a pump and dump like so many others that the Wall Street crooks shove down people’s throats.  

    CLF/Cj – I love them in a recovery but I’m not sure we’re in one and those guys fell from $100 to $11 in the crash so not for me since we don’t really believe there is a global recovery – just global money printing and that’s not the same thing.  

    Dollar 77.53 but looks like yesterday’s consolidation around 77.75, where it looked like we’d break lower in the afternoon and we did.  

  58. joemayo

    Pharm
    You’ve posted about phantom bars on spy before.  Where do you find this info? 
    Thanks

  59. joemayo

    Anyone trading ORCL today?  Earnings are AH  I don’t really follow the company but here is a link to earnings data.
    http://seekingalpha.com/article/294648-oracle-will-reward-both-sides-of-the-trade-in-after-hours-earnings

  60. cjji

    Phil,
    Thanks for the reply.  I went long on CLF at $95 and they are at $73.5 now.  I am thinking of getting out after Benny speaks.  What do you think?

  61. stjeanluc

    Chart of the day:
    http://andrewsullivan.thedailybeast.com/2011/09/chart-of-the-day-9.html
    Way too much stuff on Facebook. And with a shelf life of about 2 minutes. This is where your Internet bandwidth goes…

    Every 2 minutes today we snap as many photos as the whole of humanity took in the 1800s. In fact, ten percent of all the photos we have were taken in the past 12 months. 

  62. angelcur

    greece and the "troika" are back to playing chicken…with both sides knowing that the current bailout tranche must be paid to avoid imminent disorderly default….  key issue is buying time for the enlargement and expansion of the EFSF. With the new EFSF in place… a greek default could be a difficult but welcome catalyst to restoration of confidence in europe….  meantime  bank depositors are fleeing euro banks…finding work-arounds to keep their deposits safe as they tire of promises without action.

  63. angelcur

    euro bear…well i kinda feel like i nailed it..shorting euro and ewg et al in june?…so if that gets me some time in a red box..i think you actually meant pink and it sure isn’t a bad place to be!

  64. ban2

    Phil
    I still have 20 of the SQQQ Oct 26/31 bull call spreads @1.3 cost held as ins. during last downturn
    I asked last week about these and you suggested some possible manipulation pulling .25 here and there – but these have very big spreads and hard to capture small increments.
    Since they were insurance I’d be happy just getting out even.
    would you cover the 31 short calls here and just let the long 26′s run?
    If we pull back a bit and these go from $1.05 to $2 I’d be even
     
    tia

  65. angelcur

    so any speculation about tomorrow’s fed result?…

  66. morxlntway

    TLT – sorry to be the student who raises his hand too often. That 115 is one and the same put. I also have the 117s. This is only the 2nd BPS that i have entered and the other i sold the long leg when the stock was down and profited on the short side as it went back up. Here i get the impression that you will hold through expiration. But does that mean on Monday i will wake up with 100 shrs of TLT at 115 (less profit of other two legs)?
    Feel free to answer later.
    thanks

  67. rainman

    Someone liking FNSR today.

  68. lflantheman

    Phil/AAPL…..I like that trade!

  69. angelcur

    NDR
    According to the Philly Fed, economic activity increased in 26 states in August, decreased in 17, and was unchanged in seven.  As a result, our one-month diffusion index fell five points to 59, the lowest level since January 2010  The three- and six-month diffusion indexes also ebbed lower, but all three remained in expansion territory, suggesting activity has slowed, albeit not to a recessionary level.  The one-month average change of all 50 states was 0.1%, the least since January 2010   The U.S. index posted its smallest gain in nearly a year, while its y/y change picked up slightly to 2.5% from 2.4%   Almost all individual states (except Alabama and Georgia) have risen on a y/y basis…
    Our Recession Probability Model, based on state coincident indexes… picked up to 18% from 13%…suggesting relatively low odds the economy is currently in recession….  Our Financial Stimulus Index is consistent with trend growth…. although it is projected to moderate over the next six months

  70. pentaxon

    Phil, Terrifying investors: I agree. I think this panic and hype about stocks is totally out of control. It is an investment like any other and at the current time I think it is a reliable and relatively cheap investment.
    If you put your money in bonds now it can be wiped out pretty soon. Real estate is only popular because there is no daily mark-to-market – otherwise people would be scared to death about the volatility of real-estate prices. If you keep your money in cash it can also be lost tomorrow if the bank failes (happens quite often lately) – if the bank doesn’t fail inflation will do the rest. Stocks are segregated and therefore quite safe, Apple is more liquid than the US. Most corporations can adapt to inflation. So what is wrong with buying and holding (!) stocks???  ;-)

  71. exec

    Phil,
     
    I see we’re back to the top of the ranges.  You thinking we bounce or they will punch through this time?

  72. Manimal

     Phil – With the RUT gains for today lagging the Dow  (0.7% vs. 1.2%) is an IWM trade in order? Perhaps the IWM $71 Friday calls at $0.95?  A half percentage point is worth about $.40 on IWM if the two even up.

  73. exec

    Anyone using Streetsmart edge?

  74. jcaesar

    exec / SS edge – Wasn’t shadowfax trying it out?

  75. angelcur

    where is flip?

  76. jmm1951

    Phil/ANR
     
    Any thoughts on Alpha Natural Resources (ANR)?  The stock is in the woodshed right now having plunged from $54 per share at the time of the Massey takeover in May  to its current level of $27. According to Finviz the book value is $37 per share and there is $5 per share cash. Estimated earnings for next year $3.35.
     
    The 2013 $30/25 call/put combo can be sold for about $15 per, giving a net of $12 for a company with vast reserves of metallurgical coal. Looks like a bargain to silly old me, notwithstanding issues over mountaintop removal,, etc. What do you think?

  77. ksone88

     CMG/LULU/GMCR/Phil – Phil in following your comments over the last couple years I note that you often identify high fliers that eventually fall like NFLX. The  problem is the timing of the fall. Can you suggest some ways to structure some longer term option plays that will position for the eventual fall of these stocks.
     

  78. rpme

    Exec, I am living on the Edge.

  79. jmm1951

    Phil/ANR
     
    Oops, same as CLF, I guess.

  80. mrmocha

    SLW up a dollar, selling weekly calls here for the usual pullback.

  81. Phil

    1:00 PM On the hour: Dow +1.13%. 10-yr +0.02%. Euro -0.07% vs. dollar. Crude +1.03% to $86.69. Gold +1.53% to $1803.85.

    Europe closes a volatile session sharply higher, regaining a good bit of yesterday’s losses. Stoxx 50 +2.2%, Germany +2.9%, Italy +1.8%, Spain +1.7%, France +1.6%, U.K. +2%. French bank shares continue to decline, led by BNP Paribas -6.8%, as Bank of China halts foreign exchange swaps with the lenders. - In other words, Europe and the Financials would have been up a lot more if not for the interpretation that Chinese banks had maxed out their lending limits to EU banks as bad news, rather than extreme bullishness by China that happened to run into Central Bank rule tightening.  

    In addition to taking a hatchet to its GDP forecast for the U.S., the IMF also weighs in on Obama’s jobs plan in September’sWorld Economic Outlook: "The new American Jobs Act would provide needed short-term support to the economy, but it must be flanked with a strong medium-term fiscal plan that raises revenues and contains the growth of entitlement spending."

    102 Things NOT To Do If You Hate Taxes (Addicting Info)

    Our Hidden Government Benefits (NYT)

    Foreclosures, House Prices, and the Real Economy (Institute For Monetary And Economic Studies)

    Goldman’s economists predict Operation Twist will produce $300B-$400B worth of Fed purchases of 10-year-equivalent debt, and expects these purchases to be financed by the sale of $300B of Treasury notes and bonds due 2014 or earlier. Unlike Nomura, Goldman also thinks (but isn’t certain) the Fed will cut rates on excess bank reserves. 

    U.S. Probes S&P USA Rating-Cut Trades (WSJ)

    Bank stocks (XLF +1.1%) are "extraordinarily undervalued," Oppenheimer’s Chris Kotowski writes, arguing that fears over margin pressure from a prolonged cycle of low interest rates ignores positive offsets, such as improvements in asset quality. So long as there are lending opportunities, net interest margin will take care of itself, Kotowski believes. - Well stated! 

    UBS Scandal Is a Reminder About Why Dodd-Frank Came to Be (Deal Book)

    Fitch keeps Germany’s pristine AAA rating in place after the government agrees to tackle debt issues. "Germany adopted an ambitious fiscal consolidation program aiming to reverse budgetary imbalances and place debt on a declining path."

    The sharp drop in German investor confidence reported this morning completes a sharper 3 month collapse in the reading than the summer of 2008. "The recovery in Germany is a story of the past," says an analyst. A 10% rally in the DAX the last 2 weeks still leaves German shares off nearly 30% in the past quarter.

    Whether or not the SNB had anything to do with thismorning’s rumor of a higher floor for the euro/franc exchange rate, it’snot a bad idea to keep the market guessing, says Alan Ruskin. If not, traders will just sell euros all the way down the CHF 1.20, putting constant pressure on the SNB to intervene.

    Expectations for rate cuts in Australia are dashed followingrelease of minutes from the RBA meeting. "Expectations of large cuts … might not be giving an accurate reading of expectations in the current circumstances." The aussie rose on the news, but the currency’s direction will continue to be determined by the world’s risk appetite.

    The U.K. plans to sell a new 50-year bond indexed to inflation, according to a release from the Debt Management Office. The ultra-long gilts are nothing new for the British, but could serve as an interesting twist to Operation Twist if the FOMC floats a similar idea in the U.S.

    Gold stocks are gaining today, as the metal rises to $1,806/oz. and execs make positive remarks at the Denver Gold Forum. NEM +5.3%GG +3.8%GFI +2.8%AUY +3.7%ABX+2.3%

    Uh Oh: Copper Falls to 2011 Lows (WSJ)

    OPEC’s $1 Trillion Cash Quiets Poor on Longest Ever $100 Oil (Bloomberg)

    What recession???  Caterpillar (CAT +0.9%) says global sales in its bread-and-butter construction machinery segment rose 34%, headlining a strong sales report that shows gains in all global markets. Dealer-reported machines sales in North America came in on the low end at 30% Y/Y, down from 50% just 2 months ago. Analysts expects tough comparable to start dampening sales growth figures heading into the fall.

    Deutsche initiates coverage of the drillers, saying liquids production growth will be a dominant driver over the next year. The following are started with a buy: Apache (APA +0.8%), Anadarko Petroleum (APC +2.1%), Noble Energy (NBL +3.6%), Newfield Exploration (NFX +1.5%), Pioneer Natural Resources (PXD +1.3%), Cimarex Energy (XEC +0.8%), Oasis Petroleum (OAS +1.7%), Concho Resources (CXO +2.1%), and SM Energy (SM +1%).

    Grocers Kroger (KR -0.5%), Safeway (SWY -0.4%) and SuperValue (SVU +0.5%reach an agreement with Southern California workers, avoiding a potentially costly strike in an area considered a "trend-setter" for the rest of the country. "The agreement increases wages, protects health care and pension benefits throughout the life of the three-year contract," says a union rep.

    Shares of Carnival (CCL +5.5%) show a steady gain afterbeating earnings estimates, brushing off talk of an industry slowdown. Rival Royal Caribbean Cruises (RCL) is also enjoying the euphoria with shares up 6.3% on the day. 

    MGM gains 5.2% after Morgan Stanley’s Mark Strawnupgrades the casino owner to Overweight. While acknowledging macro and debt concerns, Strawn sees MGM offering a "compelling risk/reward" at current levels, and believes fears about the company’s liquidity are overblown. He also expects MGM’s Las Vegas operations to rebound. (previously)

    Kona Grill (KONA +27%) continues to soar on heavy volume after the company boosted guidance late yesterday. - I ate at one of these in CT and they were excellent.  Didn’t know they were even public

    Carbonite (CARB +4.1%) continues trading higher after the 6 companies responsible for handling its IPO coincidentally start coverage on the cloud storage firm with bullish ratings. Canaccord and Pacific Crest expect Carbonite to profit from the need to share and secure data spread out over multiple devices … though the same could be said for larger rival 

  82. jcaesar

    angel - Where are your rumors my friend?  We’ve had a nice couple of drops in the past 20 minutes or so and I was expecting you to chime in regarding the latest rumor, but nada.  Are your sources not talking today?

  83. kurtww

     mrmocha – are you selling SLW 41 calls in the money, or more of the 42s?

  84. nicha

    mrm – do you cover the SLW with the monthly?

  85. mrmocha

    SLW - after a dollar run-up in the stock, I sell naked the ones nearest where the run started, in this case the weekly 40 calls.  I try to get out EOD as often as possible, just in case Buffett buys SLW for $80 while I sleep…

  86. shadowfax

    exec
    I am trying to use Street smart Edge but having trouble, are you and what if you are?

  87. shadowfax

    exec
    Sorry I meant what problem are you having?

  88. angelcur

    my sources are quiet they did so well with a couple telephone calls yesterday that they are wating for angela sarko and papandreaou to start tweeting!

  89. Phil

    ORCL/Joe – Too hard to figure out these days.  They are very dependent on business spending and it doesn’t seem likely they’ll do well in Q3 but that’s kind of baked in as they are down about 20% since last earnings.  I would have said worth a gamble at $25 but now $28.75 is just too in-between.  I do think selling the 203 $20 puts for $1.90 is a nice net $18.10 entry (or a free $1.90).  

    CLF/CJ – How about killing the stock at $73 ($22 loss) and selling the 2013 $65 puts for $13 and buying the 2013 $65/80 bull call spread for $6.50 for a net $6.50 credit on the short puts so your worst case is you re-enter at net $58.50 and your upside is getting $21.50 back while freeing up your cash for more productive trades.  I like this trade as a stand-alone for people coming in from scratch.  

    Go AAPL! 

    Red box/Angel – I agreed with you in June but now I think you may be beating a dead horse (or currency, as the case may be).  

    SQQQ/Ban – I thought the idea was to cash the $26s for $2.80 and let the caller ride out?  Now the $26s are down to $1.05 and the $31s are down to .70 but you can still take the $26s off the table and at least it’s not a complete loss (unless SQQQ flies back up to $26 but between now and a 30% gain you should be able to re-cover.  You could also just spend $1.20 to roll to the Nov $22s ($2.25) and that puts your net up to the just over the value of the Nov calls in a $4 spread.  

    Speculation/Angel – We’ve been playing the last two weeks speculating both that we get QE3 and that the markets like it.  No reason to change so far.  

    TLT/Morx – It depends on your broker (and your account level within the broker).   At TOS, if you have the $117/115 bear put spread and TLT finishes below $115 – you simply get $2 (or we think that’s standard, I have not heard from anyone who doesn’t get that treatment).  You must talk to your account rep and ask them to look at your account, look at your trade set-up and tell you how it would be handled and, even then, I wouldn’t trust them.   Still, TOS has proven to be reliable enough that I feel confident letting spreads expire when they are in the money.  

    NDR/Angel – Thanks.  26 good and 17 bad sounds pretty good to me.  

    Stocks/Pentax – I agree.  The problem is most traders no longer view stocks as certificates of ownership of a percentage of a company.  I guess that’s because we never hold actual certificates anymore but I was raised with real stocks and I always used to think of them as "my company" when I invested – as did my Grandpa Max, who always kept his certificates alphabetized in the safe.  When push comes to shove and Europe collapses, what would you rather have – EU bonds or IBM?  If a nuclear bomb went off in Washington, what would recover faster, the US Government or Fed Ex?  In the case of stock certificates – your interests in ownership are 100% aligned with Lloyd Blankfein’s and it’s very doubtful that anything will happen to arbitrarily diminish your ownership rights.  That’s all great if you are a long-term investor but, for most traders – stocks are just letters and numbers on a screen – totally detached from what the companies actually do.  

    FCX making year lows!   SPWRA too.  

    Ranges/Exec – I’m expecting the Fed to do the right thing and punch us through.  That has been the missing X factor as we have tested the tops before.  If not – back to the bottom tout suite. 

    IWM/Manimal – At this point, you would be putting a lot of faith in the Fed and I would certainly not pay $1.40 in premium (2%) for a weekly.  If you want to be gung-ho bullish, you can sell the Oct $66 puts (RUT 666) for $1.70 and buy 2x the weekly $69/71 bull call spread at $1.15 for net .30 per $2 bull spread.  That pays 566% on a move over $71 by Friday and, if not, then you salvage what you can off the spread and roll the short puts back if you have to.  

  90. David Ristau

    Phil -

    NKE tends to MOVE after its earnings report…typically jumping 5-10% in the next week post-earnings…is there any way to trade that even if you are not sure which direction it will be up or down?

  91. angelcur

     floggin th eeurodog…what form is the qe thats the question maybe its oging on wiht the purchase of euros…th eform will dictate the scale of move..opperation twist…prolly not a barn burner

  92. shadowfax

    I have noticed a few IWM large SELLERS!

  93. rainman

    Making quite a move without moving /DX much. Tension building.

  94. shadowfax

    More multimillion sell blocks!

  95. angelcur

     Greece – no matter how much money gets tossed down its cavernous gullet the country is headed for bankruptcy….the numbers say it must be so
     with fed tom..we may close flat which is wehre we closed friday’s session…such ennui
     

     

  96. shadowfax

    angel
    No matter how much you dig up Greece doesn’t matter! FORGEDABOUTIT!

  97. jcaesar

    shadowfax / others – How are you able to see that large amounts of stock are being sold?  Obviously we’re not talking about just looking at volume.

  98. Phil

    ANR/JMM – They had a very bad Q2 with a $56M loss on a $6Bn market cap (10%) but $250M of that was merger-related costs with MEE.  I liked MEE at the time but ANR paid a lot for them.  They are probably way undervalued here but it’s risky until we see how the consolidated company performs and they may be taking a lot of write-offs but, on the other hand, the company is buying back 10% of the stock so I don’t think they have any real interest in seeing it recover until they get a good chunk on the cheap.  So, let’s say it’s a really good long-term prospect but iffy in the short run and that means I like the 2013 $25 puts sold for $6, buying 2x the 2013 $30/40 bull call spreads for $2.85 for a net .30 credit so the worst case is you own 1x at net $24.70 while you make $20.30 if they hit $40.  That trade is good enough to put 10 in the Income Portfolio.  

    High flyers/Ksone – We had an in-depth discussion of that re. NFLX at the end of Friday’s comment section.  Of that group you mentioned, only GMCR is one I am excited about shorting and let me know if I’m wrong but I think we had a play on them in the same group of comments.  CMG is on my radar but I’m waiting to get a handle on how their new Chinese thing is doing.  If it’s the disaster I think it is – CMG will be a great short.  

    Speaking of great shorts – poor OPEN is making new lows.  We nailed that one.  

    NKE/David – How dare you suggest we don’t know what happens next week!  They book a nice Q, test $100 and then sell-off to about $95 before taking a run to about $110.  How’s that for a prediction?  I like the Nov $87.50/95 bull call spread at $3.80, selling the $82.50 puts for $2.35 for net $1.45 on the $7.50 spread for 417% upside at $95 in November and worst case is you own NKE at net $83.95 (7% off). 

    Dollar looks ripe for failing 77.50 – could give us a nice stick into the close.  

  99. rainman

    jcaesar / blocks — If you have access to time and sales, you can see the size of the trades.

  100. jcaesar

    rainman – Can you see that in Thinkorswim?

  101. shadowfax

    jceasar
    I am catching it on tick data, it is running now but expecting the 3:30 lock up soon. Right now I am without a router to prove it’s fault or not and yes more than one is paying attention, they called me, first ever!

  102. shadowfax

    WTF
    A buy signal, for suckers only!

  103. jcaesar

    Tick data – Like from the news gadget in TOS?  I tried filtering for IWM, but the last news item was at 9:00AM or so.  Sorry for the freshman question.

  104. GSsucks

    Phil – Your thoughts on shorting FedEx (doing a call spread that profits as long as FedEx doesn’t go up) ahead of earnings?  Thanks

  105. Phil

    Wow, they are still pushing Greek default as the big story?  This is just ridiculous.  I guess they want to keep up the drama until tomorrow when they can one-two punch the bears with the formal announcement of the Greek loan and QE3 within hours of each other.  

    For now, the Dollar just popped the other way but it only matters if they break over 77.75 (now 77.60).  

    Looks like those IWM block sales were a good indicator though!  

    Watch 1,200 on the S&P and 697 on the RUT and 2,600 on the Nas but the above hedges are all just fine for what’s going on at the moment.  

    DIA 9/30 $113 puts at $1.65 are a fun momentum play for Dow under 11,500 so a stop at about $1.50.  

     

  106. rainman

    jcaesar / tos — Try the trade tab->active trader. Then on the vertical button row, on the right,  there is one labled T&S.

  107. jcaesar

    rainman – You are the Man!

  108. jcaesar

    You too shadowfax!

  109. rainman

    Nice, FCX CEO making an appearance on the closing bell. Who’s next, the CEO of Netflix?

  110. rainman

    Here we go again!

  111. shadowfax

    The latest twist is multi 2 to 3,000 share sales, not you usual afternoon snack!

  112. shadowfax

    Now big blocks but sells!

  113. angelcur

    shadow..of course no one gives a dumpah about greece its the dance of the tards solving this that has the world’s panties in a bunch..its like a little canary saying i am dead but wht do they still care….

  114. angelcur

    phil you actually think they announce qe3 tomorrow..is this a pt barnum moment?

  115. shadowfax

    The water is fine, invest with confidence!
    WOW if I only had the guts!

  116. Phil

    FDX/GS – They are already beaten down, why pick on them?  Fuel costs were way down in Q3 and wages sure weren’t higher and their volume doesn’t move all that much but it generally moves up.  If you want to be bearish I’d buy 3 Jan $70 puts for $4.20 ($1,260) and sell 4 Oct $70 puts for $1.55 ($620) so at least you don’t have too much risk on the table if they head higher.  

    FDX Nov $75/80 bull call spread at $2.25, selling Jan $65 puts for $2.80 is net .55 credit on $5 spread so good for 1,000% if it works and worst case is owning FDX for net $64.45 (15% discount).  

    Copper breaking down hard (see our weekend chat on the subject).  Now $3.71.  Nat gas crashing too at $3.79 and gasoline finally failed $2.70 and is $2.69 so oil is too strong at $86.50 but inventories tomorrow make shorting them iffy.  Dow still my favorite short because, if oil breaks, then XOM and CVX break and that will take care of the Dow.  

    SQQQ with the big bounce off the lows!  

    QE3/Angel – That was the script from last year.  They laid out the parameters of QE2 to commence in December.  

    Invest/Shadow – This market is not investing – we just gave up 2 day’s gains in 2 hours.  

  117. rainman

    PT barnum moment or the little canary at the fed didn’t like what it heard today! :) I don’t think they’ll announce any QE3 tomorrow, they’ll just announce "new" tools that they are looking at in such a way that they keep stringing along the markets.

  118. 8800

    Anyone know what time Uncle Ben will reveal his plans Wed?
    Thanks

  119. tchayipov

     what is wrong with SPWRA again?

  120. rainman

    Phil / 2 days gains gone — You must have missed Cramer say "to high, too fast" 8)

  121. Phil

    Nice $20 drop on PCLN since I put up that trade this morning.  $565 calls fell to $1.30 already and $565/555 bear put spread is now $8 for net 515% gain for the day – not bad…  No sense in risking that one!  

    Canary/Rain – It’s possible or it’s just a big flush to get rid of all the people who have been trying to establish positions ahead of the Fed.  Anything but a firm announcement will not be taken well.  

    Fed/8800 – 2:15 is the Fed statement.  Not sure if Bernanke is speaking after.  

  122. shadowfax

    Phil
    You and we are a force and the result is? What do we do now? THEY care what we think, THE FORCE!

  123. shadowfax

    And then 10K shares, give me 100, no 500K.

  124. Phil

    IWM weekly $69/70 bull call spread down to .55, RIMM Oct $20 puts can be sold for .56 or JPM Oct $28 puts can be sold for .52. 

    DIA pust are done with a nickel loss – momentum died fast.  

    QQQ $57 calls at .47 – 20 in $25KP.  They were .80 this morning!  

     

     

  125. Dennis

    I caught those PCLN puts this morning – thanks Phil, you are the king of the momo shorts!  Do you have a current trade on GMCR at this price?  

  126. jerconn

    Phil, no point in going long some DIA calls for tomorrow?

  127. shadowfax

    Fact, I have caught great fish in Montana on Sucker bait. Don’t be the sucker.

  128. jerconn

    Phil, think you made a mistake on the QQQ 57 calls, it’s the 58′s that are .45, the 57′s remain in the .80′s…pick up some 58′s?

  129. dclark41

    Jerconn:
    I think he meant the QQQ weeklies. I bought a small order at $41

  130. Phil

    Speaking of Momos we hate – FSLR in the toilet, more than 50% below the silly February highs.  

    Oops, renewed selling into the close.   I wonder what’s up?  

    GMCR/Dennis – That’s one that you never know when they will bit the dust but you can slel the Nov $125 calls for $6 and that overpay for the $130/115 bear put spread at $5.70 for net .30 credit on the $15 spread that’s 100% in the money.  If you aren’t willing to take that short, with a break even at $125.30 (up 14%) then you don’t really want to short this stock!  

    DIA/Jerconn – I like the IWM play above.  I just don’t see being too short into the close with straight plays (but I’m loving our afternoon hedges) as they could vanish in a puff of smoke on "good" news.  

    QQQ/$25KP, Jercon – Sorry, that was the Friday ones I was looking at (now .39), not the 9/30s.  

  131. jerconn

    Thanks, dc and Phil – got in the weekly QQQ’s at .37 (cause I delayed)…

  132. rainman

    After hours should be telling after all that nonsense.

  133. dclark41

    Jerconn
    And you got a better price than I to boot! :)

  134. angelcur

    RUMOR HAS IT: if we close flat we are at fridays close…fed tomorrow and other than that..the irish are drinking greek wine ;)

  135. Phil

    In retrospect – this is not encouraging as the Nas has now been soundly rejected from exactly the 2,650 intersect on our green line on the Big Chart and has, in fact, dragged everyone else down with it.  

    Still it’s all rumors ahead of the Fed and I just am not feeling the bear spirits despite the sell-off.  Volume on the Dow is just 114M with 5 minutes to go so it’s a pointless day and they are very possibly just trying to keep Asia from scooping up shares ahead of the Fed.  Also, NFLX down 10% has spooked the Momos so that’s unusual.    Even AMZN dropped 3% on the day. 

    SODA hitting $40!  OPEN failing $50.  

    Could be word that ORCL will report crap earnings…

  136. rainman

    That IWM pop should tell you something.

  137. shadowfax

    Coincidence?
    Believe or not, I do not!

  138. kurtww

    Does anyone know if it’s possible to get filled with TOS after the market closes? I thought there was a 15 minute window after the bell where options orders are still filled. Every time I’ve tried, though, it hasn’t worked out. Just curious… 

  139. escohen5

    Kurt/AH — I believe that’s only for options on the index-related ETFs, like SPY or RUT.  Everything else is done at 4:00.

  140. rainman

    kurtww / TOS — Not all options trade for 15 minutes after the bell. I think it might only be index options that do (I know IWM options trade until 4:15).

  141. sank1

     After-hours fills on tos / kurtww,
    I have fills up to about 4:10 pm Eastern fairly easily. You should be able to get fills up to 4:15 pm Eastern but the bid/ask gap increases.

  142. jerconn

    strange to see the strength in AAPL all day and then sell off at close…

  143. grenowoods

     kurtww - SPY, QQQQ, and DIA, XEO, OEX, SPX, NDX, RUT

  144. pahurik

    OREX news and halted and ARNA +16%

  145. rpme

    ORCL did all right.

  146. lflantheman

    jerconn….simply short term profit taking on AAPL

  147. jerconn

    Iflan – we’ll see, if it goes back up soon, then you’re right.  I remember tho a couple months ago when it just touched $400, then stayed down under $400 for a couple of months…but I think the general move right now is up! 

  148. Pharmboy

    Massive short – can’t tell by the VIX, but when the SPY puts begin to build, I take notice.  Look at that range bound finish.  Started where it began.

    Phantom bar spikes/joe – I notice them on TOS on the SPY.  When they are during day trading hours, it is a sign of where things are heading.  AH, it is harder to tell, but if it is in the a.m. b’f open, I pay attention to them during the trading day.

    As for holdings on biotech, CLSN is fine.  DCTH I have been reducing. SVNT is one I still have, but everything is 2013 or covered stock.  You should be able to reduce the basis on the stock by selling OTM calls against it.  PLX….do I have to mention it?  I LOVE THEM! 

    Insomnia drugs – there is a target in JNJ/other pharma that looks interesting, but I need to remember the target.  It is like orex…..but the name escapes me right now.  I will look it up when I get back home.

    Sorry I am being short, just checking in b’f dinner meeting.

  149. kustomz

    BAC moving forward with foreclosure at a quickened pace will probably catch on with other banks and will force people to start paying rent. Of course this will take a few months to play out. 2012 will be an interesting year.

    If Bernanke disappoints (due to political pressure from the right) tomorrow the charts are setup for a dramatic fall in equities. NAZ outperforming the other markets is a big negative.. chart wise.

    Not sure if the link will work but on Yahoo charts compare the DOW NAZ S&P and TLT… going back before the crash,  similar to what we see happening today. Not sure if its going to play out like Aug of 08 or April 10

    http://finance.yahoo.com/echarts?s=^DJI+Interactive#chart8:symbol=^dji;range=5y;compare=^ixic+^gspc+tlt;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined

  150. knightpilot

    Looking for a hedge to balance out my overly bullish portfolio ahead of the fed.  Thinking SQQQ $24 $34 Oct BCS for $1.30ish.  Opinions?  Better/Cheaper hedge would be great!  

  151. elliotteldrich

  152. Phil

    Hedge/Knight – SQQQ Nov $21/25 was a dollar earlier when we picked it (12:24 above).  Should be about the same now and that’s a 4:1 payoff on a 15% move up, which is about a 5% drop on the Nas.  I prefer to get ones that are likely to pay off on a small drop than spend $1.30 on a spread that pays off only on a bigger drop but there is merit in the $24/34 spread as well – it’s a factor of what you need to protect and for how long.   Since we are still pretty bullish, we have generally been selling short puts on stocks we REALLY want to own if the market drops as an offset so we don’t lose much on the hedge if the market keeps going up.  The nice thing about that strategy is we can pull our offsets if the market turns ugly and that leaves us in much more bearish positions without having to scramble and buy spreads as they are getting expensive.  We can always sell more puts later for better prices.  

    Big Chart – Still on track but Nas rejected at goal and it spooked the other indexes BEFORE they made their own tests – it’s the kind of chart that can turn ugly very quickly…

    At the close: Dow -0.03% to 11398. S&P -0.2% to 1202. Nasdaq -0.44% to 2299.
    Treasurys: 30-year +0.18%. 10-yr +0.12%. 5-yr -0.117%.
    Commodities: Crude +0.56% to $86.29. Gold +1.59% to $1804.95.
    Currencies: Euro -0.12% vs. dollar. Yen -0.28%. Pound -0.17%

    Market recap: Today’s early rally faded on renewed concerns over Greece’s progress in securing another tranche of aid. Relatively light volume one day before the FOMC’s much-awaited statement likely also contributed to the late-day volatility. Netflix andMolycorp were big losers among stocks. Oil and gold settled higher. NYSE gainers led losers by about five to two.

    Much of the uncertainty around tomorrow’s Fed decision is already baked into the market, says BlackRock Chief Equity Strategist Robert Doll. Still, the Fed has got to do "a little something to tip the hat to the markets. If they do nothing… I don’t think the markets are going to like that very much." (Video).

    Still trying to sabotage the markets:  The GOP leadership has delivered a letter to Ben Bernanke in advance of the FOMC policy statement tomorrow, urging him to back off any more easing moves. "We have serious concerns that further intervention by the Fed could exacerbate current problems or further harm the U.S. economy," the letter states. "The American economy should be driven by consumer confidence and worker innovation… not central-bank policy."

    And still screwing the public for Big Business interests:  CNBC reports 100 GOP House members have sent a letterto the the President saying killing the AT&T (T +2%)/T-Mobile (DTEGY.PK +3.1%) deal will thwart job creation. The house delegation is clearly talking in the general sense, as the immediate effect of a merger is likely to mean the layoff of thousands

    The U.S. economy remains stuck in a malaise because ofbad policy and lack of cooperation among its leaders, Jamie Dimon (JPM) says. The consumer and businesses aren’t moving ahead with spending because of infighting in government and failure to make clear decisions: "We fight over everything. Confidence… just isn’t there." 

    Milton Friedman would be arguing for more QE if he were alive today, Paul Kasriel believes; he thought it was good enough for Japan in 1998, so surely he would argue for it in the U.S. today. Undaunted, Cullen Roche thinks Friedman "had it completely wrong" in believing that the Fed could "print money" via QE: "All QE really seems to do is generate mass confusion and a portfolio rebalancing effect."

    Tim Duy finds comparisons of today’s economic plight to the 1970s "increasingly tiresome. At the end of the day, in the 1970s we were not in a liquidity trap. Today we are." Paul Volcker’s warningsaside, Duy thinks the inflationary 1970s look pretty good relative to the price stability of the past decade. 

    Japanese stocks open mixed in early trading but quickly turn higher as yen strength eases. The Nikkei Average gains +0.1%to 8,730.14, with large-cap techs and exporters leading the way: Renesas Electronics (RNECY.PK +8.2%), Hitachi (HIT +1%), Canon (CAJ +1%), Mitsubishi Electric (MIELF.PK +1%). On the downside, Elpida (ELPDF.PK -3.1%) and Advantest (ATE -2%)  both trade lower after J.P. Morgan cuts the shares to neutral.

    Japan’s trade deficit gapped wider than expected in August, as growth in exports weakened. The trade deficit totaled ¥775.3B ($10.1B), compared to July’s ¥72.5B surplus, according to Ministry of Finance. Exports rose 2.8% Y/Y and imports jumped 19.2%. Consensus estimates were for exports to rise 8.2%, and for a narrower trade deficit of ¥230B.

    "The problem with copper is that there is only air under the current price," writes Bruce Krasting. The metal has not participated in the recent risk rally, instead falling to its lowest price since November, surely putting pressure on Chinese lenders and borrowers who have used the metal as a financing tool. Jim Chanos may be right and it’s time to shift our focus eastward. 

    Wow, they are really getting desperate now – just making crap up to see if suckers will buy:  Jim Cramer gives a boost to gold shares today after commenting late Monday on CNBC’s "Mad Money" that gold companies used to pay some of the highest dividends, and could do so again: Randgold Resources (GOLD +3.5%), Goldcorp (GG +4%), Barick Gold (ABX +1.4%) and Newmont Mining (NEM +5.6%).

    "This is happening now," says Jim Chanos of the property collapse in China. He relates a story from the chairman of Komatsu (KMTUY.PK), who says he is having trouble getting paid for machinery sales there. With the focus on Europe, the story people are missing is the reversal in the world growth machine.

    Reports that 85% of local government borrowers in Liaoning missed loan payments in 2010 ought to raise the eyebrows of those who think Chinese banks are cheap. Chinese lenders aren’t as nearly as well-capitalized as Tier 1 ratios would indicate, and owners are likely to face dividend cuts, dilution, or both. China financial ETF:CHIX -24% YTD. 

    Shorting the euro is an obvious winner, asserts MarketWatch’s David Weidner. The European Union’s bungling of Greece’s sovereign debt problems over the past year makes Tim Geithner look "downright competent." All the haphazard deals, tepid agreements and last-minute summits have done nothing to alleviate the crisis, yet the euro still remains 14% higher than it was last year – it’s just a matter of time before it cracks.

    "Europe has to save itself," says Brazil’s finmin Mantegaahead of a meeting of the BRICS at which will be discussed the possibility of aiding the EU. "Naturally the BRICS … should participate … (but) we believe the EU can do more from their side then they are currently doing."

    The FTSE Group puts Greece on watch for a possible downgrade to advanced emerging market status from a developed market. "The progress made by the Hellenic authorities against certain criteria was noted," FTSE Group says, "but improvement in other areas was considered to have been slow and Greece fails to meet the criteria in four areas."

    Greece put off another week:  The EC hits the wires regarding the just-completed conference call with Greek officials, saying good progress was made and examiners are expected back in Athens next week to complete the review necessary before the next tranche of bailout loans can be released.

    Greece and Turkey are setting themselves up for another diplomatic crisis over Cyprus, this time because of offshore drilling. Greek Cypriots, without consulting Turkey, have contracted Noble Energy (NBL) to begin exploring for natural gas off its shores. In response, Turkey is now threatening to launch their own exploration program on the north side of the island – backed by their warships.NBL +1.1% AH.

    Finally people are catching on to the bond scam!  Based on current readings of the time-honored – yet terribly flawed – Fed Model, the market is a "screaming buy," insists market strategist David Kelly. At present levels, bonds are yielding nearly 7 percentage points less than stocks. This is the widest the spread has been in favor of stocks since the 1950s. “It’s bordering on insanity,” he says.

    Michael Gayed wonders if the ratio of 10-year Treasurys to the S&P 500 is suggesting a rally: The relationship "whereby bonds outperform stocks has been stuck in a holding pattern for the past few weeks… This is indicative of a high probability rally in risk assets as investors begin to realize the bonds are no longer outpacing stocks in the face of very negative macro news."

    A Barclays Wealth manager advises buying corporate bonds or dividend-paying stocks, instead of Treasurys that pay negative real yields and carry "all the risk." He sticks with a buy-low, sell-high approach to bond buying saying, "Either the lower end of investment-grade or the high end of high-yield, especially double B, is just really cheap." Will junkier ETFs like HYGJNKPHBHYLD be safer plays than TRSY and PLW?

    Pres. Obama’s new tax plan includes a partial removal of the tax-exempt status given to muni bonds. As fund manager Ben Thompson explains

  153. Phil

    Pres. Obama’s new tax plan includes a partial removal of the tax-exempt status given to muni bonds. As fund manager Ben Thompson explains it, investors could have to pay a tax rate as high as 11.6% on muni bond income, depending on their bracket  If the proposal goes through, it’s likely muni yields will go higher relative to Treasury yields.

    Though some think chip inventory fears are overblown (III), Gartner is having none of it. The firm predicts weak macro conditions will trigger an industry-wide inventory correction by late 2011, and demand and production won’t return to balance until Q2 2012. In addition, Gartner sees foundry overcapacity leading to price pressure. (previously)

    Adobe (ADBE): FQ3 EPS of $0.55 beats by $0.01. Revenue of $1.01B (+2.3% Y/Y) in-line. Shares +6.8% AH. (PR)

    Oracle (ORCL) is now up 3.5% AH after the companyguides for FQ2 revenue of $8.99B-$9.34B and EPS of $0.56-$0.58, compared with a consensus of $9.36B and $0.56. Oracle expects its struggling hardware business to be flat to down 5%, and claims the weakness is solely due to poor low-end server sales. But IBM mightbeg to differ.

    More on Oracle’s (ORCLFQ1: New software license sales +17% Y/Y. Software update and support revenue +16%. Hardware revenue -3.5% Y/Y, though 10%+ growth is claimed for the company’s high-end server business, and its hardware gross margin rose 6% Q/Q. Free cash flow was $5.3B, up from $3.7B in FQ1 2011.ORCL +0.4% AH. 

    Microsoft (MSFT) boosts its quarterly dividend +25% to $0.20 per share, payable December 8 to shareholders of record on November 17.

    A coalition of companies including Boeing (BA), FedEx (FDX) and Disney (DIS) organize an umbrella group to lobby Congress for lower corporate tax rates. The group also sent a letter to Pres. Obama saying the firms’ execs would be willing to support closing tax breaks as a compromise for a reduced corporate tax rate from its highest level of 35%.

    Look at the Emperor Mommy, he isn’t wearing any clothes:  Even the greatest company can be "a bad investment, [as] widespread recognition of greatness generally leads to pricey valuations," Frank Voisin writes, pointing to Chipotle (CMG +0.8%), which trades at 52x trailing P/E with the highest earnings in its history. For all his admiration of the company, Voisin says the stock is "exceptionally" overvalued.

    Hope springs eternal, at least for the 20% of Americans who expect to become millionaires in the next decade despite the weak economy, according to a new poll. But 62% still believe it’s "very unlikely" they’ll reach the threshold by 2020. Two in 10 believe $1M is the minimum needed for a comfortable retirement, while three in 10 think $100K-$500K will suffice.


  154. knightpilot

     Fantastic!  Very helpful.  Love the ability to flip more bearish should the need arise without chasing spreads.  Also like the inch deep and a mile wide, sounds better than narrow and deep, paying for spread that most likely won’t happen.  Thanks.
     

  155. Canuck

    Knight/hedge,
    SDS Oct 23/27 BCS  is net $0.92 for a slightly better than 4:1 and as Phil said with the SQQQ spread, both are much closer to being in the money to help hedge on a smaller correction.

  156. kurtww

     Phil – thanks for the talk on spreads. I’m trying to figure out if I’m appropriately hedged. My current bullish positions are AAPL centric because I haven’t found anything else recently to get excited about. I have 5 375/380 Oct BCS, 3 sold Oct 305 puts, and I added your suggested play today of 4 Oct 410s and selling 3 Nov 425s. I got in at just under the price you posted (net $2915). My hedges are 5 Oct EDZ 20/24 that is well in the money (I’m waiting for it to expire so I can collect, basically), 7 Nov 24 SQQQs against 3 sold Oct 26s and 4 Oct 32s (I plan to buy those back when they are cheap and sell Nov). Then today I bought 6 Oct SDS 20s and sold 4 22s. I may sell the other 2 later, or hold for more upside potential if we drop. I don’t feel like I have enough protection to help against a significant drop in the market that might cost me the AAPL 410/425 spread. When we dropped at the close that position went down $800, but my hedges only went up a little. Any help on figuring out how much to hedge would be great. 

  157. peedlew99

     I’ll be cash-y into the announcement… but i for one will not be surprised by a big disappointment tomorrow.  In 2008 QE came after default.  With so much risk of a default in the EU, the Bernank will possibly want a big gun left to draw when that event takes place.

  158. rehat

    Phil,
    It is my opinion that QE I and II have not helped the economy and has only created asset bubbles where the investing class made or lost money. But for the last few weeks it seems you either want more QE or expect it and therefore are bullish on the markets.
    I don’t understand why you would fault the Republican Leadership for writing to the Bernak to not do further easing. I am not a republican but a thousand miles especially the kind they have become, but I have to agree with them on this – it is the right thing for the economy. Further easing is the wrong way to go. Now I agree that we need Fisal stimulus which these Repubs are blocking for their own political gain, but monetary easing should not be done. 
    So I do not agree when you say they are trying to Sabotage the Markets. The markets are hooked on Bernake’s Crack and they are expecting another large Hit, which if they don’t get they will convulse, but probably a good first step to a much needed market rehab.
    my 2 cents

  159. exec

    Shadow/Edge,
     
    I’ve been trying it the last few days.  So far there are a lot more things I don’t like about it than I do.
     
    The charts have a better layout, but the resolution seems poor and the lines are fuzzy.  Also there is a lot less flexibility than SSpro.  For example you can only choose from a limited color chart for customization.  I like the way the options are set up and you can get historical charts on the options.  The trading window seems more cumbersome but I haven’t traded on it much so that could be lack of familiarity.
     
    I’m going to give it a few more days but right now I’m not overly impressed.

  160. davew

    This is how we hedge (protect) ourselves in Florida. I may just open a couple of accounts!
    Florida firm offers free AK-47s to new customers
    http://www.marketwatch.com/story/florida-firm-offers-free-ak-47s-to-new-customers-2011-09-16

  161. Phil

    Good morning!  

    Dollar ran up to 77.8 at 4:40 and then down a bit, now 77.64.  That spiked the futures down but not too much and now they are up 0.25%.  

    Really nothing exciting going on except Yen is stronger (76.30) and Swiss are weaker ($1.22) but Euro ($1.366) and Pound $1.566) are middleish and oil is $86.42, gasoline $2.70, gold $1,812, silver $40.50 and copper $3.75 – all just waiting on the Fed. 

    Shanghai had a nice day, up 2.66% but the Hang Seng gave up 200 points into the close and that’s AFTER they rallied back 100 – essentially a harsh rejection at 19,000.  The Nikkei barely moved at 8,741 – a 2,500-point spread to the Dow and the BSE pulled back a bit but held 17,000.  

    Europe is down about 0.75% at noon – zig-zagging up and down.  

    U.S. Alleges Poker Site Stacked Deck

    The U.S. Justice Department accused poker celebrities and other executives of a major poker website of defrauding players out of more than $300 million.

  162. Phil

    Hedges/Kurt – You only know if you are "appropriately" hedged by observing the behavior of your overall portfolio balance as the market moves up and down.  You don’t need to over-hedge, though, you just need to know what you will do to get more bearish if the market (or AAPL, in your case) fails to hold certain levels.  You could add more SQQQs if the Nas is below 2,600 and use that line for a stop and add more at 2,550 and 2,500 – things don’t have to be absolute – adjustments can be made along the way as long as you can ride out a 10% move with what you have.   You say you have an AAPL $410/425 spread – is that October?  If so, that’s pretty much a binary play on earnings and you will either win or lose 75% of that bet in one day – if you are not comfortable losing it then it’s not hedging that’s your problem – it’s taking a highly volatile position that has ZERO intrinsic value if you are wrong.  Hedging it with more stuff that has no intrinsic value isn’t going to help you – it just makes you the sucker paying all the premium we like to sell to….

    Disappointment/Peedle – I don’t see it as an option.  This is like a snowball that is gaining mass as it rolls downhill.  You may be able to stop it or deflect it’s path now but, if you wait – you will end up with a massive and rapidly expanding problem that cannot be controlled – I don’t think it’s likely that the Fed rolls those dice and this concept that the Fed has limited firepower is nonsense.  The BOJ has created 200% debt to GDP and we are only at 100% – we have $15Tn in stimulus to go before we even catch up to them.  Also, we just saw that Switzerland, with their 500Bn GDP were able to massively effect the Euro, with it’s $16Tn GDP so do you really believe that our Fed, playing with a $15Tn economy, isn’t able to affect our own economy with PLENTY to spare for Europe as well?  

    QE/Rehat – As I said in the above post, QE is a joke – nothing but a ponzi scheme (detailed in the linked article).  But that doesn’t mean you don’t give someone a pint of blood just because you haven’t stopped the bleeding yet.  Your "solution" of letting the patient die first and then seeing how they respond to treatment would not be popular in most hospitals.  It’s the FAILURE of Congress and the President to provide job-creating stimulus and a balanced budget that makes Fed action necessary.  What the Republicans are doing is making a bad situation much worse.  Sure, we are like heroine addicts who need another hit and you believe we can survive a few quarters of withdrawals (although I bet you are not about to have your home foreclosed or that you are not about to have your unemployment benefits expire in December) and you are willing to risk 20% unemployment and the collapse of the credit markets, bank defaults and municipal defaults along with national defaults and civil war to "teach us a lesson" while I think a little Fed methadone may be a gentler way to accomplish the same thing.  

    I "fault" the Republican’t "leadership" because they have NO solutions other than to cut taxes and cut government.  Essentially, that’s Greece except Greece is raising taxes because if they cut taxes they would have collapsed months ago as the rest of the EU would have walked away from them for being completely unrealistic about balancing their budget.  An "austerity" program that is matched by collecting even less tax money which leads to less collections and requires more cutbacks (and maybe even lower taxes to "fix" it) may be a Conservative’s wet dream but, in the parts of the World where MATH is practiced – it’s pretty ridiculous sounding.  

    GENEVA (Tom Miles) – The pursuit of austerity measures and deficit cuts is pushing the world economy toward disaster in a misguided attempt to please global financial markets, the annual report of the United Nations economic thinktank UNCTAD said on Tuesday.

    The report, entitled "Post-crisis policy challenges in the world economy," savaged U.S. and European economic policies and called for wage increases, stricter regulation of financial markets, including a return to a system of managed exchange rates, and a conscious break with market-led thinking.

    "The message here is very pragmatic: we need to reverse our course quickly," said UNCTAD Secretary General Supachai Panitchpakdi.

    Study: Austerity Leads to Violence And Instability

    The above chart is from an extensive IMF study that looked at 173 episodes of austerity measures taken over the past 30 years by various countries – across the board they were FAILURES!   Only demagogues who refuse to accept FACTS would even consider this nonsense – unfortunately, there are plenty of people like that in positions of leadership in our own backwards nation.  

    The Fed is our ONLY chance to avoid the fate the Republicans have in store for this country and even the Fed can’t save us if more of them are elected – they are like a creeping cancer that is taking over the body politic of the United States, sucking the life out of the once-thriving middle class and feeding all the wealth to the tumor-like top 1% that grows and grows until it deprives the rest of the body from the resources it needs to survive.  

    The Fed can’t stop that – all they can do is provide a little stimulus to keep us alive until the next election but then it’s simply do or die for America.

    Florida/Dave – They have the right idea, it’s an every man for himself World we’re creating and God help them who can’t help themselves!  

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