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Which Way Wednesday: Durable Goods and The Bernank

SPY DAILY Strap in for another wild one!  

We fixed our targets yesterday morning, in the main post, at Dow 11,300, S&P 1,200, Nas 2,575, NYSE 7,100 and Russell 685 and, at 10:46 in Member Chat, my comment was: "Past 10:30 without breaking 10,300 and the Dollar over 78.20 so over 78.25 is a good reason to tap the DXD hedge or grab the DIA FRIDAY $111 puts, now .98 so let’s watch that VERY CAREFULLY although it could just be a bit of profit taking into the EU close with the DAX up 12% since Friday morning. A pullback to 10% (from the DAX 5,000 bottom) is very much expected here and EWG naked calls can come off the table for now until they prove they can break $20."

We ended up holding that 10,300 line through the afternoon but we finally broke down at 3:07 and we stuck to the plan but my adjustment on the trade idea for Members in chat was: "Game on for the DIA puts but now we can pick up the $112 puts for $1.10 – 10 in the $25KP with a stop at .90 in case we dive into the close."

Those puts came off the table at $1.65 into the close, up 43% in less than an hour and even the original idea of the $111 puts topped out at $1.40 for a nice 43% gain on the day (but those took 6 hours, so not as good an annualized rate of return!).  As I noted to Members in this morning’s Alert – these are the kinds of quick adjustments we can make to re-balance our portfolios on the fly in a choppy market.  

We don’t want to let ourselves be chased in and out of short-term positions by these silly market fluctuations so we make quick adjustments with even shorter-term momentum plays that help us ride out these little moves.  As I said to our Members during the afternoon drop "I’m not changing my stance because Meredith Whitney told me to."  That was at 3:48 when people were asking if we should panic out of our bullish positions on FAS and other trades.  At 3:29 I had already pointed out:  "Also Whitney was no help – same BS as usual when they want to halt a rally. Next we hear from Roubini, Gross and El-Erian."

That was brought on because Whitney had cut her earnings estimates for GS to .31, very far below consensus of $1.13 for the quarter, she also cut MS estimates to .28 (.37 consensus) but was kind to our BCS – keeping her estimate at .12 for Q3.  I reminded Members that Whitney has been wrong 66% of the time since starting her advisory firm and, as I noted earlier, "THEY" always trot out the Doom Patrol when they want to squash a market rally and Whitney is usually the lead dog, followed by Roubini, El-Erian and Gross.   

True to form, "Doctor Doom" Roubini came out of his coffin yesterday evening and declared that  the European debt crisis could result in consequences worse” than the Lehman collapse. The U.S. already is in the throes of an economic contraction, he says; the issue is "whether it’s going to be relatively mild or whether it’s going to be a severe recession and a global financial crisis."  Here’s my article from June 15th, 2009, when I warned people not to listen to Roubini and El-Erian as they were on a World Tour telling investors we were DOOMED!  

The reason that Corporate Media treats the investing public like complete idiots is because they generally act like complete idiots and mindlessly follow any BS story that is written in bold headlines or is told to them by "someone they’ve heard of."  On June 15th, 2009 the Dow was at 8,555, coming down from 9,000 and we bottomed our around 8,100 in July but NEVER came back to 8,555 or 9,000 again after crossing back over in July.  THOSE GUYS ARE IDIOTS – DO NOT LISTEN TO THEM!  The Banksters and their MSM puppets trot this Gloom Patrol out whenever they want to move the sheeple out of positions.  Sadly, this works so well that they can do it over and over and over again – because traders never learn!  

Actual sheep need to be herded and have enough minds of their own where a shepherd needs a pack of dogs to keep them in line.  Traders can be pushed to selling all of their stock assets by simply floating a rumor on CNBC – which animal is smarter?  Just like a shepherd, the Banksters have their pack of MSM hounds who bark their stories over and over again until they get the herd moving in the direction they want them.  Is it ultimately in the sheep’s interest to obey the shepherd?  While they may get fed once in a while – ultimately, they end up being the dinner or, in the very least – fleeced!  

8:30 Update: Durable Goods were down 0.1% and that’s worse than the up 0.2% expected but July was up 4.1% so what’s 0.3% between friends?   On the other hand, Mortgage Applications were up 9.3% but that too, should be taken with a grain of salt as it’s 9.3% better than dead.  So, lacking any proper US data, we will wait for the 10:30 Oil Inventories, but those have turned into a joke as the industry crooks have stopped importing oil to create artificial draws in inventory.  What they can’t control, though, is the lack of demand for finished product and that’s the number to keep our eye on but we don’t get the proper details until 1pm.  We will probably short a pop in oil to $85 or over on "good" inventory news.

Other than the usual back and forth BS out of Europe, we have a $35Bn 5-year note auction at 1pm and that should have good demand and, aside from Hoenig (8:30) and Resengren (2:40) we hear from the Bernank himself at 5pm.  The Troika is in Greece this morning and all they have to do is to decide Greece is making enough progress to release 10% of the 109 Billion Euro rescue package they are ALREADY APPROVED to disburse and, suddenly, Greece will be "fixed" again.  Finland approved, by a wide margin this morning, to expand the EFSF and make it more flexible – something that just yesterday the Doomsayers were saying would never happen.  

I’m not saying it’s all sunshine and lollipops but I am saying we need to step back from the madness and wait for the FACTS – as these rumors can kill you!  

 


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  1. stjeanluc

    Oil Lines
    R3 – 88.03
    R2 – 86.42
    R1 – 84.85
    PP – 83.19
    S1 – 81.62
    S2 – 79.96
    S3 – 78.39
    Yesterday’s high and low – 84.77 / 81.54
    Breakout lines – 89.99 / 73.08 

  2. jromeha

    jromeha

    Phil – I was curious what you think of the carbon fiber manufactures now that BA is finally going to deliver some of its dreamliners? I was looking at ZOLT, CYT, and HXL? Thoughts?

  3. exec

    Some pretty good TA from the  CPT.  He’s bearish….of course he’s always bearish.
     
    JR…..a lot of his theories reflect yours.  What’s your take on his stuff?

  4. stjeanluc

    FAS Money – The last 2 weeks trade recap
     
    Week 12 – On Friday 9/9, we sold 1/2 (10 contracts) the October 13 puts for $2.30. We also set some protective stops on the weekly puts, but were able to save only $0.05 (sold for $0.80 and bough back for $0.75 – $50 premium profit) as the market turned down rapidly! And that was the week!
     
    Week 13 – On Thursday 9/15 we sold another 1/2 (10 contracts) October 13 Puts as the September puts we held we expiring on Friday. We were then fully covered on the put side for October with an average price of $1.98. We also set stops on the September put to protect our gains! This stop triggered quickly and we bought back the September put sold for $1.03 at $0.30 for a $0.73 profit ($730). 
     
     
    Summary
     
    Week 1 – $820 of premium collected ($0.45 call side and $0.37 on the put side)
    Week 2 – $1180 of premium collected ($-0.02 call side and $1.20 on the put side)
    Week 3 – $400 of premium ($-0.40 on the call side and $0.80 on the put side)
    Week 4 – $1470 of premium ($1.17 on the call side and $0.30 on the put side) 
    Week 5 – Loss of $500 (loss of $1.00 rolling the calls and gain of $0.50 on the put side)
    Week 6 – Gains between $540 and $1150 depending on your timing.
    Week 7 – $700 of premium (gains of $1.20 on the calls side and loss of $0.50 on the put side)
    Week 8 – We rolled Puts and Calls finishing the week long 10 Puts and 20 Calls. Rolling the original position cost us $100 and adding 10 Calls cost us $2000.
    Week 9 – We collected $520 of premiums selling calls, but spent $2700 to roll the short puts! And spent another $3370 to roll the calls and add 10 Puts.
    Week 10 – We collected $1680 of premium but spent $860 to adjust the strangle.
    Week 11 – $340 of premium collected – all on the put side.
    Week 12 – $50 of premium collected on the put side.
    Week 13 – $730 of premium collected on the put side as well.
     
    Long strangle cost – $4800 (original position) + $6330 (adjustment) = $11,130.
    Premium collected – $8430 (profit) – $3200 (loss) = $5230 (47% of the strangle) 

  5. Pharmboy

    PP for today are wrong in ShadowTrader, so SPY, DIA & IWM, respectively are:

    121.06, 119.24, 117.84, 115,92, 114.41

    115.09, 113.47, 111.83, 110.21, 108.58

    70.84, 69.32, 68.05, 66.35, 64.90

  6. Pharmboy

    Nice lazy calendar spread: IBM 180 Oct C (sell), 180 Nov C (buy) for $2 debit. 

  7. Pharmboy

    Link here.

  8. stjeanluc

     FAS Money Recap 
     
    Long Strangle –Jan 12 Puts (3.01 average now 2.94) and 15 Calls (2.75 average cost now 1.66). 
     
    Weekly – Full Cover October 13 Puts (1.98 average now 2.04)
    Monthly – Full Cover October 13 Puts (1.98 average now 2.04) 

  9. stjeanluc

    Might not just be a short covering rally:
    http://www.bespokeinvest.com/thinkbig/2011/9/27/just-a-short-covering-rally.html
    And the best performing stocks since the last Thursday when we started that rally:
    http://www.bespokeinvest.com/thinkbig/2011/9/27/winning-since-922.html
    Duh! Winning….. 

  10. nicha

    No comments for a half hour?

  11. pentaxon

    then I will fill up this vacuum of information with a chart update:
    http://www.pentaxon.com/psw/spy_vs_worldcurrency.png
    doesn’t look bad, but I’m still not that optimistic.

  12. Phil

    Good morning! 

    Good day to get some perspective.  

    Notice on the S&P chart on top of the page that we’re in that very tight range and we did test the top SPY 120 yesterday and that’s up from 112.50 so an 8.5-point gain is a 7.5% move up and it’s no surprise at all to move back to test the 5% line to see if it’s a floor – especially on a very quick move up like that where there was no consolidation at the 5% line.  112.50 x 1.05 = 118.12 on SPY and we’re at 117.85 at the moment – close enough if it holds.  

    Below that, and failing to hold our -5% lines of 1,173 on the S&P (now 1,178..72 so right in line with SPY) or 11,011 on the Dow (now 11,266) or 2,473 on the Nas (now 2,556) would be bearish but the Nas and Dow are WAY over the line with the S&P lagging so, as long as the S&P holds – we’re still leaning bullish.  

    TNA makes for a fun trade if you want to be very bullish on the RUT.  The Oct $38/43 bull call spread is $2.50 and you can sell the $30 put for $2.10 for net .40 on the $5 spread.   TNA bottomed out at $31.78 last week but hasn’t been below $30 since July of 2009 so you have to figure there’s a little support there.  The $9 cushion is roughly 25% so this trade gets in trouble with an 8% drop in the RUT to about 625 and the RUT was as low at 587 last Summer but only on brief spikes below 600, which pretty much held since July of ’09.  So risking $400 to make $5,000 with the worst-case that you are forced to be long at Russell 600.  

    Our short play today is likely to be USO as it tests $33 and that will probably be the Oct $32 puts at $1.10 (now $1.30) – we’ll have to see what happens at inventories.  

    Dollar was rejected at 78.25 at the open so that’s a good thing and the overnight low was 77.835, which would give us a really nice pop if we get back there but let’s watch that very bouncy 78 line.  We should certainly retest yesterday’s highs before the Dollar reverses and our targets remain  11,300, S&P 1,200, Nas 2,575, NYSE 7,100 and Russell 685 - but keep in mine, it’s no longer even a strong move just to make them – if we don’t move over with authority, all we’re doing is confirming the top of a tight channel near the bottom of our long-term range.  

    Wednesday’s economic calendar:
    7:00 MBA Mortgage Applications
    8:30 Durable Goods
    8:30 Fed’s Hoenig: ‘National debt, deficits and too big to fail’
    10:30 EIA Petroleum Inventories
    1:00 PM Results of $35B, 5-Year Bond Auction
    2:40 PM Fed’s Rosengren: Swedbank Economic Outlook Seminar
    5:00 PM Bernanke: ‘Lessons from Emerging Market Economies’

    At the open: Dow +0.4% to 11236. S&P +0.27% to 1179. Nasdaq +0.47% to 2264.
    Treasurys: 30-year -0.23%. 10-yr -0.07%. 5-yr -0.04%.
    Commodities: Crude -0.94% to $83.66. Gold +0.02% to $1652.85.
    Currencies: Euro +0.16% vs. dollar. Yen -0.46%. Pound +0.01%.

    10:00 AM On the hour: Dow +0.92%. 10-yr -0.12%. Euro +0.35%vs. dollar. Crude -1.01% to $83.59. Gold -0.32% to $1647.15.

    Notable earnings after Wednesday’s close: MOSWOR

    People seem to be eating out:  McCormick & Company (MKC): FQ3 EPS of $0.69 beats by $0.03. Revenue of $920.4M (+15.8% Y/Y) beats by $49M. Reaffirmed FY11 EPS outlook of $2.74-2.79. (PR)

    Darden Restaurants (DRI): FQ1 EPS of $0.78 in-line. Revenue of $1.94B (+7.5% Y/Y) beats by $10M. Sees FY12 revenue growth of 6.5-7.5% Y/Y. (PR)

    Actuant (ATU): FQ4 EPS of $0.50 beats by $0.04. Revenue of $403.4M (+30% Y/Y) beats by $8.5M. Reaffirms FY12 EPS outlook of $1.80-2.00, and revenue of $1.60-1.65B. (PR

    Market preview: Stock futures pared gains after a drop indurable goods orders, with S&P +0.3%, but investors remained encouraged over the eurozone’s progress in easing debt fears. European shares were off a bit after their biggest one-day jump since May 2010. Jabil +9.3% after reporting a big profit gain and raising guidance. Crude oil futures slipped below $84; gold was flat.

    EC President Barroso delivers his State of the Union address before EU parliament, unveiling a proposal for a 0.1% transactions tax on all trades involving stocks and bonds and a 0.01% tax on derivatives trades. The levy is expected to raise €57B and would start in Jan. 2014. 

    Geldentwertung!  Germany’s CPI jumps to 2.6% in September from 2.4% in August, according to preliminary data from the country’s Statistics Office. It’s the highest reading since September 2008, when it hit 2.9%. 

    Reality:  As a Q3 filled with bad macro news comes to a close, UBS remains confident earnings are holding up fairly well. The firm’s analysis of earnings reports issued since August 1 finds the median company beating estimates, and only slightly lowering forward guidance, as strong numbers from certain tech and retail names buoyed results.

    Rumors:  The head of Unicredit Global Securities and former chief of the Hungarian Stock Exchange pens a remarkable essay (for someone in his position), calling the euro "virtually dead," saying it is only a matter of time before Greece defaults, and that the action will trigger an immediate magnitude 10 earthquake across Europe.

    Longtime euro-skeptic, U.K. foreign secretary Hague takes a bow for his 1998 comment that the eurozone was "a burning building with no exits." The PIIGS "have to accept some very big changes in what happens in their country … the Germans will have to accept that they are going to subsidize those countries … for the rest of their lifetimes."

     The abysmal performance of EFSF bonds suggests to Michael Riddell that the market is losing confidence in the mechanism at the same time a massive expansion of the fund is being considered. "Not a good combination," he says, and it suggests the ECB may end up being the only end buyer of the paper – that should please the Germans.

    Former ECB chief economist, Otmar Issing says it’s inevitable Greece will leave the eurozone and the country needs at least a 50% haircut on its debt. Horrified at the idea of common eurobonds, he says they "will prove to be the gravedigger of a stable euro." 

    Nomura’s Richard Koo has long advocated the "U.S. is Japan" scenario, but now he suggests the comparison might be too rosy. The U.S. economy hasn’t responded to real interest rates that are far lower than in Japan of the 90s, and U.S. unemployment is nearly twice as high as Japan’s. Also, the end of the "myth" of ever-rising U.S. housing may have far-reaching consequences.

    Toyota (TM) reports its first increase in domestic car production since the March earthquake and tsunami, posting a 12% Y/Y rise in August. Suzuki (SZKMY.PK) and Mazda (MZDAY.PK) also saw increases, 5.9% and 5.6% respectively, while tough comparables at Nissan (NSANY.PK) and Honda (HM) led to monthly declines. Honda’s output fell a brisk 17%, while Nissan’s was down 2.5%.

    Maybe bad news for the economy, but clearly bad news for Best Buy (BBY), the company will hire just 15K seasonal workers for the holidays vs. 29K last year. CEO Brian Dunn says the company is not expecting "a meaningful move in the economic environment."

    Fundamentals beat rumors – YAY!  Shares of Chesapeake Energy (CHKsoar 6.4% premarket after the firm announces "strong initial production" from wells in Ohio and Pennsylvania, helping boost the company’s guidance. The natural gas and oil driller now sees increasing net liquid production 50% by the end 2012.

    Jefferies is taking reports of iPad order cuts (III) in stride,believing factors such as a Brazilian manufacturing shift and a January iPad 3 launch have played a role, and any cuts are offset by iPhone strength. Jefferies also sees Apple (AAPL) offering a low-cost iPhone that resembles the iPhone 3GS, and expects a China Telecom (CHAiPhone launch in Q1 2012.

  13. jcaesar

    That dang dollar!!!

  14. stjeanluc

    A dollar correction is not unexpected – following a move like the one we had so far this month from 73.57 to 79.63 in 2 weeks! We have retraced to the 23.6% line at 78.20 so far and going the the 38.2% line at 77.31 would not be surprising! The 50% retracement line is at 76.60 next! 

  15. Phil

    Carbon fiber/Jrom – Good long-term place to be but I’d stick with CYT – I don’t even think ZOLT is a BA supplier.  Unfortunately, the options are very thinly traded with wide spreads so it’s not the kind of stock I like to be in but you can establish a long-term position by simply selling the May $35 puts for $5 for a net $30 entry and that’s a nice, 14% profit off the current price ($36.50) in 8 months without all that messy stock ownership if they just manage to hold $35 with "free" 20% downside protection.  

    FAS Money/StJ – Nice update but what about our adjustment?  

    FAS Money – Jan $15 calls (now $1.60) can be rolled to the $12 calls ($2.70) for $1.10 and Jan $12 puts ($3) can be rolled to April  $11 puts ($3.25) for .25 so those are the adjustments on this sell-off.  

    Since we have 20 each of the puts and calls in this trade and they are at $3,200 and $6,000 for $9,200 and that’s a $1,930 loss against the net $5,230 gain, we’re overall up $3,300 over 13 weeks, which is not bad off the $11,130 cash commitment but now we’re rolling for time so make sure you really want to keep riding this roller coaster before making adjustments because it’s got to be worth the hassle you go through to make the money!  

  16. Phil

    S&P looks like it’s losing it and we don’t have much support under here but I’d rather pick up where we left off with the DIA FRIDAY $111 puts at $1 with a stop at .85, 20 in the $25KP.  

  17. stjeanluc

    That Amazon tablet – $199:
     
    http://www.engadget.com/2011/09/28/amazon-fire-tablet-unveiled-7-inch-display-199-price-tag/
     
     
    And also now sells a $79 Kindle. Paper books are on their way to extinction (for better or worse) 

  18. stjeanluc

    FAS Money / Phil – That was too late yesterday to make adjustment. You mentioned that we would  look again this morning. The price are where you have them now so I’ll proceed with these now!

  19. Phil

    IBM/Pharm – Not that lazy if they pop 10% on earnings.   Very nice S&P chart.  

    No comments/Nicha – Maybe people are getting the message that the first half hour of trading is just BS..

    Thanks Pentax – Triangle squeezy thing seems to have popped to the upside!  

    Dollar getting rejected again at 78.25 – that’s good if it sticks.  We’ll see what oil says in a few mintutes but maybe we pull the DIA play even in the $25KP if the Dollar doesn’t go over 78.25 – still at $1.02.  

  20. ronresnick

    Dear Phil,
    I currently am short a basket of European banks including BNP, Societe General, Barclays and HSBC.  After yesterday the basket is against me by a small amount.  Should I cover these shorts now and await votes and developments this week?  (Is it too risky to keep this short basket at the moment?)
    The short market values is equal to about 7% of my portfolio.
    Thank you.
    Ron

  21. Maya1

    Phil
    Good morning
    I figured you would have a quick and explainable answer
    Under what premise do you use a bull put spread? I mean if the equity is expected to move up, why not a BCS?
    Generic question, pertaining to circumstances for each strategy.
    Thanks

  22. stjeanluc

    FAS Money Recap
     
    Long Strangle –Jan 12 Calls (2.71) and April 11 Puts (3.30). 
     
    Weekly – Full Cover October 13 Puts (1.98 average now 2.20)
    Monthly – Full Cover October 13 Puts (1.98 average now 2.20) 
    We spend $1.38 to roll both sides of the long strangle ($2760 for 20 contracts on each side)

  23. Phil

    Oil UP 1.9Mb, gasoline up 800K, distillates up 100K so decent demand but build in oil not expected – that won’t give them a pop so it’s all up to the Dollar now, which is over 78.25 and that will now be our stop line for the DIA puts in the $25KP (at about the $1 mark) and we’ll just see how far it goes now.  

    I have no interest in shorting oil without them going higher first but good time to take bullish oil profits off the table if not well-hedged spreads.  

  24. Phil

    Dollar/StJ – I don’t agree with 50% retracement just because it would make a TA person happy.  Dollar actually trades on fundamentals and, while we may get 20% pullbacks for no reason, 50% is a stretch.  The Dollar will stay strong until the Euro is really fixed, not BS fixed with another short-term extension.   Once that does happen, then the attention will turn back to the Madness in our own Congress but a strong Republican showing in the election would also be a Dollar booster as the rest of the World buys into their fiscal rhetoric – despite the fact that, when in power, they spend money like drunken sailors. 

    NFLX coming back strong. 

    Books/StJ – The bad thing about that is there will be no permanent record.  Again we take a step closer to the Orwellian World, where the party in power can erase and alter history at will and no one will ever be able to prove it had ever been any different.  

    EU Banks/Ron – You shorted them AFTER they dropped?  If you have profits, I’d say take them off the table but if you were chasing into that drop last week – you may have sold into the exact bottom and your only hope is a collapse of the EU and probably all of Western Civilization along with it so I guess you can pray for that and hold on but – if you don’t think the EU, IMF, ECB, BOJ, BOE, World Bank, the PBOC and the Fed are going to allow the entire Global Financial system to collapse without trying another bailout – then those are not good positions to be in.  

    DIA $111 puts at $1.20, let’s take a $200 gain on 1/2 (10) in the $25KP and set a stop even at $1 on the rest.  

     

  25. jcaesar

    Phil – Thoughts on why the RUT is such a laggard?

  26. vic55

    From ZH
    Art Cashin On European Political Alliances, Marrying Your Best Friend’s Sister, And Fed Fisher’s Enlightenment
    This is brilliant
     “Theory is when you understand everything, but nothing works.”
    “Practice is when everything works, but nobody understands why.”
    “At this station, theory and practice are united, so nothing works and nobody understands why.”
    Let’s repeat that last sentence one more time for emphasis. “But the committee’s policy has yet to show evidence of working and nobody seems to quite understand why.”
    That makes the frustration in the FOMC (and elsewhere in the government) fully palpable. It suggests that “we’re doing what the book says to do” but not getting the results the book suggested.
    That is a perfect summation of my take on Ben since the very beginning. He is aggressive and self-assured, but he has no idea that is his own. At least Greenspan had something to offer, Ayn Rand or not it was his ideas. He did screwed up the economy but it ws his vision. Ben is a student of history and he would never become a professor at least from the history point of view.

  27. jmm1951

    stjeanluc/Kindle Fire
     
    I don’t really understand all this talk about Kindle Fire undermining the i-Pad.  There are already numerous other top-end pad computers on the market, e.g, Samsung, Blackberry, Sony, Acer, Toshiba, Asus, Motorola, Vizio, HP.  Then in the mid range you have Nook and Creative Labs.
     
    Amazon.com already has generic Android pad computers for as little as $140, so the question is really what makes the Kindle Fire worth more than $140? I had one of the cheap pads and it worked fine, but after a while the performance of the screen deteriorated and one day I pushed it too hard and the screen shattered, and that was that. So I would think the main issue would be the quality and durability of the screen.
     
    The AAPL i-Pad is in a completely different market and runs off the AAPL operating system not Android, is presumably of much superior quality in components, and has access to the popular AAPL apps. Its appeal seems to be largely based on its robustness compared to cheap competitors. I noted the other day that Nippon Airways issued its cabin staff with manuals on thousands of i-Pads to save paper, but could not understand why they did not save money by using Nooks.
     
    (Note that when the first i-Pad was released people complained it sounded like a product for menstruation, but it still sold well.)

  28. Phil

    Bull put spread/Maya – I don’t like them so I almost never use them.  I like to make positive bets, not negative ones.  When you have a lot of positions it gets confusing to manage, for one thing and, also, you are buying more premium than you’re selling so I generally don’t like that at all.  Anyway, as to under what premise do we do something like that – the answer is:  When it’s better than all the other alternatives.  I always look at dozens of ways to play a position and decide on the one I think has the most overall possibility of success with the most flexibility (ie. escape route) possible.   Bull CALL spreads or Bear Put spreads are generally useful when the premium is too ridiculous to buy a naked call or put but, by selling the premium to someone else, you strongly limit your own options so you’d better be damned sure about your target.  HOWEVER, if we are taking a Disaster Hedge – then we use a Bull Call Spread BECAUSE we’re unsure and want to limit our net loss if we’re wrong and, if we’re right and we position it correctly, then they return PLENTY of cash (but only if you wait out the premium decay).  

    There go the rest of the DIA puts.  That was a fun visit to 666 and 1,173 – let’s try not to do that again!  

  29. kustomz

    Germanys inflation at a 3 year high..probability of 50bp rate cut now 28% down from 88% and 25bp rate cut priced in.

    This is why the Eurozone will not last in current form.

  30. iTrade

     Step Aside BBC "Trader": Head Of UniCredit Securities Predicts Imminent End Of The Eurozone And A Global Financial Apocalypse
     
    the head of UniCredit global securities Attila Szalay-Berzeviczy, and former Chairman of the Hungarian stock exchange, who has written an unbelievable oped in the Hungarian portal Index.hu which, frankly, makeAlessio "BBC Trader" Rastani’s provocative speech seem like a bedtime story. Only this time one can’t scapegoat Szalay-Berzeviczy "naivete" on inexperience or the desire to gain public prominence. If someone knows the truth, it is the guy at the top of UniCredit, which we expect to promptly trade limit down once we hit print. Among the stunning allegations (stunning in that an atual banker dares to tell the truth) are the following: "the euro is “practically dead” and Europe faces a financial earthquake from a Greek default"… “The euro is beyond rescue”… “The only remaining question is how many days the hopeless rearguard action of European governments and the European Central Bank can keep up Greece’s spirits.”…."A Greek default will trigger an immediate “magnitude 10” earthquake across Europe."…"Holders of Greek government bonds will have to write off their entire investment, the southern European nation will stop paying salaries and pensions and automated teller machines in the country will empty “within minutes.” In other words: welcome to the Apocalypse…

  31. ronresnick

    EU Banks:  I covered the whole basket.  I was up $135,000 on the basket last Thursday.  Did I take my profits?  No!  That is why I am here now . . .  to learn from you!  Thank you for your quick response.  

  32. button

    Gap just filled on IWM. Hopefully USD moves down now and we get a move up! In TNA @ $36.90

  33. Lincoln

     Phil: re Bull put  answer to Maya
    When you say you are buying more premium than selling you are considering the actual premium paid plus the distance between the current price and the strike price right?
    TIA

  34. jcaesar

    iTrade / Euro dead – That thesis may be right, but the Euro is still an extremely strong currency.  If the market thought the Euro is "dead" I would think it would be trading near it’s all time lows, roughly $0.82 to the Euro, not $1.36, as it is now.  Maybe it just can’t make that move technically (below parity) in such a short time frame, but I don’t see panic out of the Euro yet.

  35. yodi

    Phil do we reload the DIA?

  36. JRW III

    exec / CPT

    Good stuff.

  37. angelcur

    EURO CARESAR…hey that magical sloppy buyer is alive!….i think that even if europe fools market one last time that any rally will be more muted than most expect….because the REAL problem is their "solutions". massive tax increases/spending cuts will only push eurozone further into contraction eventually.

  38. stjeanluc

    Josh seems to think that this is just a window dressing rally:
    http://www.thereformedbroker.com/2011/09/28/not-a-short-covering-rally-a-window-dressing-rally-which-is-actually-worse/
    End of quarter shenanigans… I guess Pharm agrees!

  39. mampcsA

     Anyone using IB to trade know how to change the setting to use the mid-point of bid/ask to compute the values in the portfolio tab? It’s very confusing now because it uses the ask price and can be very misleading for large spreads. I checked with IB via chat and they claim it’s hard coded and cannot be changed, but i recall seeing a pop-up at some point to change that.

  40. Phil

    RUT/JC – Access to capital is limited for Small Caps.  

    Greenspan/Vic – I hope you’re kidding about him.   The man was a super-criminal who engineered destruction of the middle class of this country at the hands of the top 1%.  Bernanke at least isn’t evil, just misguided.  The reason Fed policies aren’t working is because they give $8Tn to the Banks and the banks fill in a $5.5Tn hole and add $2Tn to their balance sheets and lend $500Bn – of course nothing "works" if the Banksters you give the stimulus to keep it.  You won’t see Cashin come to that conclusion because Banksters pay his bills.  

    Dollar 78.30 – not good but hopefully that’s the top of the Dollar into the EU closing sell-off (they are now down 1.5% – at the day’s lows).  Volume 45M on Dow at 11:08 – not very strong.  

    Next hedge candidate would be the DIA weekly $110 puts, now .80 but I’d want to see the $111 puts go past $1.20 before looking at those as well as Dollar over 78.30. 

    Nooks/JMM – Nippon chose IPads because quality does matter.  Corporations test things a lot more thoroughly than consumers do before they make big purchases and I’m sure they found it superior for flexibility, usability, readability under various conditions, etc.  If cheaper were better then all taxis would be Kias.  

    Berzeviczy/Itrade – It’s like a parade where more and more people join in the march as it winds down the street.  

    Banks/Ron – Well let’s hope Berzeviczy is not right!  

    Premium/Lincoln – Yes because you are more "in the money" than the caller.  Obviously, with an out of the money bull call spread you’re both out of the money but on the TNA above, for example, it’s the $38 calls at $4.60, that are .90 out of the money, so $5.50 of premium vs the $43 calls at $2.50, which are $5.90 out of the money, so $8.40 in premium.  The caller has 53% more premium than the $38s.  Over the next 23 days, you can expect the $38s to drop .24 per day while the callers will lose .365 per day so your $2.90 has a very good chance of catching up over the next 10 days – all other things being equal (which they never are).  The offset is the short $30 puts, now $2.50 and they are all premium too, which will decay at about another .11 per day so now you have sold .475 in daily premium against your .24 decay on your own long position – that gives you a very nice advantage on a flatline, a huge advantage if it goes your way and a nice buffer if it goes against you.  That’s why we like to sell premium!  

    Dollar nicely rejected at 78.30 as the EU closed.  I guess the bullish play would be selling the FAS Friday $12 puts for .63 as that’s .40 in premium so, even with 100% margin, you pick up 5% in 3 days if FAS holds $12.  If not, the Oct $9 puts are .60 and, if you don’t think FAS can hold $9, then there’s no point in selling $12 puts, is there?  

  41. JRW III

    It will be interesting to see if we fail IWM 66.33 without a bounce; if we do here’s what to watch for:

    IWM    63.04,  63.67,  64.25,  64.50,  64.74,  65.07,  65.31,  65.56,  and  65.93

    BTW, Pharm,

     

    This monthly chart suggests a potential strong rally here that might last into the end of the year and is based on SPX holding a key pivot level at the end of the month.

    Interestingly similar to my chart:

  42. Phil

    DIA/Yodi – Good call as I was contemplating it just about the time you asked (see above).  I felt 666 would hold so I didn’t want to pull the trigger and the volume on the sell-off was too low to give the the impression we were breaking.  

    Meanwhile (and also), TLT down to $116!  Come on EuroBears – THINK!!! If people aren’t panicking into TBills OR Gold OR the Dollar – isn’t it just maybe possible that all the "expert" opinions you are hearing are nothing more than hand-picked BS?  There are 1,000 ex-ministers and heads of this and that and you only hear from the couple of dozen guys who say we’re going to hell – doesn’t that seem odd to you?  Once upon a time people would be shocked that there wasn’t a "pro" for every "con" so people could hear both sides of the story and come to a conclusion – what we get from the MSM these days is an opinion shoved up our asses.  Not only that but if you tend to lean towards reading Conservative or other focused media outlets – then not only are dissenting opinions filtered out but all you end up getting are the MOST EXTREME positions, with each one having to top the last to keep the viewers/readers interested.  

    Homework assignment is for everyone to find one article and put up a link to someone who says the Euro is strong and/or the EU will survive this crisis.  Just the process of trying to find such an article should tell you a lot about how this issue is being presented. 

  43. drcraig

     JR- What is the origin of your 2010-2012 weekly SPX chart?

  44. angelcur

    phil greenspan.you are completely right he was a dangerous man…if only we had a strong leader who would give th ebanks reason to cower…great opportunity here no one to take the hammer to them

  45. stjeanluc

    Kindle / jmm – I just report the news… I guess the next couple of months will tell us more! I am not a big Apple fan myself but I have an iPad and I like it! But Amazon seems to think that there is a market for the sub-$200 somewhat crippled tablet. To refer to Phil’s argument, Kia and Hyunday (and I don’t mean to say that they are crippled – they have some nice models) do sell a lot of cars even though they might not be BMW or Mercedes! 

  46. angelcur

    this thing continues to trade like a thai farmer’s market

  47. David Ristau

    Phil –

    What do you think of the $33 line on USO…with weeklies expiring tomorrow AH…only has to not hit by tomorrow’s close…can’t imagine they can get oil to 85 by tomorrow with those inventories

  48. angelcur

    chinese are so stupid threatening asia…lord you know they are out of money when they start making loud noises again…

  49. nicha

    Android tablets under $300 in India.

  50. Phil

    Window dressing/StJ – Well if that gives us a 5% move up between now and Friday, we’ll take it!  

    TBT over $21 – AMAZING!  

    And MORE money is coming out of Bonds – 4 days in a row….

    11:00 AM On the hour: Dow +0.07%. 10-yr -0.23%. Euro +0.12%vs. dollar. Crude -1.12% to $83.5. Gold -0.29% to $1647.65.

    12:00 PM On the hour: Dow +0.64%. 10-yr -0.39%. Euro +0.33%vs. dollar. Crude -1.56% to $83.14. Gold -0.66% to $1641.55.

    EIA Petroleum Inventories: Crude +1.9M vs. consensus of +0.7M. Gasoline +0.8M vs. consensus of +0.9M. Distillates +0.1Mvs. in-line with consensus. Futures -1.4% to $83.25. 

    Irish retail sales fall 0.4% in August, bringing the Y/Y total to 3.6%. Economist Dermot O’Leary calls it another data point showing the huge divergence between a booming export sector and punk domestic demand, and expects no change in the trend anytime soon.

    Europe takes a breather after 2 days of major gains. Stoxx 50 -0.9%, Germany -0.8%, Italy -0.3%, France -1%, Spain -0.5%, U.K. -1.4%. The euro +0.3% at $1.3626.

    It’s the one-year anniversary of a report from Meredith Whitney titled "Tragedy of the Commons" that trashed the muni market, and led to her subsequent prediction of 50-100 sizable defaults. The WSJ‘s Mark Gongloff looks back (video), saying an entire sector felt an unprecedented effect from one analyst’s comments. One year later: Munis are just fine, chime in analysts.

    Roland Berger, a consulting firm to the German government, floats its own bazooka, aptly named "EURECA." The plan would have Greece sell $125B in state assets to a SPV and use the proceeds to buy back its debt. For perspective, after months of pressure, the Greek government has identified $50B in assets it may be able to sell over the next 4 years. Next.

    Let Ireland default too, argues David McWilliams, who points out markets have had a massive rally on the idea Greece will be allowed a "ring-fenced" default. Every $700M bond payment to AIBbondholders is $700M not going into the future of Ireland. "If (finmin) Noonan walked away from paying the next tranche … the market in Ireland would rally."

    ROFL – Corporations are asked to contribute 1/38th of the deficit and look how they spin it:  WSJ looks at how state and federal taxes are rising for employers as states struggle to repay $38B in federal loans for unemployment benefits, including more than $1B in interest due Friday. Many states have raised taxes to cover the payments; "It’s just one more cost to add," says a manufacturing exec. "Companies like ours are going to think that much harder if we need more folks."

    The IAB estimates U.S. Internet ad revenues rose 23% Y/Y in 1H 2011, a major ramp in growth from the 11% reported for 1H 2010. GOOG and VCLK investors could be pleased to know search and display ad sales both rose 27%, and video sales 42%, but a 2% decline in classified sales might not sit well with NYT and WPOinvestors. (previously)

    Amazon.com (AMZN +3.3%unveils its much-anticipated tablet. Called the Kindle Fire (as previously reported), the device will feature a 7-inch display and cost only $199, $50 less than the Nook Color (BKS -6.3%) and $300 less than the cheapest iPad (AAPL+0.5%). The tablet will run on Android (GOOG), but nonetheless act like a "souped-up Kindle." 

    Barclays turns positive on Caterpillar (CAT +1.1%),assigning a new Overweight rating on valuation after shares of CAT shed 8% over the last month. The company chips in with its own bit of jawboning, pointing to China as a growth driver.

    First Solar (FSLR -5.8%) falls after Cantor Fitzgeraldreiterates a Sell, and lowers its PT to $55. Cantor sees continued oversupply in the solar market hurting First Solar’s sales and pricing power. Nonetheless, the firm thinks First Solar is well-positioned to profit long-term, as the market consolidates, and subsidy reductions increase the value of its cost advantage

    Netflix (NFLX +2.5%) shares move higher, attributed to comments from Piper Jaffray suggesting subscriber cancellations are moderating: "While we continue to expect elevated churn over the next few quarters, the risk of a mass exodus appears to be moderating" following its latest survey. Piper sets a $300 price target on the shares.

    Sam Hamadeh calls Groupon’s revenue restatement an admission the company is technically insolvent. The company could even experience a "run" as the business model is predicated on consumers pre-paying and merchants delaying receipt of their cut. If merchants stop honoring Groupons out of fear they won’t get paid, it’s a "death spiral."

  51. vic55

    Phil,
    I wasn’t kidding. Remeber Harry Poter – The one Who-Must-Not-Be-Named did Great things. Terrible but Great.
    Well my point is – at least Alan has a brain, not a collection of events like Ben, who has no idea how to put them in in order.

  52. l4real

     Phil,
    I entered the TNA BCS Oct 38/ 43  at 2.38 and sold the 30 put @ 2.15. You mentioned the put sell should protect the position to about an 8% drop in the RUT. Should I be concerned prior to 8%, like a 3% or 4% drop?  Thanks

  53. stjeanluc

    That sounds amazing:
    http://www.freakonomics.com/2011/09/27/an-algorithm-that-can-predict-weather-a-year-in-advance/
    Of course, my local guy can’t predict the weather for tomorrow! 

  54. angelcur

    Electroindustry conditions stabilize.
    Key high-frequency data update.
    Mortgage apps increase post Fed action.
    Online labor demand mixed.
    Consumer expenditures drop in 2010.
    S&L government revenues rise.

  55. angelcur

    capex rebounding

  56. angelcur

    gold rolling over…ah wit i mean apple

  57. Pharmboy

    Yes, JR…that is why I put it up. 

    I still don’t see that pivot holding, but hey, what do I know.  Interesting to find out from the bond junkies that derivatives on the PIIGs debt is so high, that if a hedge fund or bank buys it and tries to hedge it, they lose if things get solved, and lose if it goes under b’c the return is not enough to pay for the hedge.  Thus they are stuck.  They can buy/sell the long end of the curves, but again, the risk reward is horrible, so many are stuck.  The EU wants to force a haircut, and the hedgies/banks don’t want to take one. Something has got to give, and I still believe it is the market that will pay the price for the haircut that will be given. 

    Retail went into bonds heavy, and now they want to force them out by scaring everyone from T-bills.  I hold my ground that 1.5% will be seen on the 10 yr, and 50/50 that 1% is reached.   How long, well, by way of JRWs chart, by year end or sometime early next year.   

  58. angelcur

     The hedge fund industry is braced for a new round of redemptions after two months of poor performance and growing investor desire to move money into cash.
     

  59. angelcur

    The world’s largest listed hedge-fund manager, Man Group PLC , stoked fears of another industry meltdown Wednesday when it reported a net $2.6 billion was pulled from its funds between June 30 and Sept. 26. It lost a further $1.5 billion from fund losses and $1.9 billion from the effect of a stronger U.S. dollar when accounting for euro- and Australian dollar-denominated funds. Its GLG unit, acquired last year, posted particularly large outflows.

    Man Group shares fell as much as 25% in London.

  60. zeroxzero

    Phil: What happened to coal? Arch down over 6%, Peabody also hit. I have none, should I be buying?

  61. zeroxzero

    What happened to coal? Peabody down, Arch off 6%.

  62. kustomz

    Slovenia DG to AA- outlook neg

  63. zeroxzero

    Sorry, my comments reverse order on an iPad, mysteriously.

  64. Pharmboy

    angel – good info to have.  Mutual fund redemption continues to go up as well.  People are scared ……  hence JRW’s chart makes sense b’c WS needs the $$ to keep the game going. 

  65. randers1

    Here is a Euro Currency perspective: There was also one from Sept. 9th this group is know as " Euro Bulls":
    That takes Huevos!
    http://www.merkfunds.com/merk-perspective/insights/2011-09-21.html

  66. yshenhar

     Homework / Phil – here are a few positive links about Europe
    http://www.cpifinancial.net/v2/News.aspx?v=1&aid=9521&sec=Market/%20Commodities/%20Forex
    http://money.cnn.com/2011/09/23/markets/thebuzz/

  67. angelcur

    reverse polish notation

  68. angelcur

    i can’t use anything but an hp calc as a result…

  69. angelcur

    http://www.bloomberg.com/news/2011-09-28/china-sovereign-bond-risk-jumps-to-highest-since-march-2009-1-.htmluncle same pointing at cds scoreboard and grabbing crotch now!!

  70. angelcur

    uncle SAM

  71. rdn4evr

     Angel HP calc,
    Me too – I paid $20 for the Iphone HP-12c app

  72. Phil

    USO/David – I said in the morning post and again at 10:33 that we were flipping short on oil.  

    TNA/L4 – Sure but not a lot you can do other than pick up a bearish play to cover.  Like maybe if 666 fails to hold you grab some IWM puts with a .50 or better delta and use them as momentum plays.  Even if they don’t cover the whole thing, as long as they pay for a roll to a lower strike that’s a good start.  Don’t forget you SOLD $5 worth of premium so if the market drops, your closer to the money calls will lose money faster than the short calls and the puts will get closer to the money AND the VIX will go up and pump up the premiums so any move against that position LOOKS very painful but none of that matters if the Russell holds 600 in the end.  

    Euro/Rustle – Thanks! 

    Coal/ZZ – That is strange, they just gave up 2 days of gains for no reason I see.  Probably some environmental thing if I had to guess so I’d wait as that sector was 50% lower in 1998 and we’re still playing for the possibility of a crash.  

    1:00 PM On the hour: Dow +0.33%. 10-yr -0.42%. Euro +0.24% vs. dollar. Crude -2.35% to $82.47. Gold -1.36% to $1630.05. 

    The Treasury sells $35B in five-year notes at a lower-than-expected 1.015% (.pdf). Bid-to-cover ratio of 3.04, vs. a recent average of 2.76; indirect bidders take 45.9%. Direct bidders take 13.8%. 

    Fisher Says Central Bank Is Under Attack From Ron Paul, Barney Frank (Bloomberg)

    Taiwan is expected to end a string of 5 consecutive rate hikes on Thursday leaving its benchmark rate at 1.875% (5 consecutive hikes only brought it to that!). Shares are off 18.5% the past 2 months and the currency is dropping amidst reports that orders in the important tech sector are starting to slow. EWT -1.1%.

    Tracking Europe’s Debt Crisis (NYT)

    The cruelest month for gold (Market Watch)

    CHINA!  You don’t say? S&P assesses the risks the Chinese property developers, pronouncing many of them in a heap of trouble if sales fall 30%. Though S&P does not expect that sort of decline, property transactions measured by square footage declined 17% in August and 14% Y/Y. The China RE ETF TAO-27% this quarter.

    Switzerland’s parliament approves a phase out of nuclear power over the next two decades, adding to a growing movement globally to either upgrade or shut down reactors – instead of investing in new ones. Bucking the trend, the UK and France are still on track to build plants, while Southern Company (SO +1.1%) bids to do the same in the U.S. 

    The UAW ratifies a new collective bargaining agreementwith General Motors (GM +0.5%), saying the contract will create 6,400 new jobs in the U.S., including positions for new hires as well as laid-off workers.

    Kindle announcement aftermath: Amazon (AMZN) keeps trekking higher, now up 4.8%. Apple (AAPL) shows no ill effects, flatlining for most of the day and now poking out a 0.2% gain. Uncontrolled bleeding at Barnes & Noble (BKS), shares down 11.2%and still sinking. With the crucial holiday season coming up, can BKS recover with a new launch or inspired pricing cut?

    Google implementing my plan!   Google will finance rooftop solar installations (LA Times)

    You can lever, but will you take the loss? (FT.com

    Three lunchtime reads:
    1) Auto stocks: worth buying before a recession?
    2) China as J.P. Morgan might have to save world
    3) Fed’s Fisher defends his ongoing policy dissent

  73. stjeanluc

    Rumors / Phil – As much as you and I would like to trade on fundamentals, this is a rumor and machine-driven market (that’s why we have Angel on board – for the rumors, not the machine (besides few people use RPN anymore – a shame)!)… So fundamentals are becoming secondaries now – they program bots around TA or use HFT to captures pennies in micro-seconds. These machines don’t care that CSCO has billions on its balance sheet or that OPEN is trading a high multiple! I am not saying that we should not keep on trading on fundamentals – just that we will keep getting amazed by some moves that will only make sense in the context of a rumor and machine driven market! 

  74. Pharmboy

    Well that FT article was timely, Phil!  It will be a hard pill to swallow when everything hits the fan…and I am betting it will.

  75. stjeanluc

    Coal / ZZ – Apparently it started yesterday as Walter Energy warned that output for steelmaking coal will fall short of expectations… I guess any excuse is good for a sell-off! Oh, and Cramer said to avoid ACI so that might be your first candidate for a looksy!

  76. stjeanluc

    Coal / ZZ – BTW, ACI was down to as low as $11.77 in 2009 (they are at $15.44 now) so that should give you an idea of where we could go in case growth stalls! And then there CHINA….. 

  77. kustomz

    Spain will extend Short selling ban

    ZXZ CRB index down over 2%..

  78. Pharmboy

    StJ – but we know the fundimentals are going down the crapper.    We all know we are in a debt deleveraging cycle, and the cash on hand may need to be deployed to take out the weak hands, or just used to sustain the status quo.  Money is/was being made on the back of layoffs….and that is unsustainable.  The feds intervened, and that is now over.  I think fundimentals are horrible right now, no matter the industry….and that includes mine.

  79. kustomz

    Looks like its risk off again now that the short squeeze has run out of juice..must hold levels on the Euro here

  80. rainman

    Any reason for the pickup in volume?

  81. Pharmboy

    Hoening leaves the KC fed with a parting shot

  82. stjeanluc

    Fundamentals / Pharm – But we should still be able to to trade mostly based on that – good or bad! For example, we could argue that fundamentals for OPEN are bad so we want to short them or that fundamentals for AAPL are good and go long. But that’s not the way it works as some rumor that Apple is cutting iPad shipments takes them down $10 in 30 minutes before they recover!
     
    Now, if we are talking macro – it’s another thing. But that should make it en even better market to trade for fundamentals as we could pick good stocks out the bad ones. Unfortunately, we now have so much correlation (possibly driven by ETF and bots) that it’s not even possible…

  83. kurtww

     And wheeeee on gold and silver! Not surprised at the continued weakness, I don’t think this correction is quite over. I’m not covering my shorts, at least. 

  84. jcaesar

    Pharm - Can you describe the fundamentals of your industry?  I’ve always thought it’s very different from all others.
    I’d say it relies on: 1) the R&D pipeline, 2) regulatory strictness (or lack thereof), and 3) insurers (including Medicare) willingness / ability to pay top dollar for new drugs.  Those are your fundamentals.  But what do I know. 

  85. Phil

    Dollar 78.25 and oil and materials (coal!) dragging things down today.  Transports down on lower oil (illogical, as usual) and SOX down 1.5% with RUT down even harder at -1.6% but not 666 yet.  TLT finally found a floor at 116 (TBT $21.20) and is bouncing a bit.  Could turn ugly but hopefully not.  

    EDZ making steady progress.  

    Thanks for perspective on Europe guys – sad if that’s all we can come up with though…

    Machines/StJ – Have you ever seen a "smart" robot that walks into a corner and keeps walking and walking?  They can have great programming but, for some reason, they hit a situation they weren’t programmed for and they just keep going – even if they end up destroying themselves.   Sell Bots can get that way too – as can Buy Bots.  No matter how clever the programmers are and no matter how many variables they think they have covered, there is no way they can cover it all and, eventually, things blow up.  Very likely that’s what really happened at UBS.   If you lose $2.3Bn and you blame it on a rogue trader – then the Bank survives but if you lose $2.3Bn and blame it on a rogue program – Investors get the hell out of your bank ASAP!  

    Oil $82.85 – we should have chased it!  

    A few long put ideas (good with S&P under 1,173):  

    • AMZN Jan $105 puts at $1.10 
    • CMG Jan $170 puts at $1.90
    • DECK Jan $55 puts at $1.15
    • GMCR Jan $50 puts at $1.25
    • IBM Jan $120 puts at $1.20
    • MA Jan $165 puts at $2.05
    • PCLN Jan $210 puts at $2.20 (good terror insurance) 
    • V Jan $60 puts at $1.42

    These are INSURANCE plays we EXPECT TO LOSE – always remember that!  These are good stocks that are toppy so not likely to kill the puts too harshly but also not likely to fail unless we have a catastrophic market fall.  Ideally, we pick up a few and, if one happens to have a nice dip, we cash that and switch to one that has not dipped yet – so we’re always switching to the cheapest ones (unless something fundamentally good happens to them).   

  86. kustomz

    Hoening..in other words its just a ponzi scheme.

  87. Phil

    In the $25KP, those DIA $110 puts are .95 so 20 of those with a stop at .80 – playing the same way as we did before. 

  88. jcaesar

    From the Hoenig article:
     

    Hoenig leveled blame at lawmakers as well, saying the Fed’s stimulative policies were a band-aid for a failure to credibly commit to lowering the United States’ long-term debt. Lack of political courage to curb spending and government subsidies and rein in debt would likely lower the U.S. economy’s long-term growth potential from about 3 percent a year to as low as 2.5 percent, he said.

     
    I find that statement incredible.  No talk about increasing aggregate demand.  Sounds like he went to the Teabag School of Economics. 

  89. Phil

    Dollar broke up – now 78.42 so hopefully they get rejected at 78.50.  

    Silver went off a cliff, from $33 to $29.85 in today’s trading.  Gold testing $1,600, copper $3.20 so it’s not just coal – someone much have an internal memo going around about sharply lower economic forecasts

  90. Pharmboy

    StJ – true, but I think the shenanigans in the balance sheet of many companies are too hard for the masses to figure out.  Couple that with the macro view, and a devil’s brew is being stirred.

  91. JRW III

    Interesting chart from Uempel, 9 month cycle due Friday to Tuesday:

    cycle.png 
    And did someone say WHEEEEEEEEE  !!!!!!!!!!!!!
  92. kustomz

    Keep an eye on Euro 1.3540 key level…must hold

  93. stockbern

    JRW    Are you accumulating any TZA puts like you did in June?  If so, what time frame?

  94. revtodd64

     Marketwatch seems to think this latest daily slide is due to the EU proposal to tax financial transfers.  If you have a whole list of reasons, why not focus on that one?!  Where are those emoticon thingies to express my true feelings when words fail me.
    http://www.marketwatch.com/story/nyse-nasdaq-shares-pressured-by-eu-tax-proposal-2011-09-28?link=MW_home_latest_news

  95. Phil

    Ah, it was Hoenig!   Damn, you don’t learn anything listening to CNBC anymore.  We should get a radio show – we could actually inform people….  

    Solyndra/Angel – So does a programmer’s choice of having robots whistle Disney tunes rather than go "BEEP, BEEP, BEEP" when they moved around the factory now "prove" that it was extravagant?  It amazed me what psychological buttons people respond to…  I have no doubt they could have been much smarter and, of course, they hit the market at the wrong time but clearly this fascination with Solyndra (especially on Conservative talk shows) is ridiculous.  

    Hoenig/Pharm – Wow, what power one guy has to move the markets.  Now we’re back to Monday’s highs – not the best way to "window-dress" into the 30th.  

    Fundies/StJ – Yes but if you own AAPL long-term and a rumor takes them down $10 – what do you care?  Do you still live in your home even though the value declined?  Do you still drive a car?  If you expect to get long-term VALUE from something then the current PRICE of that thing is not relative.  It’s the difference between having a trader or investor mentality.  

    Copper now down 7% as margin requirements increased today.  Copper is used as a technical indicator for many SellBots.  

    OIH is down 4%, XLE down 2.25% – People are bailing out of commodities and those shiny bits of metal and gooey black stuff are being traded in for those "worthless" US dollars and that puts demand pressure on the Dollar and the rising Dollar makes TBills more attractive (you invest in a rising currency) so it’s all very connected here but we’re at 78.50 and oil is testing $81 and gold $1,600 so maybe a bounce here but, if not – we’re heading to the next leg down.  

  96. pentaxon

    I have changed the chart showing the viy indicator. That is also a “cliff view”:

    http://www.pentaxon.com/psw/viyindicator.html

  97. Pharmboy

    jc – in response:

        I’d say it relies on:

       1) the R&D pipeline:  I have commented on this in several write ups, and hence my biotech/small pharma bias.  Big pharma needs help, and small compaines are filling the gaps.  We just need to continue to find the gems in the vast ocean of fish poop! 

        2) regulatory strictness (or lack thereof) – this is the one that makes our heads turn upside down and is the great unknown but manageable if the drug works. 

        3) insurers (including Medicare) willingness / ability to pay top dollar for new drugs – THIS is the biggest risk, as all will pay something, but I think the days of top dollar for new drugs are over UNLESS the treatment is for a terminal or orphan disease!  Thus margins will be squeezed to the brink of breaking.  PFE or LLY will be the first to experience this IMHO.

    but one last one is competition.  The space is getting very crowded in the me too drugs.  Think of all the SSRI’s for depression, cholesterol reducers, DPPIV inhbitors for glucuose etc.  That is again, where biotech will pick up the slack b’c there is no interal bickering and project hawking on novel therapeutics.  That is where biotechs kick big pharma’s ass every time – high risk = high reward.  It then becomes a regularoty play, as the cost to get to market are huge, and big pharma will pick up the ball.

    Those are THE fundamentals. 

  98. stjeanluc

    Fundies / Phil – And once again, I agree. You and I might have the "investor" mentality, but we are not the majority in this market anymore apparently! 

  99. jcaesar

    Pentaxon – I much prefer that view.  It makes me "see" how your VIY indicator works much better.
     
    Pharm – Thanks for the response – very interesting.

  100. Pharmboy

    BMRN is one such company that Big Pharma will need to own.  Orphan diseases where there is little to no competiton.  Also, orphan give EXCLUSIVIITY for the disease for 10 yrs….that = monopoly!  Look at BMRN today….

  101. pentaxon

    jcaesar: Thanks. And don’t forget it is not lagging at any trading day the blue lines were "fixed" already 1.5 months earlier.
    no lag = prophecy ;-)

  102. Phil

    Ponzi/Kustomz – Of course it is but you’re not suppose to actually admit it!  

    Hoenig/JC – He’s a lifer on the Fed, I think he took a job with them out of school!  Not a bad job though, KC Fed pays $400K to the Chairman.  He’s from the midwest and has always been a psycho inflation hawk a la Ron Paul – my guess is he’s heavily invested in gold and is very pissed.  I love these guys who take Government jobs and are retiring with fat Government pensions and Government benefits but tell everyone else how they have to bite the bullet!  Hoenig is also the guy who wrote "Too Big Has Failed" in March of 2009, when he was as wrong as he could possibly be about they system collapsing and chased people away from the greatest buying opportunity of all time (until this next crash, maybe).  

    So speaking of ridiculous panic.  DIA $110 puts just topped out at $1.20 and now $1.05 but I’m not feeling it so let’s cash out in the $25KP and at least get our commissions back.  

  103. Phil

    USO FRIDAY $31 calls are .85 with just .30 of premium.  10 in the $25KP overnight as pure speculation.  

  104. pstas

    BRK/B- selling more 13 Jan 60 puts; buying 60 calls.

  105. Phil

    AGQ back to $102 and $97 was Monday’s low before they popped back to $130 yesterday morning.  Oct $150 calls are $3.30 and the Oct $120 calls are $8.60 so $5.30 to be gained on a $30 move.  On the other hand, the Oct $180 calls are $1.65 so risking roughly $1.65 to possibly make $5.30 is a good risk/reward and you can sell the Oct $60 puts for $2 if you want to offset it and those are an even roll to the Jan $45s so I like that play – even though risky.  

  106. Phil

    F Hoenig!  IWM FRIDAY $65/66 bull call spread is .65 20 in the $25KP for $1,300, selling 10 VLO Oct $18 puts for .86 ($860) for net $440 on the $2,000 spread.  

  107. kustomz

    Euro 1.3560 now key, if it breaks to the downside quickly we’ll see more risk aversion…markets decline. As long as she holds we can play to the upside…

  108. shadowfax

    I have been seeing pos money flow and buying into this LOD, like 11,900 shares and others similar.

  109. Phil

    Of course it would be funny if Bernanke comes out at 5 and says:  "OK, it is a Ponzi scheme – sorry…"  

    BRK.B/Pstas – Good call!  

  110. shadowfax

    Market saying F    Hoe!

  111. Dennis

    I’m getting whiplash following you Phil but you’re right on the money so far.  For a guy who says he’s not a day trader, you’re the best one I’ve ever seen!  What is your allocation ratio at?  

  112. kustomz

    Analysis: Banks Still Hoarding Cash Despite Ample Liquidity

    FRANKFURT (MNI) – With a total of E140.6 billion allocated at Wednesday’s 3-month LTRO, up from the E132.2 billion maturing, it seems clear that banks are still keen to top up with cash at least until the end of 1Q next year.
    The extra uptake boosts excess liquidity levels, which stood at E168 billion on Friday, by E18 billion from the start of the week.
    Much of that excess liquidity has been re-deposited in the ECB’s deposit facility. On Monday, E165 billion was parked there, the highest since early September and well above the corresponding days of the previous maintenance period.
    On Tuesday, banks stocked up on one-week funding, taking E208 billion at the ECB’s main 7-day refinancing operation — the highest volume since February.

    https://mninews.deutsche-boerse.com/content/analysis-banks-still-hoarding-cash-despite-ample-liquidity

  113. alik

    Hello Phil, what is your opinion about HAL, SLB, ACI at current prices? In particular, ACI is now not much higher than in March, 2009. Are these stocks “buy" or still “short" or “stay away"?

  114. shadowfax

    Looks like a buy program!

  115. David Ristau

    The Oxen Group is shorting Micron (MU) today from the 6.15 level as we see a lot more downside moving into earnings and post-earnings with the company cutting annual EPS in 1/2 and declining revenue.

  116. shadowfax

    David
    Good call Micron has been sucking wind for too long.

  117. Pharmboy

    "Oh matt…where art thou?"

  118. jmm1951

    Phil/homework
     
     
    http://seekingalpha.com/article/293765-europe-most-traders-are-overweighting-markets-underweighting-information
     
    Particularly note the second comment under the article.

  119. JRW III

    stockbern / June
     

    Those were SPY and IWM puts (AUG), I NEVER get into TNA / TZA options, too thin !!

    But to answer your question, no, I believed this bounce (starting Monday) would fail, but I believe we will see 1282ish on SPX before year end, so no puts now. Besides, I’m doing quite well just trading TNA / TZA 8-)

  120. Manimal

     Is it about that time…stick?

  121. shadowfax

    JRW
    What is your target today I show 67.02 or 67.77?

  122. Phil

    Funny how people are freaking out on this pullback as the Dow was at 10,600 last Thursday and ran up almost 800 points (7.5% on the button) and is now 11,100, still up 500 points (4.7%) so, on the whole, a nice normal, 38% Fibonacci retrace of the 5-day run and all the talking heads are trying to pin reasons on it and everyone is trying to read the tea leaves and extrapolate the next week or month off what happened in the last 5 hours – MADNESS!!!  

    Thanks Dennis!  Allocation at the moment is 20/15 bullish or 15/10 – nothing too drastic but that felt like a good bottom as it was driven down by outrageous statements from various sources and all they got was a basic Fib retracement out of it.  If we hold that, it’s not bullish but it’s not bearish either and, given that – I’d rather play the Bull side until the bears prove their case because the absence of constant, relentless bad news is likely to cause a rally (if it ever happens).  

    ACI/Alik – Why buy ACI when BTU is $36.30?  The same goes for anything but SLB, who are clearly the best (RIG is good too but overhanging lawsuits make SLB an easier choice).   In either case you don’t have to be brave – the BTU 2013 $30 puts can be sold for $5.75 for a net $29.25 entry, which is 18% off the current price and with SLB, the 2013 $55 puts can be sold for $9.80 for a net $45.20 entry and that’s 26% off the current price.  If they do fall further and you still want to buy more, you can roll or DD the puts or buy the stock and sell calls – lots of options and, if not, then nice 20% returns for NOT owning the stocks.  

    MU/David – I have to respectfully disagree with that one.  MU is in a bad cycle but it won’t take much to flip the semis and SOX is near 350, which is huge support.  They do have technical weakness but earnings are tomorrow and expectations are super-low.  I wouldn’t bet them up but I sure wouldn’t bet them down.  We’ll see how it goes.  

    Good article JMM.  

    Stick/Manimal – Volume is certainly low enough.  Just 103M on the Dow at 3:10 is vacation-low.  

  123. shadowfax

    mamimal
    The stick looks good for IWM a few BIG buyers of TNA!

  124. ronresnick

    Dear Phil,
    What should we use as a stop on the USO 31 calls?
    Thank you.

  125. Phil

    Dollar won’t go back under 78.40 (now 78.43) – that’s not helpful at all!  

  126. Manimal

     Phil/Shadow – Thx. Keeping a watch for stick momentum. None yet, perhaps a shake up first. If not there is always tomorrow!

  127. JRW III

    shadow / Target

    Textbook would be IWM 65.07, if we fail 66.33; if we bounce, 67.31. But I think somewhere in here (66.33) as we are staddling the line !!

  128. danosu77

    Hi Phil,
    I don’t yet have a futures account, but I want to set one up before Vegas, in case we do some futures trading.  TOS said I need to let them know which futures I want, but I don’t have a clue.  Any suggestions?
    Thanks!

  129. shadowfax

    JRW
    Seems to be the dollar rules!

  130. Phil

    USO/Ron – Not going the way we hoped but it’s the overnight that is most likely to pop.  If not, we can roll into a longer vertical.  

    3:00 PM On the hour: Dow -0.52%. 10-yr -0.09%. Euro -0.05% vs. dollar. Crude -3.65% to $81.36. Gold -2.48% to $1611.45.

    Treasurys trim up losses by a few basis points across the board after a solid five-year note auction. The 30-year yield now just +0.05 to 3.12%; 10-year +0.06 to 2.03%; five-year +0.04 to 0.98%; two-year +0.01 to 0.25%.

    File under only in the government: A HUD official confirms that only 15% of the estimated 100K delinquent borrowers seeking financial assistance received it, leaving $500M in the $1B program untapped. Ironically, thousands of previously unemployed homeowners were rejected because they found a job that paid at least 15% more than their old job – precluding them from catching up on mortgage payments with a loan.

    The U.S. is already in a recession, according to bond manager Jeffrey Gundlach, pointing to local governments slashing jobs, cutting hours for public resources and stalled projects. "There’s going to be a big loss in Europe," he adds, breathing a sigh of relief that his firm has no exposure to Europe and is entirely denominated in dollars.

    Boosting the Buck:  Merrill is making a bullish call on the dollar, arguing global economic weakness will lead many foreign central banks to ease monetary policy, and thereby devalue their currencies. The firm sees EUR/USD falling to $1.30 and USD/CAD rising to $1.07. However, it expects the yen to perform well, with USD/JPY declining to ¥75.

    Italy and Spain extend a ban on short-selling due to ongoing volatility, according to  European regulator ESMA. Italy extended until Nov 11, while Spain didn’t set a date saying its decision was based on "protracted instability in European securities markets." 

    The equity risk premium - the additional return investors demand for owning stocks vs. U.S. Treasury bonds – has climbed well above historical norms to levels typically seen by emerging markets such as China and Brazil. An elevated premium may be a buy signal for stocks, Chris Farrell writes, but only if you think the U.S. will shake off its current difficulties. 

    Ugly chart of the day, from Doug Kass: Copper is not confirming the recent rally in stocks to the upper end of the Aug.-Sept. trading range. Unless Dec. copper can recover and hold 3.50, Kass says, then industrial metals will point much lower as the global slowdown spreads. ETFs: JJC -6.6%IYM -3.5%. Stocks: CLF -7%,FCX -5.9%.

    Former Fed vice-chair Alan Blinder puts QE4 out there – imagining a future round of central bank purchases involving not only MBS, but corporate bonds, syndicated loans, consumer receivables, "and so forth" (maybe even that treadmill we can’t unload on craigslist?).

    Knocking down oil:  Oil shipping stocks take a hit after Bank of America Merrill Lynch slashes its 2011 and 2012 spot-rate forecasts due to a weak macro environment. The firm cuts both DHT Holdings (DHT -5.8%) and Teekay Tankers (TNK -8.3%) to underperform (III). Other peers trading lower: Alexander & Baldwin (ALEX -2.9%), Seacor (CKH -2.3%), Kirby (KEX -1.6%). 

    Fitch Ratings follows up on Moody’s downgrade of Eastman Kodak’s (EK -12.6%) credit rating with its own cut to CC – a level signifying "default of some kind appears probable." It’s been a horrendous week for shares – down 38% in three days – kickstarted when the firm drew $160M from a credit line. EK once a Dow 30 stock, now trades for the price of a black coffee from SBUX. 

    Damned Government Regulators!  Tyson Foods (TSN -3.1%) trades lower after the thecompany recalls around 131,300 pounds of ground beef over worries it may be contaminated with e.coli. 

    Speaking of robots:  iRobot (IRBTannounces it received a $60M contract to outfit the Army with robots, but shares fall back 3.8% - indicating a bigger payoff may have been anticipated from the Street. 

    The swoon in shares of Amarin (AMRN -7.3%) may be attributed to an article on the lack of buyers for the company. Once seen as an attractive takeover target with a new heart drug that helps lower triglycerides expected to rake in $1B-plus in annual sales if approved, skeptics now say it could take 12-18 months before investment prospects again become attractive. 

    Goldman and Collins Stewart sing Jabil’s (JBL +7.8%) praises following its earnings beat (III). The former thinks the growth of Jabil’s value-added services business will boost margins, while the latter thinks Jabil will continue benefiting from a mostly healthy tech spending environment. Rising in sympathy: FLEX +1.9%, CLS+1.8%.

    Could not happen to nicer ghouls:  Shares of Imperial Holdings (IFT -63%) plummet a day after the FBI raided the firm’s Boca Raton offices. The company says the raid apparently was related to its life insurance settlement business, which buys policies from people for a fraction of their value and then collect in full when the person dies.

    In addition to Cantor’s negative comments, Renewable Energy (RNWEF.PK) adds to the pain in solar-panel maker stocks after saying it’s considering permanently closing parts of its Norwegian production as it struggles to compete with lower-cost competitors and plummeting raw polysilicon prices. First Solar (FSLR-7%), Trina Solar (TSL -5.8%).

    I agree with this, it’s why I never pick ORCL:  "The clock is ticking" on Oracle (ORCL -1.1%) and other old-line software and infrastructure companies, Silicon Valley investor Marc Andreessen says – "they have not leaped forward." His evidence: "Not a single one" of his startups uses Oracle software; all of them use cloud-based alternatives, he says.

    An InMobi survey claims 41% of North American mobile users plan to buy an iPhone 5 (AAPL), including 52% of BlackBerry (RIMM) owners. While such surveys tend to overstate demand, Apple only needs a fraction of this stated interest to prove real in order to see major sales growth, given the iPhone is used by just anestimated 27% of U.S. smartphone owners. (previously

    Benchmark’s Fred Moran considers the Kindle Fire a "direct threat" to Netflix (NFLX +0.6%), given how it comes with 30-day trial for Amazon’s (AMZN +3.9%Prime Video service. Larry Dignan, meanwhile, thinks the device’s low price tag spells doom for RIMM‘s

  131. Phil

    Benchmark’s Fred Moran considers the Kindle Fire a "direct threat" to Netflix (NFLX +0.6%), given how it comes with 30-day trial for Amazon’s (AMZN +3.9%Prime Video service. Larry Dignan, meanwhile, thinks the device’s low price tag spells doom for RIMM‘sPlayBook and every other rival tablet not called the iPad (AAPL).

    Some analysts say Apple (AAPL +0.2%) and Amazon (AMZN +4%) are now the only true competitors in the tablet computing space, but the two stocks trade at wildly different valuations. Tadas Viskanta’s point isn’t that one is overvalued and the other is undervalued, it’s that the market is putting very different valuations on two companies that are coming into closer contact and competition. 

    The bromance between Pres. Obama and Jamie Dimon (JPM) may have ended, as the banker was seen “in a discreet one-on-one” with Mitt Romney before a fundraiser yesterday. Romney reportedly has raised at least twice as much money from Wall Streetas Obama, luring away at least 100 big donors who backed the president in 2008.

    Things have been getting worse as I’ve been writing.  I’ve changed my mind on the USO puts and we can kill them at .71 in the $25KP – too much premium now with too little time left to risk it.  

  132. Pharmboy

    Good bye EL….hey hey, hey, good bye….

  133. shadowfax

    Looks like I’m wrong again, but really it is the dollar.

  134. Izega

     My capacity to be in the wrong side of an intraday trend amazes me!

  135. Pharmboy

    Or maybe it is the Euro, shadow!  Either way, every rally should be sold into until the trend breaks, and right now that trend is still down.

  136. Phil

    Futures/Dano – Equity/Index, as opposed to currency is what they are asking.    

    Wow, sharply down now in an anti-stick.  What will Ben say at 5?  

    Dollar testing 78.60.  Oil testing $81.  

    SOX and Transports down 2.5%, RUT down 3.5%, the rest down about 1.5%.  Still no volume. 

  137. jcaesar

    Pharm / Downtrend – But down like this with no apparent catalyst!  And if you say it’s the dollar, then I was is the dollar spiking? 
     
    Not to put you on the spot.  ;-)

  138. Phil

    Economist Gary Shilling spoke about the outlook for the U.S. economy and Treasuries with Bloomberg Television’s Erik Schatzker and Deirdre Bolton this morning.  He told Bloomberg TV that the S&P is going to 800 and by next year the economy will be in recession and deflation. 

  139. stjeanluc

    Can I have wheeeeee! 

  140. cwan120

    Hi, pentaxon,
    How do you read your VIY chart?  What does that cliff mean?  Does it predict that the markets will go down some weeks later?  (I vaguely recall 6 weeks from past reading of your comments)
    Thanks.

  141. Pharmboy

    js – I did not speak of the dollar, but of the Euro, and have been bearish on the Euro for a long, long time.  What catalyst took us up to 120 yesterday?  no reason to be up here, no reason to be down there, thus the wheels on the bus go round and round.

  142. Pharmboy

    Oh, until they fall off…

  143. Phil

    Wrong side/Lzega – They got me at the end too!  Still,  a day doesn’t mean anything and we still have 400 points to drop just to get back to last week’s lows.  Dollar took a huge run, from 77.83 pre-market to 78.595 at the close so up over 1% and the market dropped 2% – that’s not an indication of a weakness in stocks – just an indication of the Dollar moving up and down.  

    Whee/StJ – You only get that when I have more puts!  

    Huge Data day tomorrow with GDP at 8:30 (maybe that’s why the panic) unemployment numbers, Fed speak from Rosengaren (Super Dove)  and Plosser (Hawkish):  

    We also get Corporate Profits at 8:30 and don’t forget how many people have been saying the S&P earnings are going to be MUCH worse than anticipated.  All that is pre-market and then we get Consumer Comfort at 9:45 , Pending Home Sales at 10, KC Fed at 11, 7-year notes at 1pm, Farm Pricing at 3pm and, after hours, the Fed Balance Sheet and the Money Supply.  

    So maybe panic-selling ahead of the data but I don’t see any reason to be bearish on that data – I don’t think anything there is going to surprise us negative but we’ll see tomorrow.  

  144. jcaesar

    So now the question has to be…what are those guys going to do with all that money they’ve been taking out of bonds?

  145. diamond

    Phil – L’shanah tovah to you and your family!

  146. Phil

    That’s right Diamond – Happy 5,772!  

  147. yshenhar

     Shana Tova to everyone at PSW!

  148. stjeanluc

    Indeed, Happy New Year to everyone! 

  149. stjeanluc

    Still not a happy sight in real estate…

    http://www.bespokeinvest.com/thinkbig/2011/9/28/updated-case-shiller-home-price-indices.html 

  150. zeroxzero

    Read a British investment piece about electrical generation growth. Purportedly it goes logarithmic when GDP growth supersedes 5%, a function of industrialization and acquisition of basic products like refrigerators.

    ABB’s power en division’s backlog has risen 75% over the last three years; GE and Siemens have reported similar trends. Oxford Economics projects the global power generation shortfall to rise forms it’s present 70GW to 600 GW by 2015.

    It is claimed that the opportunity cost of not having sufficient generation is high. Schneider Electric is pointed out as a leader in smart grid development, a way for industrialized nations to stretch their power gen. capabilities. And for the many less developed countries that cannot afford sufficient project development, Agrekko (UK) is the largest lessor of generation facilities, with a business six times the size of Caterpillar, the next competitor.

  151. zeroxzero

    And happy new year indeed as you head toward 6,000!

  152. Pharmboy

    In years zero, or the Dow?  ;)

  153. roberthjrfl

    Is there anyplace that i can go to see historical statistics on the DOW or SPX?  I am looking for stuff like "the SPX has only moved up more than 50 points in one month three times.  Or like, "the SPX has only dropped 200 points in one month two times."  Or like the SPX has only gone up 10% in one month two times.
    Is there any site that has this type of information?  TIA.     (PS HAPPY NEW YEAR!!)

  154. danosu77

    Ouch Pharm!

  155. jmm1951

    roberthjrfl/History
     
    If you go to freestockcharts.com you can set up candlestick charts that go back 10 years and then set it to show a monthly candlestick and read off the kind of information you seek. When you click your mouse on a candlestick a box will appear that will give you the open, high, low, etc.
     
    What part of fl are you from?

  156. JRW III

    IWM 65.10 is pretty close to 65.07 !! (My 3:26 post) BTW 8-)

  157. stjeanluc

    That’s from our governor last night Phil:

    Now … President Obama prepares to divide our nation to achieve re-election. This is not a leadership style, this is a re-election strategy. Telling those who are scared and struggling that the only way their lives can get better is to diminish the success of others. Trying to cynically convince those who are suffering that the American economic pie is no longer a growing one that can provide more prosperity for all who work hard. Insisting that we must tax and take and demonize those who have already achieved the American Dream. That may turn out to be a good re-election strategy for President Obama, but is a demoralizing message for America. What happened to State Senator Obama? When did he decide to become one of the "dividers" he spoke of so eloquently in 2004?

    Never ceases to amaze me the balls of these guys! Because dividing has never been an electoral strategy for the GOP – except maybe for the last 50 elections! Also, next thing they will be telling that we should not tax the rich because they are the only hard working ones! Maybe you could give Christie a special NJ discount for PSW… 

  158. stjeanluc

    Maybe correlation has something to do with that:

    http://www.bespokeinvest.com/thinkbig/2011/9/28/all-or-nothing-days-becoming-more-common-than-uncommon.html 

  159. jmm1951

    SPY monthly x 20 years
     
    http://www.freestockcharts.com?emailChartID=4dd3af79-75a9-4320-8526-f4e0e30c4543

  160. elliotteldrich

  161. kustomz

    S. Korea’s current account surplus hits 7-month low in Aug.
    By Kim Soo-yeon
    SEOUL, Sept. 29 (Yonhap) — South Korea’s current account surplus hit a seven-month low in August as export growth slowed down amid global economic uncertainty, the central bank said Thursday.

    http://english.yonhapnews.co.kr/business/2011/09/28/6/0503000000AEN20110928006200320F.HTML

  162. stjeanluc

    Germany / jmm – Interesting! I guess we’ll be fixing Europe for many weeks to come. But that makes for interesting trading days! 

  163. deano

    Phil & all
    Any insight on SCCO? Great dividend, insane premiums, and at 2 year lows. Thinking of the buy write on the 2013 25′s, which should make the dividend 16%. TIA

  164. deano

     FWIW – from Jesse today:
     
    "There was a gathering of hedge fund gurus today, including the heads of Carlyle and Blackstone. And some of these wealthy and worldly wise sages are saying that the US needs a ‘financial shock’ to scare the politicians into action, presumably some action that they would approve. Some shock like back to back 1000 point down days, or several huge drops in the dollar."

  165. dclark41

    Phil:
    Been too busy at work to trade, but I did see your homework assignment. Here are a few "other side" stories about the EU/EURO.
    Even so, debt restructurings are no mortal threat to the euro zone. It is important to remember, that Greece, Ireland and Portugal amount to only 6 percent of euro zone GDP. Even Spain is only 11 percent. Moreover, overall euro zone public debt is only 84 percent of GDP, while its fiscal deficit is 6 percent. Both numbers are better than those of the US.
    http://www.cnbc.com/id/41980905/Why_the_Euro_Zone_Will_Survive
    National interests at stake: To understand why, consider the interests of key players in this drama. No country will willingly stop using the euro in order to return to a national currency. For struggling countries on the periphery such as Greece or Portugal, to do so would cause a collapse of their financial system. Moreover, unless a government planned on repudiating all its foreign debt, which is implausible, it would find itself burdened with a debt denominated largely in euros, while its national currency — a new drachma or escudo, for instance — was plummeting in value.
    Germany lies at the heart of European finance, and were the eurozone to break up, German banks would suffer devastating losses
    http://www.usatoday.com/news/opinion/forum/story/2011-08-30/Column-Why-the-EU-and-euro-will-survive/50192844/1
    Even if Greece’s inept political class decides to take the risk—not unthinkable, since it might be a way to shift blame to outsiders—it would not break the euro zone. The euro would hardly be less stable without Greece, or even without Spain and Portugal. (Together, the three make up only 18 percent of euro-zone GDP.) On the contrary, a euro centered on Germany, France, and a few of the more advanced Central European economies like Poland would make the union stronger, not weaker. The risk of this is not so much the result but the financial and political upheavals in getting there.
    The euro zone would break up not when weaker members leave, but when stronger ones no longer see gains from the arrangement.
    Working out these problems could leave Europe stronger as a political institution. Just as the Great Depression forced the U.S. to impose a tighter federalism, today’s economic crisis will likely force Europe into a closer union. Already last week, the EU Commission began pushing reforms on Greece. Through the back door of an economic crisis, the euro zone might then get the kind of political governance that skeptics always warned was necessary for a currency union to work. At the end of the tunnel could be a more integrated Europe, reformed problem economies, and ultimately a more competitive Europe.
    http://www.thedailybeast.com/newsweek/2010/02/04/the-euro-zone-won-t-fail.html

  166. roberthjrfl

    Jmm1951, thanks for the comment.  You can get that type of information in much the same way from TOS.  I was just curious if someone knew where this type of information is compiled.  As for FL, i am from Tampa but i get to south florida a lot.  are from FL?

  167. CaFords

    roberthjrfl – Historical market data (open, high, low, close) can be queried and downloaded directly into excel from Yahoo Finance. You will have to build the queries to sort through the data based on your criteria which is the hard part. I will try to find the link for you if you are interested (I am working on a backup computer so I will have to do some digging).

  168. Pharmboy

    Well, Dr. Ben tells it like it is…..

  169. Phil

    At the close: Dow -1.61% to 11011. S&P -2.07% to 1151. Nasdaq -1.45% to 2221.
    Treasurys: 30-year +0.18%. 10-yr +0.08%. 5-yr -0.011%.
    Commodities: Crude -0.15% to $80.64. Gold -0.18% to $1610.85.

    Currencies: Euro -0.01% vs. dollar. Yen -0.07%. Pound +0.01%. 

    Market recap: Stocks and commodities sank in late trading, with the Dow turning around 300 points from early gains, as fears about the eurozone’s future overwhelmed hopes of progress in resolving the region’s debt crisisExtensions of short-selling bans in Spain and Italy seemed to accelerate a budding selloff in risky assets. NYSE decliners led advancers six to one. - Fear, not facts! 

    8:10 PM Japanese shares dip in early trading with the Nikkei -0.8%at 8,546.43. Retailers and energy shares lead decliners: Fast Retailing (FRCOF.PK -3.80%), JX Holdings (JXHLY.PK -2.4%), and Inpex Corp. (IPXHY.PK-1.9%) - Turned around already, Nikkei up 0.2% at 1am.  Hong Kong closed due to typhoon.  

    Japanese retail sales declined 2.6% in August Y/Y, its first dip in over three months as a rebound from the March earthquake appears to have run its course.

    A crash isn’t inevitable, but worries aplenty (Sydney Morning Herald)

    In a Q&A session today, Bernanke calls the nation’s weak labor market "a national crisis," noting "we’ve had close to 10% unemployment now for a number of years, and of the people who are unemployed, about 45% have been unemployed for six months or more… This is unheard of." 

    In a grim final speech as KC Fed president, Thomas Hoenig says he expects U.S. economic growth to lag behind historical norms for generations. Fed policy has done more harm than good: "When you encourage consumption by inhibiting your interest rates from rising to their equilibrium level, you will in fact buy problems, and we have in fact bought problems."

    Hoenig critiques Fed in parting shot (Portfolio)

    Goldman’s 6pm comment that sent Futures to spike lows:  U.S. banks, whose stock performance rapidly grows more closely correlated to their European counterparts, are sitting ducks amid the eurozone crisis, Goldman Sachs says, as it lowers Q3 earnings estimates and price targets for big U.S. banks. Unlike in 2008, it’s not about capital, but "a weakening macro picture and a sovereign crisis in which no clear resolution appears in sight."

    Spending Less on Entertainment and Charity (Economix)

    Also not helping, more bond bears:  The U.S. is already in a recession, according to bond manager Jeffrey Gundlach, pointing to local governments slashing jobs, cutting hours for public resources and stalled projects. "There’s going to be a big loss in Europe," he adds, breathing a sigh of relief that his firm has no exposure to Europe and is entirely denominated in dollars.

    Deflationista Gary Shilling is even bearish-er, if that’s possible: 30-year Treasury yields "might go back to 2.5%… The forces of deleveraging in the world are greater than the Fed can handle. We’re marking things down to equilibrium… We had a big selloff [in stocks] but I really suspect that this is a pause before things drop further" to S&P 800.

    Now Banks aren’t even lending to Big Boys!  Hartford Financial (HIG -5.2%) reportedly halts an effort to sell its mutual fund unit after banks cut back on lending for leveraged buyouts, raising red flags that M&A deals are growing more difficult. Henry Kravis (KKR) says investors are demanding more than two percentage points in additional yield since April to buy leveraged loans, he says.

    If default is inevitable, then forcing an "orderly" Greek default may be the preferred option, says Glenmede’s Jason Pride. It could spur a relief rally for markets that have been pent up for so long with fear. The alternative – a disorderly or chaotic default – will be more damaging than the near meltdown the U.S. financial system experienced three years ago.

    It is only a matter of time until Greece has a hard default, says economist Desmond Lachman, and that’s just the tip of the iceberg. With over $3.9T in sovereign debt divided up amongst the PIIGS, what’s at stake here is the heart of the European banking system and the whole European experiment. If the European banks take the hit, that could cause a massive Lehman moment. - Remember 2/3 of this debt cancels itself out.

    Morgan Stanley’s analysis of sector performance during the market’s recent turmoil found there was no better safe haven for equity investors than utilies – utility ETF XLU is roughly even since the start of August, compared with a 10%+ drop for the S&P 500. Entergy (ETR) is Morgan Stanley’s favorite name in the space.

    What recession?  China’s IT ministry estimates the country had over 940M mobile subscribers at the end of August, 14% Y/Y. China’s 3G base is pegged at 94.1M, up from less than 50M in December. CarriersCHLCHU, and CHA benefit from overall subscriber growth, while chipmakers QCOM and MRVL gain from 3G adoption in particular- CHL is the only Chinese stock I really like.  

    Samsung’s (SSNLF.PKdeal to pay royalties on its Android devices to Microsoft (MSFT -0.4%) is bad news for Google’s (GOOG -2%) mobile strategy because it means Android is no longer free, according to Heard On The Street. Now it becomes harder for others to get away without paying, and it narrows the effective price gap with operating systems like Windows Phone.

    AMD falls 9.4% AH after warning its Q3 revenue will increase only 4-6% Q/Q, compared with prior guidance of 8-12%. The company also expects its gross margin to come in at 44-45%, below guidance of 47%. AMD primarily blames the weakness on manufacturing issues related to its 32nm technology. Intel (INTC) ramped 32nm production in early 2010

    Perhaps expectations were a bit high?  Mosaic Company (MOS): FQ1 EPS of $1.17 misses by $0.10. Revenue of $2.2B (+41% Y/Ymisses by $0.3B. Shares +0.14 AH.(PR

    General Motors (GM -3.7%) CFO Dan Ammann estimatesthe new agreement with the UAW will increase its hourly labor costs by 1% annually, the slimmest amount of any contract in the past four decades. GM expects 14% of 10,000 skilled trade workers to take buyout deals, which would be "extremely beneficial in keeping our fixed cost in line as industry demand improves."

    Ford (F -0.5%may add 10K jobs in the U.S. as part of its deal with the UAW, according to sources, as it still aims to lower overall labor costs and wages in its new contract. The concession could be a fit notes one Labor professor: "Ford, which is the most advanced in its recovery, is a natural for this kind of job creation."

    My brother’s company:  AutoZone’s (AZO) board has authorized an additional $750M in stock buybacks, a figure equal to 5.8% of the company’s present market cap. Citi praised the auto parts retailer’s aggressive stock buyback efforts in August.

    Its shares clobbered thanks to Amazon’s (AMZN +2.4%) Kindle fiesta (IIIIII), Barnes & Noble (BKS -6.9%) is already sending out e-mails offering the Nook Color to customers at a $25 discount. It’s not far-fetched to think B&N will also be more aggressive in its pricing for upcoming Nook models than has been previously rumored.

    Amazon Tablet: Apple Will Be Fine, But Netflix Is Another Story (Forbes)

    Retailers find an interesting characteristic of consumers who browse their websites using tablets: They’re much more likely to pull the trigger on purchases than other online shoppers. Many retailers also say tablet users place bigger orders – in some cases 10%-20% more – on average than shoppers using PCs or smartphones. 

    How Alcohol Affects Your Decision-Making Process (Lifehacker)

    False Signal Alert:  Copper is down because it was a speculative bubble that is bursting.  Demand has been down for years and has not been reflected in the actual price.  These are FUNAMENTALS that have been ignored by copper pricing but don’t let people fool you into believing that a drop in copper pricing (or a move to REALITY) somehow means industrial demand suddenly fell – PRICE (as with oil) has nothing to do with DEMAND.  

  170. checho

    Phil, do you expect another Yentervention by BOJ on the lines of the Swiss using a peg?  What could be potential impact of such a move?

  171. Phil

    Good morning!  

    Futures looking better, which is good as our $25KP is VERY close to goal at $100K (see update) with that goal riding on whether we hold over 645 on the RUT through Friday!  

    Dollar back down to 78.04 is the story.  The EU is maybe going to fix things – again.  Whatever, right?  

    Yentervention/Checho – The BOJ has been intervening constantly to keep the Yen at 77 to the Dollar.  Despite the Dollar gaining 10% in a month, the Yen has stayed right at 77 so there must be a huge flight to Yen safety going on as well.  The EUR/CHF is at $1.22, which was the stated Swiss target so I don’t expect a major move by the BOJ unless the Yen fails to hold 76 (stronger) but of course they want to see 80+.  Unfortunately, last time they tried to do that, they collapsed the Global markets so HOPEFULLY (not a valid investing strategy), they learned their lesson.  

  172. Phil

    Case-Shiller/StJ – Beware of another false indicator here as there is no reason we should EVER recover the housing highs.  They were a bubble.  The fact that Yahoo is no longer a $300 stock does not indicate the Nasdaq is unhealthy but, rather – SANE!  That goes for all of the Nasdaq, still down 50% from it’s 2,000 high after a decade.  Was that a reason not to buy when it was under 1,200 in 2002 or under 1,500 in 2008?  

    History can be very misleading – we aren’t waiting for East India Company to return to their former glory to begin believing International trade is rebounding and we don’t need $140 oil to tell us demand is strong, etc.  Of course we’d like to see housing stronger – we all own them – but we DON’T want to see them go back to the idiotic prices they were hitting in the middle of last decade.   This may be unfortunate if you were one of the bubble buyers but, absent of some massive inflation – it’s just not going to happen.  

     

  173. pstas

    Red Sox Self-Destruction Complete
    http://online.wsj.com/article/SB10001424052970204226204576600110058941104.html?mod=WSJ_WSJ_US_News_5
    "The 2011 Red Sox, the preseason pick by many to represent the A.L. in the World Series, will go down as one of the most epic failures New England has ever seen. Three and a half weeks after leading the Rays by nine games, their lead was gone and their season was over."
    As a White Sox fan, we knew our season was "over" some time ago, but this? Arg!!
    Baseball imitates life and investing. Expect the unexpected and pay attention to the fundamentals.

  174. Phil

    Electricity/ZZ – We lose about 1/3 of what we produce through the aging grid.  That’s very sad.  Spending $500Bn to upgrade the grid would pay for itself right away and should be one of this country’s top priorities and I’m sure the math works for most nations with older transmission systems.  Those are interesting companies to look into but not so much in the current austerity environment.  

    Christie/StJ – He’s on a full-court press to destroy the education system in NJ (we had to sue him just to stop him from funneling funds to richer neighborhoods and away from poor ones) in order not to tax the wealthy so I almost wish he would go away and try for President but, knowing him, I don’t think he’d step down as Governor to do it.  Also, to be fair, when you push him back he does compromise but his initial play is always to steamroll – which gets kind of annoying.  

    All or nothing days/StJ – That’s interesting, 57 out of 200 trading days where the Advance/Decline line is over 400 +/-.  That compares to an average of 5 between 1990 and 2006!  You can just see the Bots taking over the market…

    SCCO/Deano – I stick to FCX if I have the urge to play copper but Copper still isn’t cheap at $3 if the global economy is pulling back.  As I said about housing above, and as I’ll be saying when everyone wants to buy gold at $1,500 next week – IT’S A BUBBLE AND IT POPPED!  You don’t play for bubbles to unpop.  SCCO was below $8 in 2008 (now $26), as was FCX, now $32.  If you are going to invest in this space, it’s all about who is better able to control costs over the long-haul under the assumption copper never does come back and FCX has an edge because they are 25% gold and gold is probably not going to completely collapse.  If copper were $2.50, I’d be gung-ho bullish about bargain hunting for 10-year plays but, at $3.20 – I think they’ll be lucky to see the other side of $3.50 without some major inflation kicking in, which is possible but we’ll see it coming through policy first.  So, if anything, I would just sell a small scale of far out puts.  You are playing for a $2.50 dividend, so why not just sell the 2013 $20 puts for $3 because it’s as much as you’d collect over 15 months and, worst comes to worst, you end up owning just 1x at net $17 (35% off).  Again though, I prefer FCX, but not as good of a discount at the moment as the lowest puts they sell are the 2013 $27 puts for $5.50, which is net $21.50 (33% off).  

    Shock/Deano – Do you have a link on that one.  That’s quite the conspiracy!  

    Thanks DC – Gold star for the summaries with the links!  8)  

    Red Sox/Pstas – That was Met-like collapse – really amazing!  

  175. deano

     Phil
     
    Here’s the link to the article on Jesse’s site re: conspiracy:
    http://jessescrossroadscafe.blogspot.com/2011/09/sp-500-and-ndx-futures-daily-charts_28.html
     
    and the article from reuters (which does not exactly say that but it supports it somewhat):
    http://in.reuters.com/article/2011/09/28/idINIndia-59600320110928?type=economicNews&feedType=RSS&feedName=economicNews

  176. Phil

     Thanks Deano!  

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