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Tempting Tuesday – Again

SPY DAILYWell here we go again.  

Once again it's Tuesday and once again it's a primary and once again we are meant to believe everything is right in America as the Futures take the markets back to levels not seen since last August.  As we discussed last week and as noted by David Fry this morning

 Throughout the week Fed governors will be making speeches: Dennis Lockhart (2 speeches), Charles Evans (2 speeches), Esther George, John Williams, Charles Plosser and Jeffrey Lacker. This is part of their transparency mission and/or a campaign to pump-up investor confidence. You choose.

Yesterday we made our breakfast money shorting the Dow off the 12,350 line and today we already had a double dip at the Dow off the 12,450 line but, on the whole, it would have been easier to drink the Kool-Aid and go long.  

Unfortunately, I'm a Fundamental Investor and not a TA guy so, impressive as this run may seem, it doesn't match up with the data and, so far, it's neither matching up with Q4 earnings or Q1 outlooks.  We HOPE the Fed will go for QE3 (Friday's Fed speak indicated that and more today) and we HOPE Europe is fixed and we HOPE China doesn't implode – is this a sound investing premise?  Let's see how things have been going in the last Quarter:  

Up 15% in all of our indexes and led by the Transports, which are up 21% – even with oil up 25% over the same period which once again proves our theory that trucks and airplanes must poop oil when they run – which explains the non-inverse correlation between Transports and Fuel Costs that those of us who took Econ 101 may be familiar with.  

VIXThe most interesting thing about the above chart set is the uniformity of the moves up in the majors but I think it's the NYSE and the Russell which PROVE beyond a shadow of a doubt, that this market is traded by robots.  Look at those two charts – they are practically tick by tick matching – even to the point where the Russell is almost exactly 1/10th of the NYSE.  Sure, you could assume some similarities in two broad indexes but this is 6 full months of daily moves that are in lockstep.  That's just not natural on the order of maybe a Billion to one vs. two independently traded indexes.  

So the theory is that the broad indexes are difficult to manipulate and so they have underperformed by about 5% over the past 6 months but they were both part of the BuyBot express that has jammed this market higher since early October and lulled investors back into a state of complacency that usually comes right before the rug is pulled out from under them.

First of all, let's keep in mind that we bottomed out on the 28th at 12,150 on the Dow and the next morning we gapped up to 12,200 in a futures move that Retail Investors were unable to follow.  We went up to 12,300 on Thursday and closed back at 12,200 on the last day of 2011 and then the poor Retail Traders woke up last Tuesday with the Dow at 12,450 and we flopped to 12,300 again on Friday and yesterday we closed at 12,400 and today we should open around 12,500 (keep in mind Futures don't match the Dow, about 50 points lower).  So, of the 350 points added to the Dow since December 28th, 400 of those points were added pre-market and all the Retail Traders got to do was buy into a 50-point loss.  

This is, of course, a gold mine for the Banksters, who KNOW they are going to jack up the Futures so they just wait for a nice dip, buy from the Retailers (using the money we lend them for free through the Fed) and then they jack up the Futures and dump it on the suckers who chase the rally in the morning.  It's nothing more than a 3-Card Monty game where EVERYONE is in on the scam except the mark – and that mark is the retail investor!  

See, it's not just about having a card game you can't win – if that's all it was then eventually even Retail Traders would wise up – it's about creating the impression that you CAN win and getting you to commit your money and THEN making the loss seem like a fluke so that you are encouraged to go back to work, save up your money and gamble it again because "it could never happen twice," right?  As the great George Bush used to say: "Fool me once, shame on you, fool me you can't get fooled again." 

Speaking of getting fooled again, NFLX is back to $100 up about 60% since Thanksgiving and it's already tempting but I want to see if they can fill that gap to $120 from the last time they had earnings and fell from $120 to $75 overnight as reality is a very ugly experience for NFLX bulls.  Earnings are on Jan 25th so we have a couple of weeks to see how this little run plays out but, with a market cap back over $5Bn on less than $250M in profits, NFLX is priced for healthy growth and they'd better deliver or they will de-lever VERY quickly.  

Click to View1,297 was our +5% line on the S&P and we're not there yet, nor have we hit our 2,733 target on the Nasdaq and we're still miles below 774 on the Russell and 7,866 on the NYSE – all levels we discussed last Tuesday and even the Dow needs another 250 points to hit it's 10% line at 12,749 and it's a wide swing in the range between there and the +5% line at 12,170 so, essentially, meaningless moves in the Dow should not be the basis for bullish investing (see last Wednesday's post).  

AA certainly didn't report numbers that justify it being higher than last year (when it opened at $16) and we're long on them at $9 but that doesn't mean we feel the rest of the Dow components should be off to the races.  We'll stay Cashy and Cautious while we wait for either the other indexes to get over their Big Chart lines or for the Dow earnings to come in and somehow justify a 10% move up from last year and a 20% move up from last quarter.  

Just trying not to get fooled, AGAIN…  


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  1. exec

    They did it again.
     
    Ran it up to resistance then pushed it through in after hours.  Same ol same ol.

  2. roro

    Scaling into DOW shorts and selling if it moves higher (do I need my mind examined?)……….# 1 answer; probably.

  3. stjeanluc

    The small guys gets the shaft…. again!

    Oil Lines

    R3 – 104.48
    R2 – 103.27
    R1 – 102.52
    PP – 101.31
    S1 – 100.56
    S2 – 99.35
    S3 – 98.6

    Yesterday's high and low – 102.06 / 100.1

    Breakout lines – 105.23 / 94.96

  4. exec

    Phil/Gaps

     
    It really is sickening how they screw the retail investor. 
     
    I'm not sure I'm following where you're going with your comments above.  Do you think this is a setup to screw the Johnny come lately retail investor or are they going to continue to run it up.

  5. dpastramas

    Morning guys. More of a tech question: Is anyone using an RSS Reader to follow the comments on Phil's Daily posts? I tried various readers on my cell phone to keep in touch when on the move, but always get error messages,cant subscribe on the RSS Feed.  Thanks for any help!

  6. celesteschein

    Phil-what should I do with the $58 weekly qqq puts I have? When should I roll?

  7. Burrben

    Dpas / RSS
    OMG, I can't believe you asked that today.  I've been going round and round with Greg trying to get any windows RSS reader to work and subscribe to comments.  None work, even ones I paid for and work with secure feeds.  He said he sent this to the developers.  I don't think he's tested it himself.
     
    For now I've disabled images and flash, and it's loading better here in Nica.

  8. rayne42

    DPAS/Burrben  Im having the same issue.  I would love to get this settled

  9. lol730

    as much as it looks tempting – I'm going to move my 401k into cash today and keep it in cash until March

  10. Pharmboy

    PP for today:

  11. kramer36350

    Well, thinking musically of how to describe the market  – is it levitate me - http://www.youtube.com/watch?v=aljYMDwJLiM
    or a magic carpet ride – http://www.youtube.com/watch?v=YGtT4cv5HFQ&feature=related

  12. Burrben

    StJ / Fas Strangle
    Are you looking to close out the Put since FAS is up to 73 premarket?  

  13. jmm1951

    Interesting article here about the maiden voyage of the world's largest supertanker in the Valemax class, carrying enough iron ore from Brazil to China to build the Golden Gate Bridge three times. (What do they carry on the return journey?). Presumably these babies are too big to go through the Panama and must cross the Atlantic, go round the Cape of Good Hope, and across the Indian Ocean too, but probably they run on cheap Brazilian fuel as they carry as much fuel oil as a small oil tanker.
    http://www.telegraph.co.uk/finance/newsbysector/transport/9001096/Vales-megaship-sails-to-China-and-into-the-record-books.html#disqus_thread

    Also excellent Wikipedia article, which also mentions some problems with these ships.
     
    http://en.wikipedia.org/wiki/Valemax
     
    Don't know if it is a future game changer improving the competitive cost of getting Brazilian ores to Asia versus producers in Australia, but VALE is pretty beaten down, might be a good play on both Brazil and China, not to mention India, isn't denominated in dollars, and a tiddly dividend. Might  be a decent long term IRA hold. What do you think, Phil?

  14. lflantheman

    AAPL portfolio:   For anyone holding Jan 425 weeklies, we are going to scale out of those beginning this morning and will be completely out by EOD> 

  15. stjeanluc

    In French news today, an association just finished a shopping study and found out that the "generic" shopping basket (basic necessities) is up 4.4% YoY as compared to the official 2.2% inflation numbers. Apparently, the top 1% are not affected so all is good!

  16. stjeanluc

    FAS / Burrben – Absolutely, the plan is to buy back the 64 puts at the open and I'll wait until after 10:00 to decide on the new strike for the puts.

  17. scottmi

    Mom/Phil – there are services like you thought about for your mom.

  18. lflantheman

    AAPL Portfolio:     OUT of the 100 Jan 425 weeklies  for 3.95 for a profit of  $6,680.   If any of you are still in this trade, exit.  You might squeeze more out of it but it's risky.  We've made a lot.  Let's move on to the next trade. 

  19. stjeanluc

  20. stjeanluc

    lflan, on the 425 weeklies, I had a cost of 3.54 and now and exit of 3.95. For 100 contracts, that gives me a profit of $4100. Did I get the wrong numbers?

  21. lflantheman

    AAPL portfolio:   And what is the next trade?     I've placed an order to 20 contracts  April  425/450  bull call spread.  Analysis:  I believe AAPL is close to 450 by April.    This trade has an upside of 131% above 450 and a break even of 435.  Let's do it!   I know you guys can't follow all the crazy day trading I do on AAPL but this April spread should work for you us.

  22. Pharmboy

    GE moving straight down since the open….

  23. Pharmboy

    IWM kissing the upper BB on the daily, and above the 200d MA.  Wow, world must be in a bull market rally.  Go go go go…..

  24. stjeanluc

  25. lflantheman

    stj….I just spend some time doing an exact calculation on that trade.   The 100 Jan 425s bought at average of 3.49 each (not 3.54)  then all sold for 3.95.   The profit therefor is $4,600.   That should be correct.   Thx. 

  26. mampcsA

    Stj, i believe it was 5 contracts of MA in the 25KP. Easily available for 2 today.

  27. cslanson2

    Iflan
    Thank very much for your suggestion for the AAPL project and your daily guidance.  At this moment I'm not in lockstep with you AAPL portfolio in that  I'm still long some of the original $390 Calls and they are offset by an equal amount of the Jan-21 $425 Calls that I'm short.
    Given these positions would you get out and if so is it because you see the risk in AAPL specific or you would be more concerned about a general market correction / unseen event?
    Thanks in advance

  28. lflantheman

    And stj….the 20  April   12     425/450  bull call spread contracts went through (purchased)  for   26.28/15.28…Thx. 

  29. Phil

    Good morning!  

    OK, so the plan is to short the Dow off 12,450 and short oil off $103 but not if the Dollar can't hold 81.10 and RUT over 760 should have you with a very itchy trigger finger on stops.  

    There's bound to be a squeeze off this open but, IF you are good at quick exits, are the way to play as you can scalp nickel after nickel on this action while we wait to see which side of the lines we end up at.  

    There's still the logic that our government needs to pawn off $32Bn of 3-year notes at 1pm, which is a lot even for the Fed to swallow solo.  Tomorrow is $21Bn in 10-years and Thursday is $13Bn in 30-years for $66Bn this week.  We've done $100Bn so this is not a huge one but still, who the hell is buying these things for 2% when the Dollar is down 1% this week? 

    So I simply cannot, Fundamentally, see how we can hold this open through tomorrow and I think it's a great opportunity to short the Dow below the 12,500 line (12,450 in Futures) and oil is simply ridiculous at $102.80.

    In the $25KP we're going to press our bets and stick to the plan – if we're wrong about tomorrow, this will suck so be warned

    • 10 GLL Jan $18s at .40 and we're in for net .95 so a DD at .40 drops us to .68 on 20 ($1,360) and we're going to lose about half of it if gold keeps going up tomorrow. 
    • MON pulled back already.
    • DMND too far away.
    • 10 QQQ Friday $58 puts now .27 from .81 entry but the time is too short so best to roll to the Jan (next week) $59 puts at $1.05 for .98 rather than DD.  
    • BKS – Brilliant! 
    • SQQQ – May as well take advantage to roll the 2 $19 puts (now $1.90) to 4 Feb $17 puts (now $1.15) and pick up $30 for our trouble, which covers the cost and gives us a 10% better cushion.  The spread is $17/18 and SQQQ is still $17.28 so no worries there – yet.  
    • MA was up 25% yesterday and now the Feb $290 puts are back to $1.80, which is better than yesterday's entry so let's add 2 more at that price for 4 at net $1.90 and we'll look to sell 2 at $2.50 if it pops again to drop our basis on 2 to net $1.30.  

    If we're following last week's script, 10am should be the top and we have that 3-year auction at 1 but Williams speaks at 10:30 and George at 1pm so it's going to be a crazy day and we haven't even heard the latest rumors out of Europe yet.  

    At the open: Dow +0.91% to 12501. S&P +1.03% to 1293.95. Nasdaq +1.0% to 2704.

    Treasurys: 30-year -0.4%. 10-yr -0.2%. 5-yr -0.1%.

    Commodities: Crude +1.45% to $102.78. Gold +1.7% to $1636.15

    Currencies: Euro +0.2% vs. dollar. Yen +0.02%. Pound -0.10%.

    Market preview: It's a sea of green on boths sides of the pond, with S&P futures +1.5%. Increased optimism at small businesses in the U.S., strong French industrial production, and positive comments from Fitch about the country's rating have boosted sentiment, as has Alcoa's (+3.3%earnings report. However, WebMD (-27%) is getting wacked following its warningLater: Wholesale Trade.

    Redbook Chain Store Sales: +3.3% Y/Y vs. +4.9% last week. Redbook's early call for the January-December comparison is negative, at -1.2%.

    ICSC Retail Store Sales: -5.4% W/W, vs. +1.2% last week. It's the largest weekly decline in data going back to 1989+2.8% Y/Y, vs. +5.3% last week. Warm weather, and its negative effect on seasonal goods, is apparently behind the fall; weak consumer sentiment isn't mentioned.

    NFIB Small Business Optimism Index: +1.8 to 93.8, vs. 92 prior. It's the fourth consecutive month of increases, though the reading is still in recession territory

    Shrinking economies, austerity, more shrinking, more austerity … rinse, repeat. Citing shriveling internal demand, Portugal's central bank slashes its 2012 economic outlook, forecasting GDP contraction of 3.1% vs. an earlier estimate of -2.2%. This could cause the need for additional government austerity efforts, warns the bank.

    Even as Chinese import growth slipped to a 2-year low in December, within that figure, copper imports gained for a 7th straight month, hitting a record of nearly 509 metric tons. Not your Daddy's metal anymore, demand for copper in China may have more to do with financing schemes than actual economic use.

    For 2011, China's trade surplus clocks in at $155B, down 14.5% from 2010giving more ammo to Beijing which is making noises about slowing down or even halting the yuan's appreciation against the dollar. The yuan rose 4.7% against the greenback in 2011, it's strongest move in memory. Don't expect a repeat this year.

    Among the reforms pledged by China's securities regulator is an "active" push to encourage pension, housing funds, and insurers to begin investing in the stock market. The Shanghai Composite likes the news, rising 2.7%, it's 3rd consecutive move higher.

    Hearing of Beijing's move to "encourage" institutions into stocks (and out of housing?), one is reminded of Paul Krugman (along with Pimco's Paul McCulley), circa 2002, famously urging Alan Greenspan to create a housing bubble to replace the busted Nasdaq Bubble. 

    Iran's currency remains in free fall despite the central bank last week attempting to impose a floor on its value. The rial is 20% lower since that action and the market rate now sits about 50% below the official rate of 11.24K to the dollar. Reports emerge that texts containing the word "dollar" are being blocked. How about "greenback?"

    Now we know they are pumping their asses off – next comes Abby Cohen:  Laszlo Birinyi keeps his bullish vibe going, calling for at least 8% returns in equities this year as corporate profits drown out bears. It's not a short-term call either, with the long-time analyst saying he sees shares climbing for "years to come" based on history. 

    January 2012 marks the 3rd consecutive year the sustainable U.S. recovery has supposedly arrived, writes Nomura's professional bear, Bob Janjuah. Don't confuse mini-business cycles with real economic expansion, he argues. "I have high conviction that the U.S. economy will be seen as a risk, rather than a saviour within the next quarter or two."

    Bank of America cuts Netflix (NFLX) to underperform, saying the stock's 42% rise in the new year is "unwarranted." Among the 5 "overhangs" it sees for the stock: Dwindling customer loyalty, international expansion dragging down profits, and rising content costs. Shares -2.3% premarket. 

    Analyst estimates for Kindle Fire (AMZN) sales keep pushing higher with Barclay's Anthony DiClemente lifting his holiday season forecast to 5.5M from 4M and Heather Bellini of Goldman Sachs calling for 6M Fire devices sold in Q4. The onslaught of Fires to the market comes with a cost to the global e-reader market to the tune of broad downward revisions for 2012 sales. Shares +1.2%premarket.

    Apple's (AAPL) share of the U.S. smartphone market surged in Q4, jumping from 26% to 43%, mostly at the expense of Android (GOOG), which slipped from 60% to 47%. Blackberry (RIMM) continues its slide, hitting 6% compared to 8% in Q3 and 19% a year earlier.

  30. angelcur

    i ve extended my target for this run from 1300 to 1305 -1310..

  31. nicha

    Iflan – we still have the Jan 410/420 & 415/425 open, correct?

  32. lflantheman

    cslanson2…….If that's a January 390/425 bull call spread I think it will do fine just to keep it.    I'm looking for AAPL to go up to around 430 pre-earnings then move up another 5 to 7 % post earnings. 

  33. lflantheman

    nicha ….correct

  34. JRW III

    Good morning,

     

    IWM    73.51,  73.92,  74.28,  74.61,  75.12,  75.54,  75.80  and  76.39

     

    Also, I have an ascending trend line now at IWM 75.90

    Today sould be about it, I would think !!

  35. Phil

    Same old/Exec – And that is how we make our money.  

    Wow, 1,295 on S&P, they are totally going for 1,297.  

    CAC up 2.4%, Dax up 2.3%, FTSE up 1.5% and that matches us, which makes sense (as much sense as this can make, anyway).  

    Dollar 81.13, Euro $1.279, Pound $1.5689, 76.81 Yen to the Dollar.  

    Oil $103.13, gold $1,639, silver $30, copper $3.51 on a huge move up on the China news, nat gas though fell below $3 to $2.969 (very sharp drop from $3.04 at 8:15 and gasoline also fell from $2.80 to $2.78 which certainly doesn't make me like shorting oil less.  

    You have to have conviction to trade this as the technicals are all bullish at the moment, other than volume, of course.   

  36. bbates08

    Phil, Do you have a bullish hedge for $25KP if we add to are positions

  37. stjeanluc

    lflan, OK, thanks. Correcting and updating the spreadsheet now.

  38. mampcsA

    Phil, you didn't mention the DIA 123 puts in the 25KP.

  39. stjeanluc

    50KP / MampcsA – Correct on the MA puts, thanks! Corrected now.

  40. stjeanluc

    25KP / Phil – Sorry, my bad, but we already had 5 MA puts in the portfolio.

  41. stjeanluc

    FAS Strangle – Selling a 69 Put for about $0.43. I was tempted to go higher, but I am worried that we correct this afternoon so I wanted more cushion.

  42. Pharmboy

    AAII sentiment is all bullish FWIW.  Rule #9 from Bob Ferrel:

    When all the experts and forecasts agree — something else is going to happen

  43. yodi

    stjeanluc
    HI FAS what about you caller what are you holding ?

  44. jrod0725

    Phil, we initially had 5 MA 290 puts. Did you mean add 5 more or 2? Thanks

  45. Pharmboy

    TOL – what the ….. are they doing up at 22.3x.  That is crazy.  HOV should be at $10 then.

  46. Phil

    Setup/Exec – I wish I could be sure but it's hard to say with such little volume backing the moves.  My logic at the moment is that we are creating an environment for a disastrous auction and, if that happens, it will crash the markets anyway so I would think the bear bet is a no lose – fundamentally but you have to bear in mind Keynes' warning that the markets can remain irrational longer than you or I can remain solvent so, if they keep going up, we take our losses and reassess – not keep fighting a battle long after its lost.  

    QQQ/Celest – See above.  

    Cash/Lol – Good plan.  Might be some very good deals in March.  

    Musical/Kramer – I'll stick with "Won't Get Fooled Again" thanks. 

    VALE/JMM – I don't know enough about the total tonnage of iron from Aus or Brazil or the relative cost and capacity to give an answer.  My gut says I'd wait for a better crash to buy in. 

    Inflation/StJ – It's amazing how no one makes a big deal of these things.  

    Oops, MON on the march again.  

    Thanks Scott!  Does seem a bit more geared towards seniors more at-risk than my Mom but nice to know a system like that is out there.  I certainly would have gotten it for my Grandfather when he was home alone in his 90s.  He had a television that you could name your channels so I named several of the channels "take pills" as that was his biggest problem – forgetting to take his medicine.  

    IWM Money/StJ – TNA $49.30 not good for the short calls but we don't think it will last so let's take the money and run on the short puts and leave it at that.  

    AA Money/StJ – Looks like $9.50 may be it. 

    FAS Money/StJ – We have to sell 2 Friday $74 calls for $1.90 – that's crazy money!  

    $25KP – I forgot about the new DIA $123 puts, now .70 – of course we want 5 more of those for 10 at net .89. 

  47. Phil

    Wheeee on oil!   $102.60 drops the stop to $102.70 and we can then reload at $102.75 or wait for $102.50 to be crossed.  At $102.50, I'd take half and run anyway.  

  48. flipspiceland

    @Felipe
    I just read your reply to my post about multiple Ipad ownership. Would you, when you have a free minute, 'splain the reason, necessity, or kinkiness for having one in the bedroom? 
    Short WOR @ 21

  49. lflantheman

    AAPL traders:   We've already had a good day and we are set pretty stable now with bull call spread in January, April and July..    I will check back later in the day but  I don't see any new trades I want to do at the moment.   

  50. Phil

    GE/Pharm – Too much like SI to be worth the risk.  

    MA/25KP, Mampcs – Same logic then but the DD is to 10 and we're a bit more anxious to cut it back down to 5 as soon as we get a good break,  

  51. stjeanluc

    FAS / Yodi – I am still holding the calls yes. All premium and 3 days to go. I am guessing we will correct before the end of the week and we'll close then.

  52. JRW III

    More free money:

    By Greg Robb

    WASHINGTON (MarketWatch) – The Federal Reserve must be prepared to use all of its policy tools, especially now that Congress is cutting spending, said John Williams, the president of the San Francisco Fed Bank, on Tuesday. Williams did not advocate a particular policy action such as another round of bond purchases, or quantitative easing. Instead, he said only that the actions that the Fed takes from here will depend on how economic conditions develop. But Williams' forecast laid out a case for more easing. He said that growth would be "frustratingly slow" and the unemployment rate would remain "very high for years to come." The economy is being held back by powerful forces stemming from the bursting of the housing bubble, including lack of credit, uncertainty and destroyed household wealth. At the same time, inflation will run below the Fed's informal target of 2%, he said.

  53. 1020

    Happy New Year Phil!
     
    Talk about being fooled.
     
    A G.S. analyst today says "don't chase the rally" in homebuilders, after yesterday's upgrades…..
    http://www.thestreet.com/_yahoo/story/11371472/1/stay-away-from-homebuilder-rally-goldman-sachs-says.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA

  54. stjeanluc

    IWM Money – Buying back the TNA 43 Puts (now 0.55)

    FAS Money – Selling 2 FAS Jan2 74 Calls (now 2.06)

  55. Phil

    81.22

    Bullish hedge/BBates – In a small portfolio, you don't want to bet against yourself if you don't have to.  If my premise fails (that this morning is the tippy top) then we HAVE to get bullish but I don't want to bet against ourselves if we're not forced to.  That is NOT the same thing as when I take a bullish position on a stock I think is too low and a bearish position on one I think is too high – but that's a mix for less insane markets than this.  

    If you do want something bullish, to play (other than BAC from last week which is up almost double on the options already), how about FXE?  If you think the Economy is "fixed" then Europe must be fixed and for the Dollar to go lower, the Euro has to go higher so you can protect yourself by calling a floor on the Euro at $1.27 and selling the FXE March $127 puts for $2.65 and buying the March $125/130 bull call spread for $2.50 for a net .15 credit on the $5 spread.  If you don't believe int he rally enough to call a bottom on the Euro – then you don't believe in the rally!  

    AAII/Pharm – Good point.  Time to go contrary when they get too lined up.  

    HOV $2.13!  At least some good comes out of this nonsense.  

    TASR still $5.24 and you can sell June $5 puts for .50 and use that to buy $5 calls for .65 so you are long with no premium and risk owning them at net $5.15 without dropping the cash.  TOS says net margin is .80 per contract.  

    GLW flying too, BAC up another 4.5% – see, it's fun to be bullish as well.  

  56. stjeanluc

    Matt Davies

  57. dflam

    Phil/GE:  I have 2 GE positions I would appreciate your advice on:
    1) After closing out several positions, I now have: Long 10 Jan. $17.50 C at $2.27,now $ $2.54 ,sold 10 Mar.$17C at $.82 ,now $2.06 and sold 10 Jan. $12.50 P at $2.12 ,now $.54. Intent was to roll Mar . $17 C every 3 months. Stay w/original intent?
    2). bought 10 Jan.$10 C at $6.28 ,now $$8.85,sold 10 Jan.$12.50 C at $3.75,now $6.50 and sold 10 Jan. $12.50 P at $1.60,now $.53. Thinking of rolling puts to $15 P for $.97 since it's about 20% less than current price. Your opinion? Thank you.

  58. wappler

    Phil,
    Since we're on our way to the moon again, what EDZ hedges would you recommend for the March/April timeframe?

  59. Pharmboy

    wappler – moon:

  60. zipla

    Hi Phil,
    Initial entry to HOV was B/W with Put offset — $1.55 share; call and puts Jan 13 $1.50 for call .50 + P .65 for total .70; making stock  $0.40 a share. Make sense to roll calls?
    Thanks

  61. Pharmboy

    My premise for being a bear (for a very long time, have I) (from Surly Trader):

    AAII sentiment

    Baltic Dry Index

    What the hell are the rails and trucks shipping?  1/2 empty containers?

  62. scottmi

    Mom/Phil – You're welcome. It's a good system. If you give them a call, ask for Dan.

  63. pat_swap

    Ford is falling….an early indicator of market direction???

  64. Phil

    IPad/Flips – Well I read in bed and also wake up during the night and rather than put on the TV and bother my lovely wife, I can just push the little button and see the Futures and read the news to see if it's worth going downstairs to the command center.  It will become a problem if the IPad 3 has Siri because I'm not sure how Tina will feel about me talking to my IPad at 3am.  Maybe she has a whisper mode….

    Actually, you gave me a good idea for an app – how about set up the Karma Sutra so it works with the camera and you can have the IPad check to see if you have each position right?  Kind of a sexual twister with an electronic score keeper!  

    NFLX falling fast.  

    Williams/JRW – Well, he certainly did his job and 12,500 is all we can get out of that?  The next speaker will have to take it up a notch if they want to get the S&P over the hump at 1,297.  

    Builders/1020 – I like the fact that HOV is below the radar now.  

    LOL StJ!  

    GE/Dflam – Good retirement stock no matter what happens short-term.  I take it you have 2013 $17.50s ($2.47) so sure, your idea is fine and I'd certainly wait until after earnings before deciding to roll as you may need the downside protection of the caller.  The other spread seems fine too but, in both cases, I'd take out the $12.50 puts (.55) and wait for a dip to sell the $15 puts for $1.50 (now $1) or sell the $17.50 puts for no less than $1.50 (now $1.80).

    EDZ/Wappler – At the moment, I'd sell the April $16 puts for $2.40 and pick up the $16/22 bull call spread for $1.40 so your worst case is being in EDZ for net $15 with a 700% upside potential.  

    81.15, $102.65, $1,638

  65. stjeanluc

    Apparently, these guys knew what they were doing…. and we bailed these crooks!

    http://www.bloomberg.com/news/2012-01-06/goldman-citigroup-cdos-were-tip-of-iceberg-the-ticker.html

    They found that the bonds in the CDOs performed a lot worse. Even if one holds observable characteristics such as initial ratings and yields constant, the bonds in the CDOs suffered ratings downgrades that were 50 percent to 90 percent more severe. As of June 2010, for example, bonds with initial triple-A ratings had been downgraded by an average 11.84 notches, compared to 5.99 for those not in CDOs. The bonds in the CDOs were also more likely to have been rated by all three major credit-rating firms.

  66. bbates08

    GLL – Isn't the best play to roll 10 JAN 18 Puts to 20 FEB 17 Puts

  67. jrod0725

    Phil, are you still going for the DD on GLL at .40? Is it worth trying for an entry at .45 or do you think it will fall some more?

  68. gmarts

    Ford just warned: Q4 losses based on Thailand flooding

  69. pentaxon

    Measured in non-USD currencies US stocks have about the highest valuation of the last four years. The adjusted chart has even left it's trend channel on the upper side:
    http://www.pentaxon.com/psw/spy_worldcurrency.html

  70. Phil

    HOV/Zip – Sorry but I'm not clear with all the numbers.  You bought the stock for $1.55 and sold the 2013 $1.50s for $1.35 for net .20/.85?  Why would you want to change that when you get called away at $1.50 and you are well covered?  If you want to gamble, you can just buy the 2013 $2/3 bull call spread for net .25 and if you spend just 40% of your potential $1.30 profit on the 2013 spread, you can pick up another $1.50 if HOV keeps going higher the next year.  So why mess around with the bet that's firmly in the money when the market is still so uncertain?

    GLL/Bbates – Not if we get a nice move down tomorrow.   If not then perhaps premise is blown and I don't want to spend more to go to Feb as gold can go back to $1,850 if we're back to a QE-type rally.  

    GLL/Jrod – They've been selling for .40 on and off all morning.  See those 454 contracts?  That's us.  

      

  71. dpastramas

    Exaclty what we needed, someone hinting QE…
     
    BREAKING
    Fed's Pianalto hints she'd support more easing

  72. rainman

    stj / crooks — That's just the ratings agencies trying to save face once the cat was out of the bag.

  73. angelcur

    seeing typical "gap and hold"  today - i beleive the opening move will be held meaning higher prices later today…no signs of negative divergence  yet….the S&P is still 10-15 points below my upside target…i am with phil on the BS that is posing as fixed but in a world where romeny and christie look like laurel and hardy and obama and biden seem like cartoon characters..click your heels together and shazammm there is room for more upside!!!   maybe we run higher into the close today and tomorrow am before we set up a chance to go short…hillary for veep anyone?

     

  74. jrod0725

    Odd. I'm not getting any love on GLL. And my TOS shows the low as .45.

  75. angelcur

    baltic dry index is one of ed hymans favorite indicators..its a great one.

  76. Savi

    Phil—Is there any adjustment on the DIA 119 march puts in the income portfolio?
    Thanks

  77. sagemm1

    stj?25k update
     
    I am seeing a trade on 1/6 for long 5 MA calls and in the current portfolio same price and number but listed at puts, I beleive it is the Puts right?

  78. jrod0725

    Doh, nevermind. I was looking at the puts. Sorry.

  79. stjeanluc

    MA / Sagem – True, the puts. Thanks!

  80. scottmi

    Market Poem -
    The VIX is low,
    My hedges blow.
    Woe, oh, woe
    How far will it go!?

  81. jabobeast

    here comes TLT…

  82. stjeanluc

    Apparently, good days are ahead…

    http://www.bespokeinvest.com/thinkbig/2012/1/10/intrade-recession-odds-plummet.html

  83. exec

    JR,

     
    How are you positioned?

  84. exec

    Does anyone know what's up with Ford today?

  85. pat_swap

    Phil/Options Trades,
    Where can we see the executed trades other than TOS? Is it a paid subscription?

    Thanks

  86. sparky123

    Gmarts posted that they warned on Q4 cause of Thai flood.

  87. danny3399

    false report came out today that they were bringing down quarter guidence but it was only asian unit.

  88. palotay

    $103 line on /CL is working great right now.  

  89. Pharmboy

    Flying in a Blue Dream…..this market is!

  90. kallenjr

    Phil,
    Still a little confused on MA. You mentioned adding 2 (to a total of 4) at 10am post, but several comments align with my position of 5.

  91. kallenjr

    Pharmboy,
    That is great piece by Joe. Was featured at the close of the Winter Olympics telecast (CBS?)

  92. JRW III

    exec / Position

    2/3 short !!  If we lose the EMA (we're on it now) 200 and trendline support at IWM 76.11; then……………………

  93. Pharmboy

    Kallen – the whole album is one of my favorites.  Saw him in grad school in a Des Moines bar…..

  94. gmarts

    Earlier Ford reports of comments from Mulally at investor conference called into question.

  95. bbates08

    Phil is there a play on V insteat MA Puts

  96. craigzooka

    Goog morning from the future! It’s 6 am here but it’s also Wednesday. I am really hoping clo drops soon do we can add some more in the IRAPortfolio. As I look out right now, nothing looks cheap enough to be attractive. Other than that all positions are on track!

  97. craigzooka

    That would be VLO not clo.

  98. JRW III

    Black candle anyone ?  8-)

  99. ricpar

    Normally the market will go
    In a direction, which we don’t know
    But move it will so we decide
    Short or long or simply hide
     
    So rationally we speculate
    And hedge our bet, ain't that great
    When were wrong and wreck our car
    We salvage the parts to buy a cigar

  100. sparky123

    I keep hearing this sound-it's like air coming out of a baloon.

  101. gmarts

    And…. Boom!

  102. exec

    JR,

     
    What's the definition of a black candle?

  103. scottmi

    WTR – down at channel lows.. good boring dividend paying utility to consider for initial entry, esp for IRA accts..  can sell 22.5 calls against it.. seems like forever. Water is the next gold some say, and some don't.

  104. Pharmboy

    OJ futures trade at all time high (back to 1977) on concerns that the presence of a fungicide in samples from Brazil could crimp supplies. Oil and OJ.   I live on those two liquids…along with crushed grapes and fermented rye….

  105. gmarts

    Mine are red and green, some guys go black and white.

  106. exec

    Gmarts,
     
    I think a black has something to do with engulfing.

  107. Phil

    Thanks Pentax!  

    SPY in world currency

    More QE/Dpast – This is what we expected early in the week.  Go over last week's post – it's following the exact script we expected and that means we hit the week's high at 10 and now we fill the gap back to 12/30 in order to panic people into TBills and THEN we'll see what's real as earnings come out.  

    Hillary/Angel – It's the Dems best chance of 4 more years after Obama II (unless, of course, someone from the clown college somehow wins).  

    DIA/Income Portfolio, Savi – Good idea!  I don't remember the roll to $119 though but, from the March $110 puts, now .88 listed in the last post on the subject (12/10), we can spend $2.15 to roll out to the June $112 puts at $3.05.  If you are in the March $119 puts, now $2.27, it's worth $1.23 to roll out to the June $114 puts at $3.50 as that money, in both cases, is easy to get back from a sale.  

    Also in the Income Portfolio, we have 50 SDS March $19 calls at $4.30, now $1.03 and those can be rolled to the June $18 calls ($2.15) for $1.12 and again, with 3 months to sell short calls, it's money we should be able to get back over time.  

    F/Exec – Some kind of profit warning.  Ah, Dan says it's false.  Aren't rumors fun?  

    Still, seems to have sparked a sell-off (or whatever silly reason started it). 

    So I guess you guys can see why, although it's hard, you have to have conviction to play the Fundamentals against a market rally.  Look how cheap our DDs seem already.  

    Trades/Pat – I think even the Paper Money version of TOS shows you the number of contracts.  I used to use Investools but TOS bought them.  

    Oil/Palotay – The gift that keeps on giving!

    MA/Kallen – The point was to DD.  I was looking at the spreadsheet from yesterday with 2 but the official position is now 10 of the puts – no matter where you began BUT we go back to $5 if we get a pop back over $2.  The puts are still $1.85 at the moment.  

    V/BBates – You could use the same logic and pick up the Feb $80 puts for .25 but keep in mind, we're just playing for a double on a dip so at about $95, that trade is done (or at least set a stop).  

    GOOG morning/Craig – Well, we know what's on your mind!  

  108. rainman

    JRW / black — if /DX can break 81.25 I think there is a good possibility.

  109. Pharmboy

    Green filled (rather than green hollow) is the same as black.  Just means the candle started high and finished at the low, although all above the previous finish.  Not a good sign. 

  110. gmarts

    exec, I got no engulfment on that candle, just high velocity (big dump) continuation

  111. craigzooka

    @scottmi, I took a look wtr for the Ira portfolio, unfortunately the options have a huge bid ask spread which makes it unsuitable for covered calls.

  112. JRW III

    exec / Black candle

    Reversal indicator !!

  113. rainman

    scottmi / water — The article in that link seems pretty shallow to me (pun in tended) not to mention that the writer is obviously biased. It might not be the next gold, but there's something up when a bottle of water costs more than soda which has the same base water. Thanks for the heads up, somehow WTR slipped from my alert list.

  114. craigzooka

    @phil, woopsy, posting from my iPhone in newzealand! I am trying to get Siri to post my comment for me with little success. But after using her for a while I don’t think I can ever go back!

  115. JRW III

    exec,

    Traditionally, candlesticks have not been different colors. If the close was less than the open, you get a filled candlestick and if the close was higher than the open, you get a hollow (white) candlestick.

    If the previous day's closing value is less than or equal to the closing value for the current day, draw the current day's candlestick in black.

    If the previous day's closing value is more than the closing value for the current day, draw the current day's candlestick in red

  116. gmarts

    OK, so you were talking about the current daily candle then, not the intraday

  117. Phil

    12:00 PM On the hour: S&P +1%. 10-yr -0.1%. Euro +0.2% vs. dollar. Crude +1.6% to $102.97. Gold +2.0% to $1639.55

    12:33 PM European shares close sharply higher, bouncing at the session's start following a big night in Asia, and holding onto the gains. Stoxx 50 +2.5%, Germany +2%, France +1.9%, Italy +3.1%, Spain +2.3%, U.K. +1.7%. The euro gives up sizable gains, now flat at $1.2767

    Zillow's November real estate market report shows home values falling 0.1% from October, down 4.6% Y/Y. Nearly all metro areas showed Y/Y declines, but some – including Los Angeles, D.C., Ft. Lauderdale, San Francisco, and Detroit – flattened out or turned positive towards 2011's end. 

    San Francisco Fed chief Williams sticks to script, bemoaning the jobs "calamity," and saying the Fed must all use all available tools to deal with it. His own forecast is for better growth and lower inflation than last year, but with a continued high unemployment rate which he expects will remain above 7% into 2014.

    Cleveland Fed's Sandra Pianalto, rotating into a voting role at the FOMC, says past Fed interest rate and monetary policy decisions have worked, and she hints she would be prepared to support more stimulus: "I have supported our policy decisions, and there is evidence that they have been effective." She foresees 2.5% growth this year and 3% in 2013. - Oh good, everyone is on message!

    In a case of money going round in circles, the Fed transferred $76.9B in earnings to the Treasury in 2011. The bank earned $83.6B in interest from its eye-watering $3T portfolio, which includes Treasurys, federal agency debt, and mortgage securities held by Fannie and Freddie. (PR

    Real or not real?  Ford (F) CFO Lewis Booth says the company will post a Q4 loss due to the Thailand floods. Ford had been expected to earn $0.26 in Q4. The shares dive about 2.5% on the news, but remain+0.5% on the day. Update at 11:22: CNBC's Phil Lebeau says the early wire report was incorrect; Ford will post a loss for the Asia-Pacific region, but has not changed its Q4 profit outlook.

    Uncovered emails regarding his family's fx dealings may have forced Hildebrand from the SNB, but his biggest mistake will turn out to be his euro policy, writes James Saft. By offering to buy unlimited amounts of the currency, he makes a junior trader error – a trade that will work well most of the time, until one day it doesn't, and then it will be a disaster.

    The bank run in Greece slowed in November, with just €3.5B in deposits leaving the country's banking system compared to €6.8B in October. Since Jan. 2010, Greece's household and corporate bank deposits have fallen about 25% to around €173B.

    Greece is closing in on a deal with private bondholders over a debt swap that is crucial for its second bailout, the EU's Olli Rehn says. It might not be worth holding your breath just yet, though, especially as Greece's next panic-inducing payment isn't due until March.

    The ECB's refusal to take any loss on its holdings of Greek paper makes little sense, given the loss could easily be fudged away, writes Neil Unmack. The policy also drives real-money investors to require greater yields on sovereign debt, as they now believe they'll have to stand behind the ECB in line for repayment. 

    Hedge funds engage in a game of chicken with the IMF,scooping up chunks of Greece's €14.5B in debt maturing in March for 40 cents on the euro, and betting the agency will ultimately give on the next tranche of bailout aid, allowing the funds to receive full payment on the discounted paper. 

    Growing corporate trend: going tax-free. More than 60% of U.S. businesses with profits of $1M are structured as pass-throughs, pushing federal corporate tax collections to just 1.3% of GDP from their peak of 6.1% in 1952. The rules originally were meant to help small businesses and entrepreneurs, but larger firms like Blackstone (BX), Bechtel and Kinder Morgan (KMI) also are taking advantage.

    BofA sharply cuts its 2012 forecast for U.S. natural gas(UNG -3.5%) to an average $3.30/MMBtu, down by $1. November and December saw the warmest winter weather in more than 30 years, the firm writes, “Thus, we are starting the new gas year with an incredible glut. This is not just bearish for 2012 but also for 2013." - Wow, fundamentals and energy – that's a volatile mix!  

    Taiwan Semiconductor (TSM +1.2%), which manufactures chips for many leading chip developers, isn't getting hurt by the publishing of its December sales report, even though the report notes sales fell 13.2% M/M and 9.4% Y/Y – one more sign of the industry's huge inventory correction. Nomura (Buy) believes sales to the graphics (AMD and NVDA are clients), hard drive, and TV markets were particularly weak.

    Affecting a lot of seasonal retail:   Comments from Goodyear Tire (GT -7.8%) CEO Richard Kramer that unseasonably warm weather is hurting winter tire sales lets the air out of shares, plunging 10%-plus in the past half-hour. Kramer says GT is on target to meet 2013 goals but recent trends have been challenging, with volume softness across all categories. Also, CTB -3.5%. 

    BorgWarner (BWA +10.3%) shares power higher after issuing upside FY12 EPS guidance and in-line revenue guidance. The supplier of engineered automotive systems and components sees EPS of $5.35-$5.65 vs. $5.21 consensus, revenues +10%-12% vs. ~12% consensus, and operating income margin of 11.5% or better, which would be a new record.

    McDonald's (MCD) is close to agreeing a deal with the IOC to continue the irony of the company sponsoring the summer and winter Olympics until 2020. McDonald's is one of 11 top sponsors that provide an estimated $100M each for every two-game package.

    Nomura's Romit Shah is impressed with the ultrabookshe's seen at CES, and while he's maintaining his Reduce rating on Intel (INTC), he argues ultrabook proliferation could boost Atmel (ATML) and Cypress (CY), whose touch controller chips go into them. Should ultrabooks account for 40% of laptop sales, as Intel hopes, Shah believes the addressable market for touch controllers could grow by $300M-$500M. 

    Cowen reiterates an Outperform rating on Apple (AAPL+0.7%) while warning of unrealistic expectations that leave little room for an upside surprise after it issues FQ1 results on Jan. 24. While some analysts extrapolate strong activations into FQ4 2011 iPhone sales in the mid-to-upper-30M, Cowen's checks don't support such a lofty figure, although it raises its forecast to 30.5M units from 26.5M.

    With today's 1% S&P bump so far on top of a 1.8% gain in the year's first five trading days, are we on the verge of a stock market breakout? Doug Kass lists 10 reasons for a breakout, and Josh Brown is mindful of the many things that can go right from here: a soft China landing, a non-catastrophic eurozone endgame, improving economic data and more.

    A Reuters survey of analysts and economists, has Chineseproperty prices falling 10-20% this year – numbers just enough to cool the market without the dreaded "hard landing." Most curious is the learned respondents crediting government tightening measures but not the unpleasant side of a bubble with the slide in prices.

    Despite recent evidence to the contrary, bearish Gary Shilling sees U.S. consumers shifting to a saving spree from a 25-year binge of borrowing and spending. As for his 2012 investment themes, it looks like more of the same: Treasurys remain attractive, the dollar continues to rise vs. the euro, housing prices have another 20% to fall, banks stay unattractive, commodities continue to decline.

  118. Phil

  119. JRW III

    We should get clear direction in the next 10 minutes or so. Coming up on 200, EMA, trendline resistance !!

  120. Phil

    Don't forget the auction ends before 1pm, that's just the results so they are done with today's 3-year panic move and we'll probably drift back up so we can do it again tomorrow.  

  121. turtle1755

    where do I find the Income Portfolio?
    got out of AAPL weeklies this am that I bought yesterday at close;  nice move and just got out of SPY short on today's market. Life is good.
      Love the AAPL plays we are doing:  are there any stocks like this that some knowledgeable person will run for us  as  in the AAPL plays???
    turtle1755

  122. samz3700

    Phil – Above chart does not account for the fact that with many pass-throughs some portion of earnings is treated as a return of capital so you don't have to pay taxes on it until you sell the underlying asset – applies to MLPs and others.

  123. sagemm1

    Phil/SQQ BCS
     
    Would you consider covering our short side at a profit and just letting the longs run or would you wait for them to expire worthless? I guess considering I feel we may have already hit our weeks high

  124. kinkistyle

    Heres an interesting bit of news:  IBM is buying 35,000 HAMP Loans from BAC.
     
    "More than 35,000 mortgages in Home Affordable Modification Program trials transferred to the IBM (IBM: 181.64 +0.03%) servicing arm Seterus from Bank of America (BAC: 6.535 +4.23%), according to Treasury Department data released Monday.



    The transfer of 35,000 HAMP trials to Seterus would put it near the top 10 largest servicers in the program. American Home Mortgage Servicing extended 42,000 HAMP trials, the 10th most of any other servicer."

     
    Looks like Big Iron is getting into the subprime biz.

  125. terrapin22

    Phil / Oil/ SCO - I'm in the Jan '12 35/38 bull call spread.  looked great back on 12/30.  now down about 30%.  now with the Iran war rumor mill continuing to roll on, i'm not sure oil will turn down in next 10 days.  roll out to Feb?  

  126. ronresnick

    Dear iflantheman,
    I have from a few weeks ago 10 AAPL Apr 2012 405/430 bull call spreads.  With respect to your 425/450 BSC suggestion this morning, do you think it makes more sense to put on 10 new 425/450 BCS or buy back my short 430 calls or roll those up to a higher strike or some other trade to avoid getting called away on the short 430s or do nothing now and wait until we get closer to April?
    Thank you!

  127. roro

    Took the money from the DOW shorts, and sell orders back at this mornings highs in the event of a runn up to the close.
     
    Nothing like the 1% a day in/out trades. Thx for the HUs, Phil.

  128. Phil

    WTR/Scott – The same people who ran oil up from $20 to $100 in the past 10 years have their sites on cornering the market on water.  Stage one is destroying the water supply – that's done through the assault on the EPA, allowing our water infrastructure to decay as well as the way Fracking operations are allowed to pop up all over the country even though they MIGHT be damaging the water tables.  Fresh, clean drinking water is one of our countries most valuable resources and it SHOULD be indefinitely renewable – but where's the profit in that?  

    Siri/Craig – I'm still waiting for the next version but looking forward to it.  

    Income Portfolio/Turtle – Under the Portfolio Tab.  

    Pass throughs/Samz – Well that and a lot of games that further lower the effective rates.  It's all well and good to have a high Corporate Tax Rate but what's the point if no one actually pays it?  Always cracks me up when idiots on Fox start talking about how Greek citizens don't pay all their taxes when our own code is full of loopholes rich people and corporations can fly private jets through.  

    SQQQ/$25KP, Sage – If I had noticed them at .30, I think I might have as I felt very strongly that we'd drop from there but .40 is a lot to pay when the $17s are only .85 and we're .56 in the money but tomorrow, if we get another pop, it does look like our premise is intact so it's worth trying to buy back the $18 calls for .30 or less.  

    IBM/Kinki – Not a bad use of cash.  

    SCO/Terra – I'd pull the $35s for $1.80, leave the $38 caller open (.70) with a stop at $1 and buy the Feb $35/40 bull call spread for $1.70 so no charge and you're in a lower, longer $5 spread that MIGHT cost you $1 but only if SCO goes higher and you are already in the money so that would not be terrible.  

    You're welcome Roro and good job exiting as we're already heading back up for the obligatory re-pump into the close.  

  129. scottmi

    Cost of Education – side topic, commentary by David Platt about the changing nature of higher education (the bubble is about to burst): Lowering Higher Education.

  130. Canuck

    Craigzooka/Wednesday:
     
    can you tell us if the mkts dropped tomorrow?

  131. gmarts

    The pronounced correlation of these markets makes tape watching almost painful when NOTHING is moving except a few lazy HFT bots.

  132. rainman

    Canuck / Wed — F*ck that, give me the lotto numbers!

  133. biodieselchris

    market at a 5 month high but instead of going general market protection like SPY/DIA, I decided to beat an old drum with CMG. A reasonable P/E of 15 puts them under 100 per share, so not a bad bet. 
     
    New data includes pumping by Cramer which is an automatic boost to put positions. I remember him beating the NFLX war drums in July with the stock at 300 immediately before heading down 220 points in colossal fashion (and to a respectable sub 20 P/E that is…). I'm not big into conspiracy theories but what's good for the goose … I mean seriously, it's not a stretch he's lining up suckers for the Boyz to dump to before the inevitable market hammer commeth (and seriously, a burrito place?? it's not like they sell iPhones for crying out loud)

  134. zipla

    Phil,
    SCO/Terra: I followed your advice to Terra about the SCO Jan 35/38 BCS. Was wondering about some SCO offset puts I sold around the same time. I' short 10 Jan $33 puts and 5 35s. Let the lie and see how it goes?
    Thanks

  135. Pharmboy

    SGEN & ARIA volume has dried up.  Both are 1/4 of normal shares traded. ARIA: Big blocks of 10, 9 and 6 Puts in May. 

  136. Lincoln

    BDC: CMG 
    I'm with you on that one, just be prepared to scale in and roll along because now that europe is fixed and china will be soon the demand for expensive burritos will surely go up.

  137. Phil

    SCO/Zipla – Sure, at $36, I wouldn't be worrying about oil getting to $105 unless Iran actually does something crazy (so 50/50).  

    Speaking of Iran – We were playing the "Ann Coulter or Hitler" game and realized you can play the same game with Rick Santorum and Ahmadinejad:

    "The idea that the Crusades and the fight of Christendom against Islam is somehow an aggression on our part is absolutely anti-historical.  We're talking about are core values."

    "Those who believe in this type of thing cannot be the leaders of the nations that aspire to human perfection, basing themselves in the love of all sacred values."

    "All the people who live in the West Bank are Israelis, they're not Palestinians. There is no 'Palestinian." 

    "I think nobody loses their job because of making a statement that reflects their opinion. From this point of view, conditions here are far better than in many other places in the world."

    "If you have the right to bigamy, you have the right to polygamy, you have the right to incest, you have the right to adultery. You have the right to anything. Does that undermine the fabric of our society? I would argue yes, it does. … That's not to pick on homosexuality. It's not, you know, man on child, man on dog, or whatever the case may be. It is one thing." 

    "We believe that visa quotas should be lifted and people should visit anywhere they wish freely."

    "Our enemies can deal a blow to us any time they wish. They did not wait for permission to do this. They do not deal a blow with prior notice. They do not take action because they can't."

    1:00 PM On the hour: S&P +0.9%. 10-yr unchanged. Euro +0.1%vs. dollar. Crude +1.1% to $102.42. Gold +1.6% to $1633.95.

    1:03 PM The Treasury sells $32B in three-year notes at 0.37% (.pdf). Record bid-to-cover ratio of 3.73, vs. a recent average of 3.37; indirect bidders take 38.5%, vs. a recent 37.8%. Direct bidders take 5.3%, vs. a recent 11.3%.

    1:13 PM Treasurys remain flat even with buyers coming in by the truckload for the government's three-year notes. The 30-year yield steady at 3.02%; 10-year fractionally higher at 1.96%, five-year at 0.84%

    2:00 PM On the hour: S&P +0.83%. 10-yr unchanged. Euro +0.12%vs. dollar. Crude +1.3% to $102.63. Gold +1.52% to $1632.50.

    Delving into last week's jobs report, Bloomberg finds that more Americans are moving from part-time to full-time jobs. Those working a full week rose to 113.8M in December, the most for almost three years, while those who worked fewer hours because they couldn’t find a full-time job dropped to 8.1M, a three-year low.

    U.S. job openings in November totaled 3.2M, unchanged from October, the Labor Department reports. Although the number of job openings remained below the 4.4M openings when the recession began in Dec. 2007, the level in Nov. 2011 was 1M more than in July 2009, and has increased 30% since the end of the recession in June 2009. 

    The Fed may have pushed investors too far in search of returns, causing a "mispricing of risk" says Esther George (.pdf), the new president of the Kansas City Fed. While not explicitly saying she's opposed to Fed policy, George highlighted one of her predecessor's chief concerns: surging farmland values. - We expected her to be a bit hawkish

    Philip Mause points out that the once-ballyhooed Fed Model may be a bit out of date after crunching the numbers to find the 10-year Treasury yield and trailing Dow earnings rings up a DJIA of 47,150. Ignoring the projection itself, he argues the model still has some impact in evaluating investor decisions as he backs up his prediction that more firms will begin to settle in at 2.5%-3% yields.

    Bespoke says bulls can take heart from Yale's Crash Confidence Index, now at the lowest level (meaning least amount of confidence a crash isn't in the near future) since early 2009 – not the worst time to go all-in long in stocks. 

    "The single biggest mistake of the individual investor… is underweighting stocks," says New Arc Investments' Jeff Miller. This happens for several reasons, including fear and an underestimation of the upside. "We have just experienced a year with tremendous earnings growth and no movement in stock prices," Miller points out.

    UBS's Chen Li gives it until mid-year before collapsing conditions in the property market force China to ease up on curbs. He sees supply at that time hitting more than 1.5X demand and developer cash flows dwindling to next to nothing, making easier policy a necessity.

    Steven Bulwa ignores the negative sentiment around nuclear power to make the case for 4 uranium stocks he calls an "unusual opportunity." He says talk in Europe of reducing nuclear plans pales in comparison to the upside presented to the sector by growth in China and India. Picks: CCJDNNRIOURA.

    * 2,4,5 and 6 were Amadinejad!  

  138. BruceE

    Now that is hysterical, Phil!  

  139. aldojsaenz

    Hello Pharmboy – Have you ever looked at CYAN?

  140. Pharmboy

    CYAN/aldo – no, sorry.  Never heard of them.  Not my area, as they are more of an additive/nutraceutical.

  141. David Ristau

    The Oxen Group got our clients into a long on $HOG today at 40.22. We are looking for Harley to move higher this week and into earnings as the company is expected to see significant growth in earnings YoY. First target is 41.00.

  142. zeroxzero

    Natural gas glut:  cui bono?   I wouldn't think utilities would rocket, since they're rate-regulated.  Which companies win big with cheap gas getting cheaper?

  143. Pharmboy

    This board has dried up on comments just like buyers in the market…..or is everyone dumbstruck?

  144. zeroxzero

    Zzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzz.

  145. rsaxton

    Like the levitating man, you just have to wonder in awe as to what's holding it up. Voila'…. its the stick. 

  146. hemas03

    Phil, today XLF popped over $13.50 and I had been waiting for that to happen I order to attempt the left over short call FAS 72 from the WCP as per your earlier reco:
    . “FAS/Zip – Oh, we shut those down a while ago.  Now you have to ride it out as FAS popped.  At  $69.74, there’s no reason to give up time if you don’t have to.  You need XLF to stay below $13.50 and, if they go over, you can buy something like the Jan $12s (now $1.45) to cover but keep in mind you need 3x to fully cover but 15 would moderate your delta loss on FAS by 50% while you wait out the rest of the premium expiration (down to 25% of current price) and THEN you can roll using the profits from the 15 XLF calls to pay to shove the Jan calls to higher Feb calls (right now the Feb $80s are an even roll at $3.25 and that’s up another 15% on FAS which is another 5% on XLF to about $14″
    Still a good way to go or simply rolling to the feb 79 or 80 ? I get the impression we are at x road here, so not sure what to now. Thanks in advance.

  147. Phil

    Not getting much of a pump into the close.  I'm with ZZ, it's nap time.  

    Dollar 81.10, Euro $1.2788, Pound $1.5486, 76.81 Yen to the Dollar – it's like we're frozen in time.  

    Oil $102.30, gold $1,634, silver $29.95, copper $3.508, nat gas $2.93 and gasoline $2.775.

    Dow volume 95M at 3:20 so another dead day there too.  

    Utilities/ZZ – They are regulated on what they charge but cheap nat gas is an input cost for them.  Some are regulated to profit margin but they fudge that when they want to.  

    Dumbstruck/Pharm – Just waiting for the real action tomorrow.  

    Not too much of a stick and that's not a good sign for the bulls.  

  148. Phil

    150 comments more like a Monday than a Tuesday.  

  149. scottmi

    Fun/Pharm – well, here is some fun with gorilla glass..

  150. lunar

    pharm, do you follow EXEL?  i hold shares.  it's been edging up lately, any thoughts?

  151. stjeanluc

    FAS Strangle – Unless we have a late stick, I'll leave the current position open. The calls are close but I am more worried on the downside with the run we have had. But we have a 7% cushion now so no need to worry yet on the put side even we correct tomorrow.

  152. Pharmboy

    EXEL – U and  me both.  Holding the shares (I DD a few weeks ago) and sold the Feb 7 puts from a while ago. I will roll those most likely and DD on my shares, selling the Aug 6 or 7 Cs…..

  153. stjeanluc

    Phil, when the market opens tomorrow I'll be in the plane on my way back so you won't have the portfolio recaps. I should be home by market close (if everything runs on schedule). I'll update all the positions tonight though. Do you want me to post them for reference?

  154. lflantheman

    ronresnick….1:31 pm       I think those  April 405/430 bull call spreads are fine.  They will pay 75% from today if AAPL > 430 in April, which is a decent return, and a high probability trade.  I would keep them. 

  155. JRW III

    Just close lower than IWM 76.16, please !!   (Black bar)

    75.80 should hold, imho !!

  156. kevinb63v

    Phil,
    What would you counsel for Sold JAN 12 $20 Puts on CSCO, for which I got $2.72, so net $17.28 if assigned: buy them back in expectation of the up to 20% drop that you have been foreseeing and make a better play later, or accept the assignment on a perennially good stock and sell the JAN 13 $20 puts and calls for $4.74 for net 12.54/16.27 (59% if called), or some other variation?

  157. dmoroz

    Comment: I am disgusted by almost every headline I see on CNBC. Forget Europe: Wall street pros are saying buy US stocks? What changed since last year when 'Europe' gave us mini crash in August and pushed everyone out of stocks? NO COMMENT.

  158. Phil

    XLF/Hemas – So you have the short $72 call?   If so, I'd give it to tomorrow and see what kind of dip we get.  I kind of doubt XLF pops $14 so there's not much more damage to be done and we're thinking the whole bull run can still reverse. 

    Actually I like slow comment days – gives me a chance to catch up on my news reading!  

    3:00 PM On the hour: S&P +1.0%. 10-yr +0.1%. Euro +0.20% vs. dollar. Crude +0.91% to $102.21. Gold +1.59% to $1633.95.

    The Fed makes a timely $76.9B payment to the U.S. Treasury for its 2011 income earned minus expenses. How did the Fed make that tidy sum? Almost 97% represents interest payments on Treasury securities and mortgage-backed securities that have been boosted in large part through the Fed's broad quantitative easing programs. 

    Every 60 days the Government Accountability Office issues a report on the various TARP programs. Each report looks at how the Office of Financial Stability, the body currently overseeing all TARP programs, is performing on a given metric. The latest report looks at the estimated lifetime costs to U.S. taxpayers of the programs still in operation.

    Gallup data shows economic confidence on the mend, rising to a seven-month high but remaining in negative territory. Gallup's ratings have improved by an average of two points each week since early October; at that trajectory, economic confidence would turn positive by mid-April, in plenty of time to benefit Pres. Obama’s re-election bid.

    More damning data (Economist)

    Earnings Pessimism Could Be Overdone (WSJ)

    Framing a Case for Home Builders (WSJ) - Notice a theme today?  WSJ pumping and pumping…

    The boom in data center building isn't letting up, as soaring consumption levels for mobile contentcloud services, and online video drive the construction of giant new facilities. Data center owners such as Equinix (EQIX), DuPont Fabros (DFT), and InterXion (INXN) stand to gain from all this demand, but could see tough competitionfrom cloud-centric players such as Rackspace (RAX) and Amazon (AMZN). (also

    Noting the $7B Keystone pipeline is the largest infrastructure project "on the books" for the U.S. at the moment, TransCanada (TRPdetails the 20K jobs it would create. Separately, Canada's Natural Resources Minister excoriates "environmental and other radical groups" who seek to put a halt on any major project.

    Pfizer's (PFE +0.5%) Lipitor cholesterol drug is holding onto ~37%-38% of the overall U.S. market as it competes with generic versions, CEO Ian Read says, "basically where we expected to be." But he says it would be difficult for Pfizer to hold more than its current share, as some patients are encountering resistance at pharmacies wanting to fill prescriptions with a generic. 

    Shares of Skechers (SKX +8.7%) soar, perhaps buoyed onword that the company is lining up another Super Bowl commercial during the coveted two-minute warning time slot. Last year, the firm landed a lot of attention (and sales?) after a steamy ad featuring Kim Kardashian became water cooler material. 

    Netflix (NFLX -2.4%) and Warner Brothers (TWX +0.4%) reach agreement extending the current 28-day sales-only window to 56 days for theatrical new releases and made-for-video titles on DVD and Blu-rayWarner says it is balancing its home entertainment revenue streams by creating different times at which a product is available at different prices. - There's a really roundabout way of saying NFLX now has to wait twice as long to release stuff!

    It turns out that among the nation's S&P 500 corporations, CEO pay averaged a rather paltry $10,762,304, up a rather infinitesimally minute 27.8 percent on a year-over-year basis.  I, for one, cannot imagine how anyone could live on that kind of money!  How is one supposed to maintain that yacht, private jet, fleet of antique automobiles and 10,000 square foot house?  I also cannot imagine how anyone could get by with just a 27.8 percent annual raise.

  159. yodi

    stjeanluc
    Have a good flight , decided to cloth both legs no harm in taking profit tomorrow will be an other day

  160. stjeanluc

    Thanks Yodi… I am with you on the profits!

  161. Phil

    Gorilla Glass/Scott – What a brilliant and timely invention!  I love the fact that there's not a human visible in the entire production cycle!  

    Yes please StJ!  I need them now as I'm not updating them myself in a post!  

    CSCO/Kevin – Yes, I'd take the money and run, little that it is and wait for a better entry (or at least a higher VIX).  

    Wall Street Pros/Dmor – Well haven't you heard – bonuses are down this year and baby needs a new pair of shoes!  

  162. zeroxzero

    Euro selling off, market creeping down.

  163. Lincoln

    Yodi: FAS
    how many contracts do you sell when you do those FAS strangles trades initially?  are you then willing to DD or just roll out and DD to the next week if need be?  TIA

  164. JRW III

    We could see a retest of IWM 76.66 before the fall as VIX could go lower yet !!

  165. dflam

    Phil/EDZ:
    As a hedge,I bought 5 EDZ Feb. $18 C at $3.50 ,now $1.55 and sold Feb. $25 C at $1.40,now $.45 .To pay for it,I sold 5 PM March $75 P at $1.57 ,now $1.53 I recognize the PM puts won't decline as quickly as the EDZ  BCS,but do u recommend any change to the BCS? thnaks

  166. hemas03

    Thanks Phil, yes it is the FAS $72 Jan shrt call.

  167. lflantheman

    I've bought 10 Jan monthly QQQ 60 puts  @ 2.06   for the AAPL 50k portfolio.   Why?   Just a small bit of insurance for the next few days, and we've got the money for it.  No other reason. 

  168. zeroxzero

    VXX is just betting on a horse race — you don't end up owning any horses, right?

  169. Phil

    EDZ/Dflam – I'd wait to see how the week ends up but then you'll want to at least shift the $18 calls to something longer, either another bull call spread to cover the naked Feb caller while you wait for it to die or just another call with more time (and less time decay) while you wait for the short call to expire.   PM looks pretty safe with a nice rising 50 dma at $74 and a rising 200 dma below that.  

    VIX/JRW – On the chart maybe but that's not going to sell $35Bn worth of 10 and 30-year notes, is it?  

    FAS/Hema – Well then no point reacting on a one-day move up – especially when we think this may be the end of the run.  

    AAPL/Iflan – I'd get out or get short until they prove they can hold $425.  I'm telling you – there will be a rumor or two between now and earnings looking to take them down.  In fact, I was looking at the next week $415 puts at $3 as an interesting gamble. 

    VXX/ZZ – Yep and it's essentially a parimutuel bet too. 

  170. Phil

    Well, after all that the RUT held 760 for the day so a win for the bulls but an ugly one.  

    Gotta run to a meeting!  

  171. scottmi

    Bonuses – what you have to do when you don't get a 27.5% increase YOY: Five people, one guitar.

  172. lflantheman

    Phil….I think that's good advice.  There will be people trying to move them down over the next couple of weeks.  Our July and April spreads in the portfolios would be fine, but the Januarys would suffer.  Let me consider it this evening and I'll post again either tonight or early a.m.   Thx.  

  173. exec

    They love to mess with the technical traders don't they. 

  174. exec

    JR,

     
    Do you have a forecast or any of those interesting stats for tomorrow?
     

     

  175. JRW III

    http://www.zerohedge.com/news/obama-ask-debt-ceiling-increase-matter-days

    The Obama administration will be asking Congress to raise the debt limit in the coming days, White House press secretary Jay Carney said on Tuesday.

    Sorry posting is difficult after the upgrades, but Greg and mathhew are working on it !!

  176. yodi

    Lincoln
    FAS when I start any new play like the stangle here I start with 2 contracts just enaugh to buy TACOS for the next day especially at CMG I might DD if I have to but take in to consideration that this play is not light on PM margin about 5,000 plus for two contracts. Can I lose 5,000 well you need a lot of plays to make it up. So as you can see 4 contract knocks you back more than 10K Not that is a problem for one day, But look at JRW he is out of the end of the day and sleeps well at night.

  177. drmtv10

    Hi,
    Initiated a small position in VOD, selling July 25/20 put credit spread for $0.75.  Like buying VOD for 24.25 (or roll)  for dividend and VOD position (investments) in emerging markets as well as VZ.  Comments? (Weakness in their core market could easily result in price drop to 25, but that may not happen due to QE3.  Hence starting with a small position.)
    Thanks, 

  178. JRW III

    exec / Tomorrow

    Well, today was Holiday volume, so I think may have just been distribution.

    We may just drift for the next few days (10 max) until something goes wrong in the world; I mean hey, France has a GDP growth rate of 0% (zero), so no recession there !!  8-)

  179. stjeanluc

    Phil, here is the current recap for all the portfolios including the 25 KP. If anyone sees any mistakes, please notify Phil. In the 25KP, I use Phil's prices since I cannot guess what everybody is getting.

    Back in the USA tomorrow….

  180. craigzooka

    If I can get to an actual computer I will update the IRAPortfolio. On another note, I am a little upset that I get better cell reception in rural newzealand than i did with AT&T in Washington DC. However, I just got the Verizon iPhone 4S and it makes my AT&T iPhone 3G look like a commodore 64. It was an absolute breeze to switch to a prepaid sim when I landed in the Zealand. If only Siri could look things up for me here.

  181. Beaufleurs

    Craigzooka, do you have a portfolio link that I could take a look at to follow along?  Is it a google doc thing?  Thanks.

  182. craigzooka

    I just tried to edit the IRAPortfolio with my iPhone but it sucks ass. I will have definately have to wait till I get to a real computer.

  183. craigzooka

    @beauflors, the portfolio hasn’t changed in the last two weeks. If you can go back and find the old comment where we listed the contents, it hasn’t changed. Other than that I am on my iPhone in the middle new Zealand and I can’t figure out how to properly edit or link the spreadsheet.

  184. Beaufleurs

    Lflan, I know Phil has discussed the importance of scaling into a postion….On the April bcs, I plan to scale in a few contracts at a time, to my limit of 10 contracts.  I'm assuming scaling in is ok on any of the longer  term positions you suggest such as the April bcs?  Thanks for assisting me with my learning!
      

  185. elliotteldrich

  186. dpastramas

    Phil, would appreciate your advice on the below:
    I am stuck with BCS on EDZ 22/26 exp Jan 12 (i booked it mid Dec as part of new year hedge). Paid $1.50 and now it is worth aroun $0.05
    I am thinking about leaving the short calls expire worthless and if we get the dip the next couple of days roll over the long call to Feb.
    Any thoughts? (I know i shouldn't have waited so long to roll.. i'm learning i'm learning)

  187. jophil

    Hi all,
    what's your opinion on OptionsXpress vs ThinkOrSwim?

  188. Burrben

    Jophil
    I vote neither.  I vote Interactive Brokers.  But lots of people use TOS here.
    They are getting sued for their TD fiasco….
    http://www.investmentnews.com/article/20120110/FREE/120119994/-1/INDaily01&dailycount=1&issuedate=20120110

  189. stjeanluc

    Since I won’t be around at the beginning of the day, here is what I would do with the FAS strangle in the morning:
    If we gap up like this morning, cover the short put and wait until after 10:00 to sell another set of puts. It should be sold for around $0.40 if possible.
    If we gap down or open flat, do nothing as we have a 7% cushion on the downside.
    I should be on again around 3:00 pm. Good luck….

  190. lflantheman

    Beaufleurs…..Certainly, scaling into a position is always a good idea.  It forces you to think about the trade more than once before you totally commit.  It minimizes your losses if you find you've made an error.  And, if it's the correct trade, and the stock goes the opposite direction temporarily, it allows you to get into the position at a lower price.   Scaling is good.  

  191. kallenjr

    Is that a star I see in the evening sky for the $COMPQ index?

  192. sparky123

    kallen,
    maybe, butif it's not a shooting star it may have trouble reaching escape velocity 

  193. Burrben

    StJ / FAS Strange
    I decided to just hold onto the original position.  If it gaps up, would you think to roll to a higher strike NEXT week, correct?  

  194. zeroxzero

    The German, Spanish and Italian bond auctions are going to be a clenched-teeth event this week.  Looks like Euro owners are starting to dump 'em and get out of Dodge ahead of the fact this evening.  As for Phil's note posted today:
     
    "The ECB's refusal to take any loss on its holdings of Greek paper makes little sense, given the loss could easily be fudged away, writes Neil Unmack. The policy also drives real-money investors to require greater yields on sovereign debt, as they now believe they'll have to stand behind the ECB in line for repayment.", I think Mr. Unmack is dead right — the ECB's determination to maintain payment priority over private bondholders might be their dumbest mistake yet, with some slight potential of attaining epic [Euro dive to 1.20] proportions over a surprisingly short time frame.   
     
    To wit: this, from Bloomberg, this evening: Jan 10, 2012 8:58 PM ET:  "…The euro also weakened after Reuters reported hedge funds may resist a 100 billion-euro plan to restructure Greece’s debt. Greek Prime Minister Lucas Papademos expects to have an outline for the plan next week, when talks on the terms for a second financing deal with European Union and International Monetary Fund officials start in Athens."

  195. Burrben

    CBOE PutWrite Index
    I think this is pretty interesting.  You sell a ATM put on the SPX each and every month, and for 2011 it returned over 11% with a sharpe ratio of 0.92.  My old HF only did 5-6% last year, and they must have invested 1 to 2 mill in new technology.  
     
    Can it really be so simple?
    http://seekingalpha.com/article/318720-2-option-writing-strategies-historically-outperforming-the-s-p-500
     
    http://www.cboe.com/micro/put/pricecharts.aspx

  196. scottmi

    So simple/Burrben – yes, with buy/writes on dividend paying stocks. EASY to get well over 5-6% per year. 15% plus is general expectation in the last year. The killer is that you have to wait the whole year or so to get just a measly 15%. ;-)

  197. dclark41

    Hey Phil, Robert Reich agrees with what I was saying last week. Encouraged workers looking for jobs because of so called "positive" employment numbers will ultimately push the unemployment rate back towards 9%. Looks like some cracks are starting to appear in this weeks' fixed economy narrative.
    http://www.philstockworld.com/2012/01/10/how-a-little-bit-of-good-economic-news-can-be-bad-for-the-president/
    …and a little more negative news from who else but Zero Hedge
    http://www.philstockworld.com/2012/01/10/germanys-export-debacle/
    …and another story mirroring what zeroxzero said above. Uh yeah,……this is going to work out well!
    http://www.smh.com.au/business/world-business/hedge-funds-lock-horns-with-imf-on-greek-debt-20120111-1pu2q.html

  198. biodieselchris

    general market pullback / overdone bull run also includes MCD at 100. June 90's are under $2.

  199. scottmi

    Motorsport – if we have another boring day, can always check in on Dakar 2012, running now…

  200. biodieselchris

    In the last 6 months, DIA has bottomed and returned to the zero % line while TLT is up 25%
     
    Bonds are overpriced or a new paradigm shift has occurred where both stocks and bonds rise together (and this could actually be so, considering the monetary inflation caused by QE's and MBS purchases).
     
    The same chart above over a two-year period paints a picture for the over-priced theory though. 

  201. roro

    European equity indexes opening pretty much at yesterday's closings;
     
    DAX 6150ish, FTSE100 5690, CAC40 3205, Spanish IBEX 8475, and Italian ITA40 14,900
     
    The Dow is also up 40/50 points off its overnight low so far………3:15 AM

  202. roro

    Picked this up a minute ago; Spain's new govt may force banks to cut the value of foreclosed residential real estate by 50%

  203. malsg

    If I was a Hedge Fund …
    Buy bonds paying 20% (give or take)
    Buy insurance against Greek default
    Open shorts …..
    Make a big song and dance about not letting the IMF, EU get their private investor haircut … and tank markets (Tick on those shorts)
    Decide at the last minute to take a haircut – say to 10% (What a ghastly return) - after closing shorts and opening long positions – raise markets
    If Greece decides to deafult get pai anyway and credit insurers backed by Taxpayer.
    http://uk.reuters.com/article/2012/01/10/uk-greece-psi-funds-idUKLNE80904J20120110
    You have to love it when a plan comes together …

  204. Phil

    Good morning!

    Quite the save in the Futures overnight.  We bottomed out around 10 but all uphill since with the Dow swinging back 50 points to a bit over flat now.  Dollar topped out at 81.40 at 10 but fell back since tp good old 81.10.  Oil $102.20, gold $1,646 going very much the wrong way for our bets, silver $30.17, copper $3.55 in a big run from $3.48, nat gas $2.885 and gasoline $2.78 on a harsh rejection at $2.80. 

    Hang Seng tester 19,000 and popped 150 points off that line to close up 0,8% at 19,151, Shanghai gave up 0.4% of it's rocket gains  and the Nikkei was up 0.3%.  Europe has the FTSE and DAX flat but the CAC is in a lovely mood and up 0.4%.

    The Euro is at $1.277, Pound $1.546 and 76.93 Yen to the Dollar.  EUR/CHF is 1.212 so they are no longer holding their 1.22 target since the scandal (which means the Euro is weaker than they like).   

    I see nothing in the news to justify this pre-market "recovery" and I hate to sound like a broken record but I like shorting oil (/CL) if we get below that $102 line with tight stops and the Dow (/YM) is right at 12,400, which is a great spot to short.  RUT (/TF) is at 762 and below 760 (same as yesterday) will confirm a downturn but 12,400 is a great line so why wait?  S&P futures benchmark at 1,286, Nas 2,364 and of course, if the Dollar can't hold 81.15 then we're on the wrong side (now 81.17.  

  205. Phil

    Wednesday's economic calendar:

    7:00 MBA Mortgage Applications

    8:40 Fed's Evans: Economic Outlook

    9:00 Fed's Lockhart: Economic Outlook

    9:30 CFTC Meeting: Swap Rules

    10:30 EIA Petroleum Inventories

    12:30 PM Fed's Plosser: Economic Outlook

    1:00 PM Results of $21B, 10-Year Note Auction

    2:00 PM Fed's Beige Book 

    1:55 AM Asian stocks rise modestly: Japan +0.3% to 8448. Hong Kong +0.5% to 19107. China -0.1% to 2284. India +0.3% to 16219.

    4:31 AM European stocks open slightly lower. Better-than-expected economic data isn't enough to outweigh continued eurozone crisis concerns, and investors are waiting for tomorrow's ECB meeting. London -0.2%. Paris +0.3%. Frankfurt -0.3%

    Europe Banks Resist Draghi Bid to Avoid Crunch by Hoarding CashBanks are hoarding the European Central Bank’s record 489 billion-euro ($625 billion) injection into the banking system, thwarting attempts by policy makers to avert a credit crunch in the region.

    Asia-Pacific Credit Outlook Moderated By Sluggish Exports And European Slowdown by Standard & Poor'sGlobal risks have steadily increased over the past year, with economic growth marked down. Brittle market confidence is manifesting in liquidity and funding pressures, particularly in the eurozone, with a knock-on effect on the rest of the world. While emerging markets are holding up, Standard & Poor's base case is for weak growth in the US and a mild recession in the eurozone during the first half of 2012.

    The Bank of Japan may say that the country's economy is likely to contract for the year through March 31. The BOJ may revise its economic forecast at Jan. 23-24 policy meeting.

    China's first-quarter power consumption growth may be as low as 5%, citing Yu Yanshan, deputy director of the State Electricity Regulator Commission, as saying. Power consumption growth slowed to 11.7% last year from 14.5% in 2010, citing Yu. - What do you think that means?

    Home Prices May Fall Further 30% in China's Shenzhen. Property prices in Hong Kong's neighboring city will likely fall to levels seen in April 2009 with government curbs in tact, citing Centaline Property Consultants. Shenzhen new home transactions by area fell to an 11-year low last year, citing Centaline data. Shenzhen used-home sales slumped 55% y/y in 2011, which was the most on record.

    Austerity, while painful, is "a must" for heavily indebted nations, Xiao Gang, chairman of Bank of China Ltd., wrote in a commentary today. Restoring investor faith in European governments and banks is paramount, Xiao wrote. Debt restructuring may also be inevitable and should be done quickly, he said. It is impossible for emerging markets to rescue the world, Xiao wrote.

    PBOC Adviser Sees 2 More Years for China Property Curbs. One or two more years are needed for curbs to stay in place to stabilize the housing market before the government can introduce long-term policy, citing central bank adviser Xia Bin. China needs to keep property measures stable and consistent, citing Xia. The reduction in property investment is a big risk to China's economy, citing Xia. Risks from the property curbs will emerge this year, bringing more pressure on their implementation and the overall economy. The fall in home prices will reduce local government's land sales, which affects the banking system and equity market, he said.

    The S&P 500 finished the day with its highest close since last October, moving out of a trading range it's been trapped in for months. According to a number of technical analysts, another sharp move to the upside from here could spark a breakout if it holds, and the rally could be a big one. 

    The Fed engaged in "rank electioneering" in its white paper last week seeking more political involvement in the housing market,WSJ editorializes. But Bloomberg likes some of the ideas, which included shifting from REO sales at Fannie and Freddie to a bulk REO rental program: "It is shameful that steps such as these are still being talked about but not urgently implemented."

    Too-Big-to-Fail Definition May Be Expanded. Global regulators may expand the definition of a too-big-to-fail financial firm, signing up domestic lenders, clearing houses and insurers to capital rules designed for the world’s biggest banks.

    Trouble is Brewing for Office Market. Penn Mutual Towers, an office complex across the street from Independence Hall in Philadelphia, has seen its vacancy rise and income fall after one big tenant left and another renewed its lease for 15% less than it had been paying. Its creditors are foreclosing on the property, according to data company Trepp LLC. Similar problems are mushrooming in office markets throughout the country, foreshadowing a new wave of real-estate trouble.

    A few headlines from across the pond hitting the wires into the close: Senior EU officials expect a debt restructuring dealbetween Greece and its private creditors to be announced next week. The haircut is expected to be the 50% hoped for at the Oct. 27 summit. Sources say the EU is prepared to drop the fiction that the haircut is voluntary, possibly bringing CDS payouts into play.

    Germany's real GDP growth came in at 3% in 2011, in-line with expectations. Euro flat against the dollar.

    The U.K.'s trade gap widened to a larger-than-expected £8.64B ($13.6B) in November from a revised £7.87B in October. Exports fell 1.5% M/M, while imports rose 1.1%. 

    Spain's industrial production fell 7% Y/Y in November, after falling a revised 4.2% in October. It's the worst decline since Oct. 2009, exceeding forecasts of -5.4%. A 16.3% plunge in the manufacture of consumer durables led the decline.

    Spanish Banks Try to Build Their Way Out of Home Glut.

    Italy's Q3 budget deficit narrowed to 2.7% of GDP, down from 3.5% the year before, bringing Italy a step closer to its goal of eliminating its budget deficit by 2013. The narrowed figure reflects a period before the country's severe austerity package was put in place.

    There will be protests in Italy against Europe, Germany and the European Central Bank unless Italians soon see clear benefits resulting from their willingness to step up savings and accept an economic revamp, citing an interview with Italian Minister Mario Monti. "I am demanding heavy sacrifices from the Italians," Monti is citing as saying. "I can only do this if concrete advantages become visible."

    The Mafia has taken advantage of Italy's banking woes to grab market share in the lending business. No more Mustache Petes, the business is more likely done by bankers, lawyers, and notaries. An anti-crime group estimates the mob has €65B in liquidity, making it the largest bank in Italy; no word on its exposure to Italian sovereign debt or if it has access to the ECB borrowing window.

    Greek Crisis Dries Up Drug Supply as Even Aspirin Can't Be F0und. For patients and pharmacists in financially stricken Greece, even finding Aspirin has turned into a headache.

    Now Desperate Greek Parents Are Giving Up Their Children. The economic crisis in Greece is beginning to take its toll in alarming ways. The BBC published a story today recounting how some Greek families are giving away their children because they are now unable to take care of them.

    Awaiting a Greek Payout. Could Greece’s next rescue payout go straight into the pockets of London hedge funds? That, more or less, is the bet that a growing number of investors are making now as they load up on Greek government securities that mature in March.

    Hungary Seen Signing Letter Of Intent For IMF Loan – Sources. Under fierce pressure from international markets, its currency at times in freefall and its credit rating downgraded to junk status, Hungary's government appears to be increasingly open to compromise.

    "Our goals are not nearly so modest," says billionaire Christoph Blocher, sugar-daddy to the Swiss People's Party, when asked if he's satisfied with SNB Chairman Hildebrand's resignation. Many were infuriated at Hildebrand's peg/floor to the euro, viewing the move as a back-door entry into the EU. The trading scandal gave them the opportunity to pounce. The peg remains … for now.

    Canadian Government Mulls Deeper Spending Cuts In Budget 2012 – SourcesCanada's Conservative government is contemplating a more aggressive budget-cutting campaign than previously indicated, as it drives to reduce the country's deficit.

    Sitting out the risk-on party of recent weeks is copper, which fell a bit today and has remained roughly flat while the U.S. stock market has rallied since Oct. 26. This may suggest that, while financial conditions in China may be starting to ease, the effects haven't yet filtered through to China’s economic activity.

    A large build-up of short positions by money managers has made copper more vulnerable to price spikes than other metals. Money managers have bet on falling copper prices for 16 consecutive weeks, forecasting sluggish demand on the back of the eurozone's crisis and uncertainty about China's growth. Copper +1% to $3.5494.

    China Savers Lose in Longest Streak Since 1995: Chart of the Day. Savers in China have had negative returns on their bank deposits for the longest stretch in 16 years, leaving Premier Wen Jiabao less scope to cut interest rates to sustain economic growth. Inflation has exceeded the benchmark one-year deposit rate for 22 months, the longest span since 1995. "Such a prolonged period of negative real savings rates means the central bank will face a tough decision on whether to cut interest rates to boost growth," 

    India's Skyscraper Boom Matching China's May Signal Bubble, Barclays Says. India, which is building the world’s second-tallest skyscraper, is catching up with China in an office building boom that may indicate that an economic slowdown is imminent, according to Barclays Capital Research. 

    Singapore Construction Demand to DropPrivate-sector construction demand in Singapore could fall by more than 50% this year compared with last year due to the effect of the global and domestic economic woes on the domestic property market, the government said

    Rumor du jour:  Sources say top oil exporter Saudi Arabia is nearing its output capacity limit, and may have little room to respond to potential shortages caused by Iran sanctions. Currently pumping just under a record 10M bpd, the country has an on-paper capacity of up to 12.5M bpd but hitting that target might involve extracting heavy crudes the market isn't interested in. Crude -0.1% to $102.10. 

    North Dakota Surpasses OPEC Member Ecuador in Oil ProductionNorth Dakota oil production surged 42 percent to 510,000 barrels a day in November, exceeding the output of OPEC member Ecuador, as energy explorers accelerated drilling in the Bakken Shale formation. The state’s daily crude output topped a half-million barrels for the first time during the month,

    U.S. Wheat Expanding From Century Low as Glut Looms: CommoditiesU.S. farmers, the world’s biggest wheat exporters, probably planted the most winter grain in three years, expanding acreage from a century-low reached in 2009 just as a global supply glut swells to its biggest in a decade

    Cargill Profit Plunges 88% on Commodity-Trading 'Challenges'. Cargill Inc., the commodity trader that’s the largest closely held U.S. company, said fiscal second-quarter profit fell 88 percent because of commodity market “challenges” and a drop in sugar prices.

    The speculative-grade corporate default rate in the U.S. fell to 1.8% in Q4 vs. 2.0% in the previous quarter and 3.4% a year ago, Moody's reports, while the default rate in Europe almost doubled to 2.7% from 1.4% Q/Q; a year ago, it was 2.3%. But global defaults likely have hit a cyclical bottom, and "the days of very low defaults are probably coming to an end." 

    This will be interesting:  Goldman Sachs (

  206. Phil


    This will be interesting:  Goldman Sachs (GS) and Citigroup (C) reportedly plan to market ~$1B of bonds backed by commercial property loans as soon as next week, in what likely would be the first deal of its kind for 2012. Banks pulled back from making new loans to package into bonds in July as Europe's debt crisis roiled credit markets and sent yields soaring, but originations have since picked up.

    MetLife (MET) says it is exiting the business originating forward residential mortgages, andBloomberg reports that a majority of the mortgage origination unit's 4,300 employees would lose their jobs as a result.

    Now we're supposed to be China:  Toyota (TM), which is forecasting strong 2012 sales growth, is hoping North America will turn into a major export base. The company, which has already begun exporting the Camry to South Korea from the U.S., is looking to cut its Japanese exports by 200K, to 1.5M, so as to reduce its exposure to a strong yen. 

    Toyota's (TM +0.5%) newest hybrid vehicle will boast anindustry-leading 53 miles per gallon in city driving and sell for less than $19K, the president of its U.S. sales unit says. The subcompact Prius C is the fourth member of Toyota's family of Prius vehicles; the 1.5L-engine car will debut later this year, along with another new Prius, a plug-in hybrid.

    Microsoft (MSFT-1.4% AH after Bloomberg reports the company says PC sales probably were worse than expected in Q4 due to the floods in Thailand. 

    Hundreds Threaten Suicide at Microsoft(MSFT) Supplier Plant In ChinaSome 300 Chinese Foxconn employees who manufacture X-box 360 machines said they would throw themselves from their Wuhan, China, plant if demands for lost wages were not met. China Jasmine Revolution, an activist revolutionary organization with a name borrowed from the Tunisian revolt that set off the Middle East unrest, reported that employees made their demands for a wage increase for 100 employees on Jan. 2.

    Check Out All The Best Gadgets From CES 2012 Right Here.

    Bank of America (BAC +5.7%) led all S&P gainers today and has easily outperformed the index so far this year, and Bret Jensen expects the momentum to continue throughout 2012. He cites the housing market finally hitting bottom, a continuing drop in loan-loss provisions, and good progress in shoring up its capital levels.

    WTF???   The owners of The New Republic have retained Blackstone (BX) to explore a possible sale of the publication. Among those that may have interest are Bloomberg andNews Corp. (NWSA) - that would make a few heads explode. The magazine currently loses money and the deal would be a small one, likely less than $20M. - Yes, KA-BOOM!!!  

  207. Phil

    See – I dare you to read all that and tell me you're bullish!  

  208. craigzooka

    Well, good morning to you too Phil! Its about to switch from Wednesday to Thursday and I am pretty tired so pretend I came up with a cool joke about it being tomorrow.

  209. lvmoda

    I not a slave to technical analysis, but statistically the points made in this article are very, very bearish:
    http://advisorperspectives.com/dshort//guest/John-Carlucci-120110-The-Great-Repression-Update.php

  210. Phil

    Guitar/Scott – That's a great image for the recession!  

    TA/Exec – That's because they have rules so it's easy to manipulate Technical funds and force them to move money around.  If I know your poker system is only to bet Jacks or better and fold everything else – I simply fold whenever you bet and I don't have a great hand and, if I have a straight and you're betting, I know I can push you all in even if you have jacks.  It's very obvious you shouldn't tell people your strategy in pretty much any game yet that's what TA is – it's millions of people following a strategy that's completely transparent to the people you are betting against.  

    CMG/Yodi – OK, I'm on the bandwagon again.  How ridiculous is their valuation now.  At 53, they are now valued for 2 overpriced food chains so even a huge success in ShopHouse can't justify $350.   Earnings are 2/1 and it may not be very satisfying but I like selling the naked Jan $345 calls for $4.70 as they can be rolled to Feb $370 calls, now $4.50, which should hold their price well due to earnings.  I also like the March $300/320 bear put spread at $4.80 so you can pair those up and it's net .10 on the $20 spread but $4.80 on the $20 spread with no margin required isn't too terrible either.  

    VOD/DrMtv – I like them but they're not cheap.  I really don't know why people are buying stuff right now but I guess the coming crash is only obvious to me (without Fed action).  Long-term they are great but risking $4.25 to make .75 when VOD was at $12.74 in the last crash is not my cup of tea. 

    Thanks for the spreadsheets StJ!  

    Lawsuit/Barf – Only $8.2M, I guess it's not a proper class action because I imagine it was much, much more than that.  

    Big Chart – All about the S&P but I don't know why it looks so close when we're 5 points below.  Maybe Elliott needs to adjust that line.  

    EDZ/Dpast – TOO LATE!!! If you intend to adjust a spread, you do it BEFORE you have a 50% loss.  What do you expect me to say about a .05 spread?  At this point, you'd be lucky to get .15 off the table out of $1.50.   I would sell Feb $16 puts for $1.10 and buy the Feb $16/20 bull call spread for $1.30 and that's net .20 on the $4 spread and, with any luck, you'll get your $1.35 back and a small profit if they at least flatline from here.  If the Hang Seng goes back over 20,000 – get out, of course and India will test the 50 dma at 16,275 (now 16,175) to also give a good indicator.  

    TOS/Jophil – I would never go back to Options Express after switching to TOS.  

    Bonds/ZZ – We can probably add that to the above bad news tomorrow morning.  

    Option writing/Burr – What have I been saying all these years?  

    Reich/DC – And he certainly knows what he's talking about.  

    MCD/BDC – Like IBM, too good to bet against. 

    Chart/BDC – Well that makes the case for a possible market rally. 

    Hedge fund/Malsg – Buying bonds?  Buzzzzzzzzzzzzzzz!  Next fund manager please….

    And wheeeeeeeeeeeeeeeeeeeeeeeee!  There go the Futures!  I love it when a plan comes together…..

    ROFL Craig!  

    Recession/LV – Yep, I used his chart in the post above.  

    81.50, $101.50, 12,373!!!!!  

  211. Dennis

    Amazing call Phil!  Good enough for steak and eggs for me, thanks.

  212. roro

    I caught that Dow short at 06:16…………sweet!

  213. roro

    It is amazing how much confidence you engender, Phil………..I knew the 1% a day trades and repeated often were possible as I had done in stretches, and I knew kill zone trades were also possible and 5% to 10% returns per month were very possible with practice, experience and smart risk management all without having to take a lot of risk, but I guess I was talking to the disbelievers and since I have dropped them into my 'why bother to try to explain it' file and come over to the dark side at PSW I feel soooo much more content not only with the returns, but with the company and a comments and the obvious opportunity to learn and learn and learn some more.
     
    It all helps the mental and emotional discipline of the trading too. So thanks again.

  214. roro

    Went long USD/CAD at 1.0175………..short OIL proxy.

  215. pstas

    CMG- Phil- I was looking at the above trade you outlined for Yodi above- I don't show the "no margin" effect you mention?
    Did I miss something?

  216. roro

    Tight range on the 8 Hr charts for the FTSE between 5600 and 5700.
     
    Same for the DAX between 6000 and 6150.
     
    Higher lows below both so selloffs have become more shallow back to 11/25, but resistance has held……..breakouts?

  217. barfinger

    To confirm what others have posted before regarding IRA accounts: I sold 12 SPY jan 126 puts and the margin for the position was 12*12600=151200. I then bought 12 jan 117 puts and it reduced my requirement to 10800. *slap* why did i never think of that myself????

  218. 8800

    Phil,
    Just to clarify the put purchase recom on MA from yes'd – you were indicating the April 240s – now 1.70. Right?
    Thanks

  219. jmm1951

    barfinger/IRA
     
    It should have reduced the margin requirement below $10,800, because you can further reduce it by the premium received for the $117s.

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