Comment by Phil

View Single Comment

Phil
October 26th, 2011 at 10:12 am

Good morning! 

Well, the pre-market pump isn’t holding up so well already as the Dollar rockets back off a test of the 76 line.  More to the point, it was a very harsh rejection of the Euro at $1.40 and the Pound at $1.60 and let’s not forget that Yentervention is still out there with the Yen bouncing off the (too strong) 75.70 line this morning.  Below 76 really freaks the Japanese out and they will take drastic steps to strengthen the Dollar if that keeps up.  

Unfortunately, that stopped us out of AGQ in the WCP with a clean double so now it’s just the SSO and FAS plays working for the week (and GNW is for Jan).  If you want to get back into silver, let’s keep our eye on the $1,725 line in gold and, of course, the $34 mark in silver, which is where we expected to get rejected when we took the trade so now we hope for another entry at $32.  

Oil pulled back to $92 already and those Nov $34 puts (from 10:52 yesterday) are still at .93 so barely moving and still a good entry to play oil down but, as I said yesterday – scaling in VERY CAREFULLY.  They bottomed out at .80 when USO was testing $94 so they are not going to be very exciting until/unless we get a big move.  

David Fry sums up yesterday’s action and both of our sentiments nicely with this chart:  

What we’re looking to hold from the Big Chart are our Must Hold levels on the Dow (11,590), S&P (1,235) and the Nasdaq (2,603) – all green so far, along with the -5% level on the NYSE (7,473) and the -10% line on the RUT at 697.  Keep in mind though, that the NYSE and the RUT are already disappointing down there so just losing any two of these should flip us more bearish.  

DXD makes a very nice cover with the Nov $16/17 bull call spread at .50 and we can buy 12 of those and sell 2 NFLX Nov $67.50 puts for $3 in the WCP as I’m not expecting them to go another 10% down this month but we still need to set a stop at $4.50 on the short puts and we’ll roll the loss ($300) if we have to.  If all goes well, that buys us $1,200 of downside protection, which is always nice to have.  

If you like AMZN (and I discussed why I do at the end of yesterday’s post), the 2014 $150 puts can be sold for $27.50 and that’s a nice net $122.50 entry or you can pair that with the 2013 $150/200 bull call spread at $30 for a net $2.50 entry on the $50 spread that’s 100% in the money.  It’s a bit early to get bullish on AMZN but if you are scaling in and take a small initial entry here, your worst case is owning them at net $152.50, which is still another 25% off the current price. 

Damn, the Dollar is flying back to 76.50 so I’m going to cut this short and push the hedges.  Who knows what the latest rumor is but, by tonight, we’ll finally have some facts.