Just Another Cyber Monday (Manic Edition)
by Phil - November 28th, 2011 8:21 am
INSANITY!
That’s what we have today (and what we’ve been having all month) as the markets celebrate the fact that neither the US consumer or the Euro is dead – yet. Holiday sales are apparently up 16.4% from last year with 10% of those sales being IPhones and Ipads so we can thank the actually dead Steve Jobs for saving the markets from a total meltdown this month as we were on track for the worst November EVER until today.
The DOOM meter was certainly set to 100 and, in fact, 100 is about how low the McClellan Oscillator went on Friday – to a state of oversold not matched since August 8th, when the Dow bottomed out at 10,600 so holding 11,200 in this protracted sell-off was a victory, of sorts, for the bulls and certainly a victory for those of you following our Big Chart – which made us perhaps the ONLY newsletter that was bullish on Friday, when I laid out my bullish case and right in the main post – for free – suggested long ideas on:
- Oil Futures (/CL): Was $95, now $100 – up $5,000 per contract
- Gasoline Futures (/RB): Was $2.50, now $2.54 – up $1,680 per contract
And, in Member Chat – our Morning Alert had the following trade ideas:
- FAS Dec $48/55 bull call spread at $3, selling the $40 puts for $2.40 for net .60 on the $7 spread. 5 in the WCP on that one.
- FXE Dec $132/135 bull call spread at $1.20, selling the $129 puts for $1.10 for net .10 on the $3 spread.
- JPM Jan $25 puts can be sold for $1.20
- AA 2013 $7.50 puts can be sold for $1.28.
- VLO June $17 puts can be sold for $2.05
We also speculated on an aggressive AMZN long play with the Dec $200 calls at $2.50 but, overall, we take this 2% bounce after a 10% drop with a grain of salt. As I said to Members in the alert: Just like we watched with amusement while things fell earlier this week, we should take a move up just as lightly until we cross back over our Must Hold Lines – to some extent, we have selling fatigue driving this move – keep in mind my bullish discussion on hyperinflation is more…
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DiggBlack Friday Follies – Once More unto the Breach, Dear Friends
by Phil - November 25th, 2011 8:00 am
When Black Friday comes
I’m gonna dig myself a hole
Gonna lay down in it ’til
I satisfy my soul – Seely Dan
Shop or we’ll drop! That’s the message from the markets to consumers this morning as it’s do or die (literally) for the Retail Sector this weekend against a background of a collapsing Euro-Zone and – get this – the S&P warning that Japan now, is in danger of losing it’s AA minus credit rating.
S&P’s Takahira Ogawa says the agency is getting closer to downgrading Japan’s AA- rating, due to its finances "getting worse and worse every day, every second." Ogawa’s remarks follow an IMF warning that Japan is at risk of a "sudden spike" in bond yields that could make its debt unsustainable.
JAPAN??? But we’re not done freaking out about Europe yet! I guess this may be a sign that the EU is bottoming though as Fitch hit us with a downgrade of Portugal to JUNK yesterday and Moody’s did the same to Hungary. Both of those countries also have a "negative outlook," indicating junk is just too good for them. Small wonder then, that the Dollar has spiked up to 79.75 this morning (up 1%) pushing our Futures, of course, down 1%.
Even oil is taking a hit now – at $95.14 but we’ll play for the bounce on (/CL) on the $95 line with very tight stops below it as that SHOULD have a bit of support into the weekend. Gasoline (/RB) can also be re-longed (we did this on Wednesday) off the $2.50 line – the last run took us back to $2.55 and, at $420 per penny per contract – that put a lot of turkeys on the table for Thanksgiving!
The Euro itself is hitting the $1.3225 line but the Pound is hanging tough at $1.55 as not joining the EU may have been the best decision England has made this century (well, it’s been a pretty bad century for the British Empire). While tempting to go long – we’re in a bit of a full-blown panic here and we’re going to exercise patience (see yesterday’s post) as Monday could go big in either direction although, as I said in our early morning Alert to Members, I think Fundamentally, they markets have suffered enough…
Thanksgiving Thoughts
by Phil - November 24th, 2011 5:27 pm
What an ugly finish November is having!
We’ve been trying to get bullish with little success and, if we are not reversing tomorrow, I will be regretting the wasted time poking at bullish plays when we could have been going "wheeeee" on the slide.
I thought that blue line on Dave Fry’s chart was going to hold, it’s about 2.5% down from our Must Hold level for the S&P on the Big Chart (1,235) and that would have been a reasonable (and slight) overshoot of the 10% drop we were expecting so we played for the bounce but now we’ve blown our -5% line at 1,173 and our next support level is -10% at 1,112 – a very sad level to revisit if we do.
Technically, of course, we’re breaking down. Fundamentally, I’m not so sure. The fear is palpable as Europe looks terrible and clearly all these austerity measures are taking a toll on the Global economy but it’s simply NOT showing up in the data yet. PMI’s are dropping across the Globe but the Purchasing Manager’s index is a SENTIMENT indicator that reflects the OPINION of the buyers about business prospects.
As I have been pointing out (yes, there was a point) in my recent series of articles about market and media manipulation – there is a protracted campaign underway to push sentiment down – to chase retail buyers out of the markets.
Who is doing this? Perhaps it is the IBanks, who want to bottom out the market ahead of QE3, when we’ll be off to the races again. Perhaps it is the Fed and Treasury, who want to chase people into the $140Bn worth of bonds they have to sell each month. Perhaps it is the Republicans, who want to campaign against the worst possible economy next year to prove that Obama has blown his handling of the economy almost as bad as Bush did – so we may as well try one of their idiots again since it seems to make no difference. Don’t laugh – I have a button for Romney that says that…
Whatever and whoever is behind the negativity (and let’s not forget Germany, who are angling to take control of the EU and will be able to do so if things deteriorate further) – our job as investors is not to particularly care – but…
Wall of Worry Wednesday – Time to Climb?
by Phil - November 23rd, 2011 7:54 am
Are we there yet?
As you can see from David Fry’s chart of the NYSE McClellan Oscillator, we are dipping into oversold territory and that usually doesn’t last very long. Overbought doesn’t last very long either and, as I mentioned in Monday’s post, we took that July spike to "overbought" as one of the signs that told us to short the market into the August collapse. We went long at the end of August and cashed out our short-term portfolios two weeks ago so we aren’t looking to catch any falling knives but, as I said yesterday – there are certainly bargains to be had already so no reason to have an empty Long-Term Portfolio as we can hedge for a drop back to the August lows (S&P 1,100).
There’s plenty of scary news out there. I sent out an early morning Alert to Members at 6:32 as Germany had a failed auction of $8Bn worth of 10-year bonds, with bids falling 35% short of the offer! Euro-Zone PMI reports SUCKED, now running at 29-month lows (May 2009, when the markets were about 50% lower than they are now) and Chinese PMI fell all the way down to levels not seen since March 2009, when we had a total market collapse – ah memories…
To put a cherry on top of the bad news sundae, there was a shocking revelation last night that Bankers lie AND cheat in order to make money! Yes, like I said, SHOCKING! BCS, CS, HBC, BAC, JPM and RBS all being sued/investigated over manipulating the LIBOR market. Apparently this is coming from the EU, US, Japan and the UK. While "shocking" to people who think the market isn’t rigged – IT’S NOT NEWS! Here’s my comment from April 18th:
More shenanigans from the Gang of 12: Three investment funds file suit against several major banks, accusing them of conspiring to artificially suppress LIBOR, robbing investors of returns. U.S. and U.K. regulators have been investigating the
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Super Tuesday Committee Failure – So What?
by Phil - November 22nd, 2011 7:43 am
Long live the Debt! In case you are voting in the next election – here are 12 people to get rid of. Much as I may blame one party over another for this failure, they all deserve what’s coming to them for A) Pretending they were going to accomplish something and B) For not now getting up and making very strong statements denouncing the corruption in politics that make it impossible for Congress to do the Nation’s business anymore.
In case you happen to be a Fox News viewer, I will try to keep this VERY simple because, as it turns out, we now have definitive studies that prove Fox News MAKES YOU STUPID. Of course, it is possible that only stupid people watch Fox News but I know many people who think they are smart and watch Fox News so I have to blame Fox News here as do researchers at Farleigh Dickenson University who found "The results show us that there is something about watching Fox News that leads people to do worse on these questions than those who don’t watch any news at all." As I can tell you from raising my own children to be good citizens:
The biggest aid to answering correctly is The Daily Show with Jon Stewart, which leads to a 6-point decrease in identifying the protesters as Republicans, and a 12-point increase in the likelihood of giving the correct answer. "Jon Stewart has not spent a lot of time on some of these issues," said Cassino. "But the results show that when he does talk about something, his viewers pick up a lot more information than they would from other news sources."
Watching Fox News, by the way, led to an 18-point disadvantage (out of 53% of all respondents) in being able to answer questions like "Were Egyptians successful in overthrowing Hosni Mubarak" or "Has the Syrian uprising been successful" but that was a Fox viewer’s area of expertise compared to having a clue of what is going on in American politics other than "Obama sucks." Tied with Daily show viewers for best informed were NPR supporters but, sadly, only 21% of Americans get their news from NPR and only 18% from the Daily Show while 64% list Fox News as one of their frequent news sources.
In another study, World Public Opinion, a project managed by…
Monday Morosity – “Hard Times Ahead” says Rajoy
by Phil - November 21st, 2011 6:41 am
Mariano Rajoy won the biggest majority in a Spanish election in almost 30 years, and told Spaniards to brace for hard times as the nation fights to avoid being overwhelmed by the debt crisis. Bonds continued to drop. Rajoy’s People’s Party swept the ruling Socialists from power after eight years, winning 186 of the 350 seats in Parliament, compared with 110 for the Socialists’ candidate Alfredo Perez Rubalcaba.
“Hard times lie ahead,” Rajoy, 56, told supporters outside the PP’s headquarters in Madrid, giving no new details of his plans. “We are going to govern in the most delicate situation Spain has faced in 30 years.”
Spanish borrowing costs continued rising toward euro-era records (6.6% this morning) even as the PP won a mandate to slash the budget deficit, overhaul the stagnant economy and reduce the 23 percent jobless rate. Rajoy, who hasn’t given details of his proposals, won’t take over for a month, prompting him to say on Nov 18th he hoped Spain wouldn’t need a bailout before he’s sworn in. Miguel Arias Canete, head of the PP’s electoral committee and a former minister, said today markets need to give the party time, as ministers won’t be appointed until Dec. 21 and Spanish law doesn’t allow Parliament to resume any sooner than Dec. 13.
So NO QUICK FIX IN SPAIN IS POSSIBLE – let’s face that fact now so we’re not endlessly surprised by it as the rumor-mongers can now have a field day attacking the lame-duck outgoing Government ahead of the transition. Meanwhile, our own do-nothing Congress looks to be heading towards certain disaster as we have what appears to be a TOTAL FAILURE of the US Deficit Reduction Committee to do anything to actually reduce our deficit.
Now I don’t want to point fingers (cough, Republicans, cough, cough) ahead of our National Holiday that celebrates unity and goodwill and crap like that. Let’s just say "they" couldn’t agree, so now it’s going to be Hard Times for America as we, in theory, will kick in $1.2Tn of automatic cuts including (gasp!) over 5% of our nation’s Trillion-Dollar annual Defense budget. Oh, not until 2013, of course because our Government doesn’t really have the balls to cut anything under any circumstances.
EXCEPT, of course, aid to the poor. THAT they can cut and cut and cut and cut. Payroll tax cuts –…
White Christmas Portfolio – Goaaaaalll!!!
by Phil - November 19th, 2011 7:31 am
Looks like we’ll be having a green Christmas this year!
Congratulations to all who played along with our latest virtual portfolio as we couldn’t have made 33 better trades in a month as we blasted past our goal for an 89.4% gain, from $15,000 to $28,415 in just 25 days. There’s certainly as much luck as skill in getting this kind of result but, since we’re over a month ahead of schedule and ahead of our $25,000 goal – there’s no reason to shut this down and we’ll see how far we can push things through Christmas – on one condition.
In the last update, I put up a link to our NYC Food Bank, where we are fortunate enough to have arranged for matching donations for the next Million Dollars that comes in. If you should happen to benefit from what you learn following our virtual portfolio – PLEASE take a moment to give something back to the millions who are less fortunate. It doesn’t have to be the Food Bank – all of our communities have needs and you may find it pleasantly surprising at how good it makes you feel to just walk into a local shelter – hand someone a check and say "Happy Holidays."
That’s all you have to do. They may try to hug you (there’s a lot of huggy people working in shelters) but they won’t put you on a list or bug you for money or come to your house – they are just thrilled to make it through a week with enough money to take care of the people who really need it. Please keep that in mind as this is a particularly hard holiday season for charities – as giving has plunged around the country and needs, obviously, have skyrocketed.
Thank you. Now we can get back to our Capitalistic endeavors!
- 2 NFLX Nov $67.50 puts sold for $3 expired worthless – up $600
- 5 DECK Nov $105 calls sold for $6.60 expired worthless – up $3,300
- 5 SCO Nov $45/48 bull call spreads at $1.10 expired worthless – down $1,100
- 20 FAS Nov $11 puts sold for .65 (-$1,300) expired worthless
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TGIF – Saved by the Bell or on a Highway to Hell?
by Phil - November 18th, 2011 8:10 am
Wheeeeeeeee, what a ride this week!
Since we went bearish on Tuesday afternoon, the Dow has dropped 450 points. That pushed our White Christmas Portfolio over the top (as we flipped bearish, of course) with a virtual balance of $26,075 including $2,565 of unrealized gains on our still-open (and still bearish) positions. That’s up $11,075 (73.7%) from our $15,000 start on October 24th and we’ll be getting back to cash and going for another $10,000 (our original goal) before Christmas.
How did we do it? We teach keeping trades short and simple in a choppy market as we stick to our trading range. Trades in the WCP were very much like the trade ideas I published Wednesday morning, from our Tuesday Member Chat at 3:21. As we had a little BS rally Wednesday afternoon, many of the trades were still makeable that day. In fact, in Seeking Allpha, where the post didn’t even go up until later that morning, Jamesbwood was able to take advantage of the XOM $77.50 puts at .14 (less than our original entry) and took a double off the table at .28 – a 100% day trade!
All of those trades ideas are great examples of the kind of trades we look for in our White Christmas Portfolio (our current, virtual, short-term portfolio) – ones we can get quickly in and out of with nice gains. We were quite satisfied with our oil shorts and cashed those out yesterday and, had President Obama followed my advice and sold those 140M barrels for $100 (could have gotten $102), he could have bought them back yesterday at $98.50 for a quick $210M profit – enough to pay for at least an hour’s worth of the deficit! Percentage-wise, he would have been better off subscribing and taking those trade ideas from our Member Chat. Those Wednesday morning trade ideas were:
- GOOG $625/620 bear put spread at $3.10 is a nice downside play – figure risking $1 to make $1.90.
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GOOG is at $600 and this spread will likely expire at $5 today – up 61.3%
- MMM $82.50 puts are $1, also a good trade for a crash tomorrow.
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MMM finished the day at $80.43 and the $82.50 puts were $2.35 – up 135%
- WYNN $130/125 bear put
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Thrill-Ride Thursday – Here We Go Again!
by Phil - November 17th, 2011 8:40 am
Wheeeee – isn’t this fun?
To paraphrase Lloyd Bridges in "Airplane" – looks like I picked the wrong week to short oil. We attempted to short oil at $100 and that did not work. Then we attempted to short it at $102 and that did not work but $103 finally worked like a charm this morning as Oil Futures (/CL) plunged back to $100 between 4am and 7:30.
The trick with playing the futures is to play them like a series of momentum trades with tight stops (see our Strategy Section) above a certain resistance point. As long as you manage your losses, you can simply re-enter at the next resistance and try again. For example, if you picked the $100 line yesterday to short with a stop at $100.10, loss of $100. Then the $102 line seemed like it would work but another $100 lost but $103 (we play the crosses back under, of course) became a huge winner, without a serious pullback until the bounce off $100 for a gain of $2,500-$3,000 – depending on how tightly you set your stops.
So far, the $100 line held up (only because the Dollar was slapped back down from 78.65 to 78.35) but there are still 86M barrels of oil open on the NYMEX and scheduled for December delivery. That’s right, as I predicted yesterday, 60M barrels worth of oil contracts scheduled for December delivery were cancelled yesterday in a blatant attempt to create an artificial supply shortage for oil in the US.
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Which Way Wednesday – Popping or Topping (again)?
by Phil - November 16th, 2011 8:08 am
Wheeee, what a ride!
At 1am, in Member Chat, we were discussing why the market was selling off 1% but by 5am, we had rallied the Futures back above yesterday’s close causing me to say to Members at 5:33:
The Euro itself is up 1% to 1.352 but not the Pound and the Yen is below 77 so still time for all this to reverse again and we’ll be back to where we were last night (down 1%).
Nas Futures are my favorite short (/NQ) at 2,365 with a stop at 2,371 and that’s $20 per point so be very careful. Oops, silly me – oil (/CL) is my favorite short at $99.50 with a stop over that line.
We caught that move pretty much on the nose and the Nasdaq fell right back to that -1% line at 2,340 for a $500 per contract gain in less than an hour and oil came back to $98.60 for a $900 per contract gain by 6:10. That was enough for our morning drive to McDonald’s AND a tank of gas so congrats to all the early risers and we really had it all this morning with the 3am trade working like a charm followed by the double dip we caught at 5:33 and now we have a silly bounce back (8am) but, so far, not high enough to get us excited about shorting again.
We left off yesterday with plenty of short positions from our afternoon Member Chat – JUST IN CASE we had a repeat of last Wednesday’s 400-point drop. While we didn’t expect such a violent move (caused last week by Belusconi’s resignation which was, a day later, turned into a good thing – see "Whipsaw Wednesday – Yawn!"), we did think yesterday’s rally was just A BIT overdone (see David Fry’s chart) and, since nothing that has happened overnight has changed that outlook, perhaps some of the following trade ideas from yesterday’s Member Chat at 3:21 will still be playable this morning:
- GOOG $625/620 bear put spread at $3.10 is a nice downside play – figure risking $1 to make $1.90.
- MMM $82.50 puts are $1, also a good trade for a crash tomorrow.
- WYNN $130/125 bear put spread at $1.90.
- XOM $77.50 puts at .21 are a fun play too.
- Still shorting
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
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