Wednesday Worries – Yentervention, Euro Style
by Phil - February 8th, 2012 5:16 am
78.50 on the Dollar!
The Yen finally got back to 77 and EUR/CHF back to 1.21 so my theory that the BOJ has given up on the Dollar and moved to boosting the Euro is playing out nicely.
This does not make me more bullish (expecting falling Dollar to boost the markets) because, in the grand scheme of things, this is kind of like now there are two kids building a sand wall on the beach instead of one – sure it will last longer than the wall just one kid was building but, eventually, the tide will get it anyway or, as Jimi Hendrix said more poetically: "Castles made of sand, fall in the sea, eventually."
Once you start messing around with Forex markets, you are messing with major macro forces that are hard to control. Japanese banks have $7.5Tn of Japanese bonds at 1% – what happens to the value of those bonds if the BOJ does push the Yen down 10%? Who takes that $750Bn hit? What if rates go up to 2% – what's the value of the bonds then? Who will bail out the Japanese Banks when they have a multi-Trillion Dollar (several hundred Trillion Yen) hole in their balance sheets? Do Japanese spreadsheets even have room for Quadrillions? They are going to need it!
Then there's this Bloomberg article on the Central Banks, who have doubled their balance sheets since 2006 to $13.2Tn but, magically, have caused no inflation (according to Ben Bernanke – not according to people who actually buy food and stuff). China is now sitting on $4.5Tn of other people's TBills (mostly ours) and that's up $1.5Tn in a year. The ECB is right behind them with $3.6Tn and another $1Tn supposedly coming in the next EFSF round and the Fed has $2.9Tn plus whatever nonsense they are running off book.
So, how is it that WE are the bad currency here? If the Dollar is a problem, then China, who's GDP is only about $8Tn (optimistically, possibly $5.5Tn depending on who's measuring) is almost as insane as Japanese bankers and maybe more so as they are betting on our country's ability to pay and maintain the value of the Dollar (already a fail, right?). I suppose no one can ever recognize losses and just carry more and more junk…
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DiggSuper 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 Madness – G20 FinMins Set Two Week Deadline
by Phil - October 17th, 2011 8:01 am
Two weeks!
European leaders have two weeks to settle differences and flesh out a strategy to terminate their sovereign debt crisis as global finance chiefs warn failure to do so would endanger the world economy. “The risk of a recession would be increased dramatically were the Europeans to fail to accomplish goals that they’ve set for themselves,” Canadian Finance Minister Jim Flaherty said after the G-20 meeting on Saturday.
The Brussels meeting “has the potential to turn into a positive historic moment,” Joachim Fels, London-based chief economist at Morgan Stanley, wrote in a note to clients yesterday. “But it could also easily turn into a negative catalyst.”
Europe’s plan, which has still to be made public, includes writing down Greek bonds by as much as 50 percent, establishing a backstop for banks and magnifying the strength of the 440 billion-euro ($611 billion) temporary rescue fund known as the European Financial Stability Facility. “The plan has the right elements,” U.S. Treasury Secretary Timothy F. Geithner said in Paris. “They clearly have more work to do on the strategy and the details.”
The G-20 officials — who met to prepare for a Nov. 3-4 gathering of leaders in Cannes, France (and we’re fondly remembering London’s 2009 meeting with the graphic on the right) — said in a statement that the world economy faces “heightened tensions and significant downside risks.” European authorities must “decisively address the current challenges through a comprehensive plan.”
The policy makers held out the possibility of rewarding European action with more aid from the International Monetary Fund, while splitting over whether the Washington-based lender’s $390 billion war chest needs topping up. Europe’s latest strategy hinges on putting Greece, whose government forecasts its debt to reach 172 percent of gross domestic product in 2012, on a sustainable path. Austerity has plunged the country deeper into recession and provoked civil unrest that threatens political stability.
My reaction to this in Member Chat this Morning was to call for shorting the jacked up Dow Futures (/YM) at 11,600, saying:
Speaking of the illusion of power – yet another G20 meeting ends with yet another plan to have a plan but this time, for some insane reason, they only gave themselves a week to fix everything. I’ll be writing about this this morning but the gist of it is the Finance Ministers have essentially sent their own
…
Bears Snap Up TD Ameritrade Put Options
by Option Review - June 10th, 2011 4:12 pm
Today’s tickers: AMTD, XRT, BTU & NG
AMTD - TD Ameritrade Holding Corp. – Put options on TD Ameritrade are popular on the final trading session of the week, with shares in the financial services company trading 0.85% lower on the day at $18.76. Investors may be scooping up puts on the largest U.S. online trading firm following comments from the company’s chief executive regarding concerns that the slower pace of client trading activity in the context of a more uncertain economic climate may endure through the summer months. In-the-money put options in the August contract, which expire after TD Ameritrade reports third-quarter earnings on July 19, are drawing the most trading traffic today. It looks like investors purchased around 2,175 puts at the August $21 strike for an average premium of $2.77 each. Bears traded more than 3,400 puts at the lower August $20 strike on previously existing open interest of just 381 contracts. Roughly 3,000 of the lower-strike puts were picked up for an average premium of $1.82 a-pop. Investors long the August $20 strike puts make money in the event that AMTD’s shares fall another 3.1% to breach the average breakeven point on the downside at $18.18 by expiration day in August. Greater demand for TD Ameritrade put options helped raise the stock’s overall reading of options implied volatility 12.4% to 31.77% as of 1:00pm in New York.
XRT - SPDR S&P Retail ETF – A large ratio put spread initiated on the retail ETF suggests one big options strategist is positioning for substantial, albeit limited, bearish movement in the price of the underlying fund through July expiration. Shares in the XRT, an exchange-traded fund designed to mimic the performance of the S&P Retail Select Industry Index, dropped 2.4% to an intraday low of $49.15 today. The trader…
Wonderful Weekly Wrap-Up
by Phil - June 12th, 2010 8:28 am
I love it when a plan comes together!
Last week, I felt like I was going to have to call Animal Control to help me fight off the bears. As I mentioned in last week’s Wrap-Up, all 14 misses (out of 55 trade ideas for the week) we had were bullish plays that we were grabbing on the way down. On Friday we went bullish on USO, SSO, DIA, TBT (well, we’re always bullish on TBT), AET, ABX, Copper Futures and even poor BP. Those followed up on bullish plays we had taken on Thursday on TSRA, USO, MEE, FCX, EEM, ERX and XOM. We went into the weekend still bearish but we were excited about flipping back to bullish. My closing comment in the Wrap-Up was: " I’m hoping for a blow-off spike down on Monday with heavy volume, hopefully followed by a recovery over the next few days" and, gosh darn it, wouldn’t you know that’s EXACTLY what we got.
I don’t MAKE the markets do these things, I simply tell you what is going to happen and how you can make money on it… Needless to say, we had a LOT of fun this week at PSW! Last weekend, however, was such a bearish frenzy in the MSM that it was making our Members nervous and THAT I do not tolerate so I wrote : "The Worst-Case Scenario: Getting Real With Global GDP!" to illustrate why I felt our bottoms would hold and I began a Top 20 Buy List on Sunday and boy did we get some fabulous entries this week!
Monday Market Movement – Will We Survive?
As I said on Monday Morning: "I already stuck my neck out calling a bottom so now we’re just waiting patiently." We were disappointed to have not gotten a stronger statement from the G20 over the weekend but it was just the Finance Ministers, so we weren’t expecting too much until the big boys meet at the end of the month. While we were in a buying mood, I cautioned against getting too bullish until we took back our anticipated "weak bounce" levels, which were the orange lines on Monday’s Multi-Chart:
I pointed out (on another Multi-Chart) that Europe was already gathering strength so we were pretty confident things would go our way but, as I said in the 9:50 Alert to Members, SOX 340 and TRANQ 2,000 had be taken back before we could feel confident. My outlook for the day was:…
Options Traders Storm Las Vegas Sands Corp. as Shares Soar
by Option Review - April 5th, 2010 4:04 pm
Today’s tickers: LVS, PFE, EEM, PNRA, IGT, BTU & UNG
LVS – Las Vegas Sands Corp. – Shares of the owner and operator of The Venetian Resort Hotel Casino and other gaming resorts surged 8.92% to attain a new 52-week high of $23.19 today. The rally in share price at Las Vegas Sands Corp. inspired options investors to initiate bullish trading strategies on the stock. Near-term bullish players populated the April contract by purchasing both in and out-of-the-money call options, as well as by selling out-of-the-money put options. Existing open interest levels in call options at the most heavily trafficked strikes in the April contract (April $21/$22.5/$24) cloud the picture a bit because it is more difficult to pinpoint new positioning. However, fresh plain-vanilla call buying in the September contract provides a clear bullish signal on the casino resort operator. Traders anticipating continued upward movement in the price of the underlying stock through September expiration picked up 2,000 calls at the September $26 strike for an average premium of $2.29 apiece. Investors holding the September $26 strike call contracts profit if Las Vegas Sands’ shares surge 22% from the current price of $23.19 to exceed the effective breakeven point to the upside at $28.29 by expiration day in six months.
PFE – Pfizer, Inc. – A large-volume plain-vanilla debit call spread employed on Pfizer this afternoon indicates one options player expects shares of the underlying stock to rebound by expiration in June. Pfizer’s shares slipped 1.10% lower during the trading session to stand at $16.90. The investor looked to the June $17 strike to purchase 19,500 calls for an average premium of $0.56 per contract, which were spread against the sale of the same number of calls at the higher June $19 strike for $0.08 each. The net cost of the bullish transaction amounts to $0.48 per contract, thus positioning the investor to accrue maximum potential profits of $1.52 per contract should Pfizer’s share price rally more than 12.4% from the current price to $19.00 by expiration day in June. Shares of the global pharmaceutical company last traded above $19.00 on February 2, 2010, when the stock reached an intraday high of $19.33.
EEM – iShares MSCI Emerging Markets Index ETF – Shares of the emerging markets exchange-traded fund, which corresponds to the price and yield performance of the MSCI Emerging Markets Index, increased more than 1% during the current…
Weekend Wrap-Up, Still Trying to Get Bullish
by Phil - March 14th, 2010 5:20 am
I’m having writer’s block this weekend.
Usually when I can’t think of what to write it helps me to go over our virtual portfolios so I started this morning reviewing the Buy List but I didn’t get far because it was silly. Of 43 plays on the buy list, 39 are doing well – too well in fact to the point where it’s hard for me, in good conscience, not to say let’s kill the whole thing and get back to cash as we’re up about 20% in 2 months and that’s just ridiculous – most people would call that a good year and go on vacation.
The Buy List was 100% bullish and we did catch a good bottom on our early February entries. I was gung ho bullish then because I felt comfortable that the 10,000 line on the Dow would prevail and that we were good for a run back to the top (10,700), following, more or less, the pattern we had in 2004 (see original post for charts). Well that’s pretty much what’s happened since then but that’s not making me happy because I see no reason we won’t complete that pattern and begin falling off a cliff shortly.
As you all know, I’m not a big fan of TA, or patterns for that matter but the reason I started looking for patterns was to try to get a handle on how long market could really keep going up before falling victim to exhaustion. To me it seemed we weren’t at that point on Feb 6th but now that we’ve put in that big push back up – if we can’t punch up to new highs on all our indexes then I do think it’s time for the markets to take a break.
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Clearly I’ve been too bearish for the past couple of weeks and we are now 224 points over 10,400 on the Dow which is where I turned bearish as the January data made me lose faith in our ability to get back to 10,700. I should have stuck to the TA because we’re a lot closer to 10,700 than we are to 10,400. With the Russell and Nasdaq exploding to their own new highs. You can see though, from the above chart, why I do want to wait to see the NYSE, Dow and S&P confirm this move up – it’s not far now!…
Manic Monday Market Movement
by Phil - January 25th, 2010 7:58 am
I love alliterative titles, don’t you?
Fun time is over, the Jet’s lost to the Colts (avenging their first loss of the season) and the Saints beat the Vikings in overtime actually putting the best two teams from each conference (by record) into the Superbowl for the first time in ages. Superbowl tickets are going for $2,800 (average according to Stub Hub), which is about the same as the last two years so not economic downturn is being felt there.
As I mentioned in the weekend wrap-up we were fortunate enough to have cashed out the bull side ahead of the holidays and we followed our two step program for bearish success on Friday by 1) taking the money and 2) running – as it’s been a very long time since holding a bearish position over the weekend hasn’t been punished by the market Gods (by that, of course, I mean Lloyd Blankfein).
We have plenty of bullish plays that we attempted to bottom fish last week (see our Weekly Wrap-Up and save money by buying our mistakes!) and we still have our disaster hedges in case things get worse but, on the whole, we’re expecting a 1% bounce in the very least off our 5% lines (anything less will be a bad sign) and our chart is shaping up like this:
| Dow | S&P | Nasdaq | NYSE | Russell | Trans |
…
Weekend Wipe Out – All the Way Back to Mid-November Lows!
by Phil - January 23rd, 2010 11:36 am
Well I hate to say I told you so but…
No wait, that’s nonsense – what market prognosticator doesn’t love to say "I told you so"? Actually, it’s kind of my job to tell you so and the reason I’m so popular is because, more often than not, when I tell you so, I tend to be right. I’m not right all the time and my single biggest flaw is I am often right but sometimes way too early and timing is EVERYTHING in the markets. It’s not good enough to tell you what is going to happen (give things enough time and everything happens eventually, right Cramer?) - I need to get the period right as well so we can turn it into an actionable trading idea that makes money.
As a fundamentalist, I didn’t like the entire last 500 points of the rally. I had predicted the market would finish the year at 10,200 way back when it was down at 8,650 when the idea was we’d have a Santa Clause rally to 20% (10,380) and then a 20% pullback of that run (346) into Jan earnings that would take us back to 10,034 so the entire run from 10,200 to 10,700 REALLY annoyed me. It didn’t annoy me just because it made me wrong – I’m wrong a lot and I’m old enough to have learned how to deal with it. What annoyed me was the manipulation as, clearly, the fundamentals in no way, shape or form justified the additional 5% move up.
I’ve gone on and on about how fake the move was and how manipulated the markets were and how artificial the support was and I think I’ve pulled out the Seinfeld "fake, Fake, FAKE" clip often enough now that I don’t even have to do a link (but I love it, so I do) or explain how it’s a metaphor for recent market activity so I’m not going to waste our valuable time here. Let’s just do a review of the recent action, which is my best way of preparing for the upcoming Members only post where I’ll be charting out new levels and coming up with action plans for the week ahead.
So don’t read this if you can’t stand to hear "I told you so" because this is the review post and I did tell you so!
When did things go wrong? Clearly they were wrong for ages but when…
PSW Rewind of 2009 – The First Quarter
by Phil - January 1st, 2010 2:42 pm
Thursday’s close was very exciting, wasn’t it?
Well it sure was for us as my 10:01 Alert to Members was a play on the DIA Jan $103 puts at .56. Thanks to the late afternoon dip, they finished the day at .90 (up 60%) after peaking out at .95, a very nice win to close off the year. That was the only Alert trade all week as this market has been too tough to call and we don’t make trades just for the hell of it. I had been sniping at DIA puts all week expecting a pay-off but Thursday it finally came together.
Of course, I also strongly advocated hedging on Thursday morning and listed 4 trade ideas in the morning post to hedge ourselves against the possibility of just such a drop so don’t say you haven’t been warned. Whether there will be follow-through on Monday or a full reversal remains to be seen and, even if I knew, I wouldn’t tell you here because this is a review – predictions are another article entirely.
We treaded very cautiously into last year because our PSW Holiday Retail Survey was not looking very pretty so it was no surprise to us, on Dec 26th, when we got some horrific retail reports. These are, of course, the same reports that we "beat" this year – but not by much. Dec 29th was Monday and Israeli jets attacked Hamas targets in the Gaza sending oil flying up to $48 a barrel. That gave us a nice commodity rally into the close of the year but January 2nd was a Friday and we decided (fortunately) to take the money and run on our long plays, holding open our main cover of SKF Jan $120s at $4.35, which hit $80 later in the month (up 1,732%) and USO Feb $32 puts at $3.40, which hit $10.50 in the Feb dip (up 208%) so, on the whole, not too differently positioned than we are now, coming into the new year. Visually 2009 looked a little like this:
January – Waiting for Obama, or Something, to Change
We began January much the same way we ended December with my Wed Jan 7th comment being: "We call it "Testy Tuesday" for a reason and our 5% rule was tested twice during the day but the market failed to…
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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...
Ilene is editor and affiliate program
coordinator for PSW. She manages the Favorites backup site
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