by phil - May 3rd, 2012 7:52 am
Spain is up 2.3% this morning (7:30).
They are bouncing Europe with them despite a pretty poor round of trading in Asia (flat). Why? Because Spain's 3 & 5-year note sales "only" went for 100 more basis points than last time with the 3-years coming in at 4.04%, up 54% from last year's auction at 2.62% and the 5-year notes fetched 4.75%, up only 28% from the last 5-year note sale so YAY – Spain is fixed!!!
A whole $3.3Bn worth of bonds were sold or about 1/3 of 1% of what has been allocated through bailout programs to buy this junk but this autction is moving $80Tn worth of global equities up 1% ($800B) – talk about getting bang for your bailout buck!
I'm not going to get into how silly this is getting – we went through this all in '07 and '08 and the markets can be amazingly silly when they are in denial so we'll just go with the flow and pick up some nice upside momentum plays – as long as we can stay over 3 of 5 of our Big Chart's 2.5% lines and, if the pre-market move up holds – they should have no problem taking back 3,075 on the Nasdaq, 820 on the Russell and 8,200 on the NYSE. We're already over 1,400 on the S&P on yesterday's stick-save close and the poor Dow has 800 whole points to go before they catch up at 14,000 so it looks like the Dow will be the logical bullish bet if the other 3 indexes join the S&P over the line.
So IF the Dow is over 13,300 AND the other indexes are over our mark – how much money can we make playing for the Dow to catch up and make it to 14,000. 700 points is a lot, so there should be many ways to play this to our advantage. DIA $133 calls are $1 and have a delta of .44 so you capture 44% of a move up, which means a 100-point rise in the Dow will get you a 44% gain – it's a good trade to enter with tight stops below 13,300 as the Dow has 2 weeks and two days left to make those 800 points and that should be a cake-walk as they're already up 400 points in the last 7 sessions and, as we know from our friends at CNBC –…
by phil - April 16th, 2012 7:53 am
Despite Asia continuing their downhill slide, despite the Bank of Korea lowering their Economic Outlook, despite Swiss PPI showing DEflation, despite Spain's 10-year bonds rising to 6.07%, despite India's inflation at 6.89%, despite the 5-year CDS spread on Spanish debt hitting new records, despite James Galbraith warning that the EU periphery will collapse, despite the Saudi TASI Index dropping 4% in the last two days, despite the biggest weekly drop in Copper Futures of the year, despite Credit Suisse cutting 5,000 jobs and Best Buy closing 42 stores and even BMW sales off 30% in Brazil….
Despite ALL these weekend news items and DESPITE our very Depressing Weekend Reading – the bears, as Steve Martin says in the above clip, still have DOUBT in their heart and are allowing the Futures to rise this morning (7:30) as Europe bounces up 1% from their 30-day lows in this traveling revival show known as the stock market.
Faith is a wonderful thing and we all like to believe in miracles but a good investor demands PROOF – much the way many of our biblical heroes required signs from the Lord before making their own commitments. We don't need a burning bush but we do need more than vague promises of EU action before we believe their 5 loaves and 2 fish will be enough to bail out the entire continent, right?
On the chart above, I drew a blue line across the 50% levels between the tops of the last 6 days and the bottom. Not reflected on these charts is the fact that the Nikkei FELL another 1.74% this morning or that the Hang Seng dropped 0.44% – pushing them further from their goals.
As I mentioned above, the EU markets are off to the races on rumors that US Retail Sales will save the World at 8:30 with an upside surprise off very low expectations. Even if we do get a bump – so what? Retail sales were anemic last month except Gasoline, which was up 3.3% while General Merchandise was DOWN 0.1%. Gasoline was up 10% in March so YAY!, I guess – but is that really what we're going to base a rally on?
by phil - April 6th, 2012 8:45 am
NOW things are getting interesting!
Who wants a market that goes up and up and up – where's the sport? Even the Nasdaq finally blew it's 15-week winning streak and that helped us decide to stay pretty bearish going into yesterday's close. This morning we went over the news and the week's data to position ourselves for the Futures and my conclusion to Members in our special 4:03 am Alert was:
Next week we get the BBook, PPI and CPI but the focus will be on earnings and AA is not likely to get us off to a good start so I simply don't see anything in particular to be bullish about at the moment.
The point I had been making (with many charts and graphs) was that it didn't matter if we added even 250,000 jobs – it still isn't enough to begin to fill in the hole in any meaningful way and, even more important, the QUALITY of jobs we have been adding is TERRIBLE!
It doesn't matter if you give everyone a job if they are only minimum wage jobs. We need our consumers to have an income to spend and aside from inflation (real inflation, not the Fed's BS numbers) eating into their buying power, when someone loses a $50,000 job and replaces it with a $35,000 job – that's NOT an improving economy – not for the long run, anyway.
Of course the stock market will like it, at first – as lower wages paid for the same job = greater Corporate Profits but that only works as long as there are people outside your country who have money to buy your goods.
As we noted just yesterday with the Retail Reports, the high-end stores are doing very well as the top 10% is doing well but those serving the bottom 90% are struggling because, clearly, these people are running out of money. While the market has been content to "ignore and soar" during this gathering storm, now we begin to see the size of the wave that's coming in and it's starting to look scary indeed…
8:30 Update: An anemic 120,000 Jobs added in March! That's about 1/2 of what was expected by Economorons, who can't even get a handle on a major, critical number like Payrolls – how scary is that? So many of…
by phil - April 3rd, 2012 8:42 am
When will I see you again?
When will our hearts beat together?
Are we in love or just friends?
Is this my beginning or is this the end? – The Three Degrees
Will the S&P see 1,420, will the Russell see 860 again?
We need to see 13,600 on the Dow to flip our bull switch and we're happy to play that index bullish with something like the DDM (now $71.03 with the Dow at 13,264) $68/70 bull call spread at $1.15, which pays $2 (up 74%) if the Dow simply doesn't fail 13,200.
The potential loss of $1.15 on the trade can be offset with the sale of the May $127 puts at $1.10, which is a bet the Dow holds 12,700 (down 4.25%) or you can pick a stock you would REALLY like to own if it gets cheaper like AAPL, and sell the May $460 puts (down 25%) for $1 or a stock I would love to buy cheap(er) like BTU May $28 puts (down 5%) for $1.25 or CHK July $21 puts (down 14%) for .90. Assuming you offset $1 of the $1.15, then you are in for net .15 on the $2 spread with the potential for a 1,333% return on cash if the Dow simply doesn't go down from here. If you are not willing to make that bet, then you are simply not bullish.
We still favor cash in this very uncertain market but we've been more enthusiastic about adding bearish trade ideas, on the whole. Our very bearish, very aggressive, short-term $25,000 Portfolio gained a virtual $20,000 in the past two weeks DESPITE the fact that we're re-testing the tippy top of the market.
That's because we are essentially doing the opposite of "buying the dips", which is "selling the rips" – taking advantage of the excitement of the bulls, who are whipped into an almost daily frenzy by these low-volume rallies.
I'm happy to be bullish, really I am, but SHOW ME THE EARINGS! We are now up 10% since January earnings and 25% since October's report so I am looking forward to some SPECTACULAR numbers to back up these new and vastly improved valuations for all these companies. Heck PCLN (on our Long Put List and now in our $25KP) is up $250 (55%) since January alone…
by phil - March 27th, 2012 7:34 am
Wheeeeeee – isn't this economy FANTASTIC?
It sure is for those of us in the top 1% (1.4M) - people earning over $352,000 in annual income. We made $105,637 more Dollars in 2010 than we did in 2009 – thanks in large part to the Fed's fantastic policy of printing more and more money, which lets us borrow cheaply or invest with leverage in inflating equity as the Dollar collapses. Sure the Dollar collapsing hurts everyone – but an extra $105,637 keeps us ahead of inflation, right?
I'm stil jealous of course (good Capitalists are always jealous), as the top .01% (14,000 of us) – who earn an average of $23.8M, were able to add another $4.2M to their annual incomes in 2010. That's 52,500 TIMES the average $80 increase earned by the bottom 99% (thank goodness we're not one of THEM!). That's right, somehow, the riff-raff in the bottom 99% managed to grab 7% of the Nation's total increase in income – clearly Congress needs to make immediate changes to prevent this travesty from happening again!
Steve Rattner has a different opinion, saying: "The only way to redress the income imbalance is by implementing policies that are oriented toward reversing the forces that caused it. That means letting the Bush tax cuts expire for the wealthy and adding money to some of the programs that House Republicans seek to cut. Allowing this disparity to continue is both bad economic policy and bad social policy. We owe those at the bottom a fairer shot at moving up."
That's Commie talk! If we allow the bottom 99% to make a fair share of the money, they would make 5% more and you know they would only SPEND it on stuff they need TO LIVE. Then our companies would have to provide more goods and services to the bottom 99% and jobs would be created and we, at the top, would have to WAIT for the money to trickle UP from the bottom as only companies that do a good job servicing the bottom 99% would increase in value. Even worse, we may have to WORK (a four-letter word) to provide goods and services for the people who have money in order to EARN (another four-letter word) our Incomes. That's no fun for us at all!
by phil - March 23rd, 2012 8:28 am
No one told us markets could go down? This is an outrage, I demand an investigation – TURN THOSE MACHINES BACK ON!!!
Has it already been a week since I said "Stop the Rally, We Want to Get Off"? As I noted in that post, we began our list of 12 Long Put Plays for Members on Thursday of last week (near the end of what I called "A Weak Week of Denial") and some have already doubled while others, like PCLN, have gotten even cheaper, which only makes us love them more…
I concluded that this rally was fake, Fake, FAKE and gave my reasons on Friday so no point in going over them again – now we're just watching and waiting to see what sticks as we haven't actually done a lot of technical damage (see Dave Fry's chart) – Yet!
Although we were TRYING to get bullish on Monday, we did so only after setting more aggressive targets in our Weekend Review of the 5% Rule (see post for details and levels) and by 10:09 on Monday, our first trade idea in chat was the very bearish TZA spread that I featured again in Tuesday's post, which was the April $17/18 bull call spread at .42, selling the April $17 puts for $1 for a .58 credit. TZA finished at $18.39 yesterday and the spread is now .54 but the short puts are down to .65 for a net gain of .47, which is 81% in 3 days and a good way to offset the 2.3% drop in the Russell – isn't leverage fun?
What was not fun is what happened to people who trusted Credit Suisse to run an honest game with their TVIX instrument. As noted by ETF Digest's David Gillie, an ETN is an unsecured, unsubordinated debt security with significant basis on the credit rating of the issuer. Although ETNs may be named to indicate tracking certain futures markets or indices, due to the fact that their holdings are credit notes rather than tangible assets, such as ETFs, their price becomes largely supply and demand based rather than based on underlying holdings. As Kid Dynamite points out – it does say right in the TVIX prospectus:
“The long term expected value of your ETNs is
by phil - March 22nd, 2012 8:34 am
Do you REALLY think this will go on forever?
On the right is the AAPL quarterly chart but it could also be the quarterly chart of SHLD, NFLX, FOSL, STX or PCLN (Bespoke Chart), all of whom are up more than AAPL (which is up 50%) in 2012. We've discussed PCLN as one of my favorite shorts and we had a good discussion in Member chat last night comparing PCLN to EXPE, who drop the same amount of cash to the bottom line (before buybacks and dividends) but have just 1/8th of the market cap of PCLN.
Sure you can say that PCLN is twice as good as EXPE (it isn't, but you can say it) but can you say it's 4 times as good? How about 8 times? EXPE nets $500M a year – 8 times that is $4Bn – more money than the entire travel sector makes! How, exactly, will PCLN grow into that valuation? Eliminate all competition and then grow the sector by 50%? Well, that's pretty much what AAPL did but how many AAPLs can you have in one market?
THAT is the problem my friends. Aside from the macro concerns we discussed in yesterday's post, we have a sort of value mania that is driven by the very real success of one company, much the way we had a dot com boom in the late 90s driven by the very real success of just a few companies. Back then, everyone was the next QCOM, YHOO, MSFT, CSCO – whichever category you were supposed to be the best. Qualcomm, in fact, was the best performing tech stock of 1999, gaining 2,619% that year and finishing right about $100. By the end of July, 2002, they were trading at $10 but hey, what a ride!
In fact, here's the CNet story from Dec 29th, 1999 titled "Qualcomm Jumps on $1,000 Price Target" and coming on the heels of "Qualcomm to offer Net2Phone services in Eudora" it's no wonder people were super-excited! AMZN was "only" up 25% that year to $100 but Jeff Bezos was Time's Man of the Year and yes, their business has been growing at an amazing rate for the past 12 years and they have crushed their competition and dominated the sector – and gained less than 6% a year for their troubles.
by phil - June 7th, 2011 8:11 am
Our winning streak continues!
With 335M barrels of oil still on fake order at the NYMEX, yesterday’s early morning short play at $100.60 gave us a ride back to $99 and that was good for as much as $536M pre-market. In the morning post, I said "hopefully we’ll get another crack at shorting oil at $100 or higher" and we did – right at the open – and that was good for a ride back to $99 for another $335M of potential gains (just following through with last Thursday’s plan to break the NYMEX speculators).
We took the money and ran on those USO June $40 puts at $1.40 (up 22%) in Member Chat at 10:53 but the next rebound in oil didn’t quite get to $100 ($99.88) and we missed the run down to $98.50, which is where it’s sitting this morning.
Of course, we don’t only short oil… In my 9:58 Alert to Members I, of course, reminded them that oil was at $100 and shortable again but we also grabbed the QQQ weekly $56 puts for .33 and those finished the day at .55 for a 66.6% gain (the mark of the Blankfein), which is not bad for 6 hour’s work (or so I am told). We also had a more complicated spread with DDM offsetting SPY as a sort of arbitrage on two spreads.
Thanks to David Ristau’s guest appearance in Member Chat pre-market, where he mentioned he was jumping on our short oil bandwagon, we selected HAL for a short trade in Member Chat at 10:10 along with our planned PCLN short play (mentioned pre-market in the morning post) and both of those were, of course, huge winners already so thanks for HAL David!
It wasn’t ALL bearish, we went long on XLF as it hit $14.90 with some short put sales along with a very long-term bull play on HOV but we took a loss bottom-fishing on IWM as the June $79 calls stopped us out after falling from $2.07 to $1.95 (down 5.8%) but we had to try something long to get a little balance or risk being too bearish. Our bullish sentiment didn’t last long though and we decided to short the Nasdaq futures at the 2,300 line at 11:42, those gave us a spectacular run down…
by phil - August 20th, 2010 8:29 am
This week cannot end soon enough for the bulls.
While it’s no shocker that we are finishing the week where we started and, in fact, finishing the options expiration period where we started last month (July 16th), it’s still very disappointing that we are making no progress. This weekend I asked if it was "Time for a New, New Deal?" I went to DC over the weekend and I’ll write about that this weekend but let’s just say I’m not seeing the political will to actually do something major to put Americans back to work and, as I said last Friday, when I said "Hoping the Weekend Brings Perspective":
Weekend stance – off this disappointing two-day run I’d say as neutral as possible over the weekend. I do think we need a good blow-off bottom now because we blew our chance to turn it around on volume yesterday.
Trading Range – I was counting on QE2 AND a stimulus announcement by next week. After the weekend we may have neither so it’s really going to be all about watching our levels in absence of any fundamental market forces. Monday we have the NY Fed and NAHB Housing Index. Tuesday is Housing Starts, Building Permits and a PPI that will also be BTE along with Industrial Prodcution (probable disappointment) and Cap Utilization (dragged down by refiners). Thursday is Leading Economic Indicators and the Philly Fed and that’s it for the week so, once we get past housing, the newspaper is more likely to move the markets than the data points.
We got so-so Leading Indicators yesterday and a TERRIBLE Philly Fed, leading me to send out a 10:03 Alert to Members saying:
Whoa! Philly Fed is disaster! -7.7. Leading indicators are up 0.1%, which is in-line but Philly was expected at +8 so this is TERRIBLE! We should test yesterday’s lows at least on that.
DIA $103 puts give good bang for the buck at .74 to stop the bleeding – just keep in mind thay have a ton of premium and need to be taken off quickly when momentum stops
While that play worked out very nicely, the bleeding I referred to was my 9:43 Alert to Members where I reiterated my "small gambles" on SSO, QLD, DDM and USO – but I did say at the time: "Don’t forget we get Leading Indicators and Philly Fed at 10 and…