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Will It Happen Wednesday?

Can we turn this thing around already?

That was hardly a dip in retrospect and we are getting to be very experienced astronauts, able to ignore those little shakes and rattles as the market ship lurches forward into uncharted territory.

This is the one week anniversary of our physics lesson where we talked about how difficult it is to break orbit and, more importantly, about the periapsis – the point at which the market, no matter how high the orbit, comes perilously close to reentering the atmosphere of bearishness!

Ironically, the larger the Apogee (the point at which the market is furthest above "normal") the more terrifying the drop back to the Perigee (underperformance) will seem, even though there are literally trillions of astronomical bodies that go through this cycle every single day without crashing!


In fact, in order to break an orbit, a spacecraft may purposely throw itself into a very close orbit around a planet in order to utilize the gravitational pull to its advantage as it picks up speed for that final thrust into deep space.  This is what the Nikkei did today as it dove down to 16,776 yesterday, perilously close to a breakdown before "slingshotting" back over 17,000 this morning!

As we said last week in the parachute article, the perigee is a good time to eject excess mass (nervous investors) as you prepare to leave them, and previous market highs, behind.

All of Asia had a pretty good rebound, led by Thailand which jumped 11% (yes, in one day) as investors poured back into the market – proving once again that a sincere, quick apology is the best way to save a relationshipI'd love to see the VIX for that exchange!  "Yesterday, after the market closed, we got together with stock market brokers and the private sector to discuss how to prevent flows from the stock market to bond market instead," Finance Minister Pridiyathorn told The Wall Street Journal in an interview.


When in doubt, let Goldman Sachs run your economy…  What kind of crazy little banana republic would come up with that solution?  — Oh, never mind!

The Hang Seng rose to 19,240, "just" 165 points below a new all-time high.  We'll see if they picked up enough momentum (or shook off enough excess mass) to break out this week.  Our pals at CHL added 4.67M subscribers last month, a very nice report after hitting our double down target of $1.10 yesterday! 

China is putting in some tough new trade restrictions to curb the exportsof babies!  That's right, you can no longer adopt a Chinese baby if you are old or fat, single, medicated or poor!  China says its rationale for a change in rules is simply that it cannot meet the demand of prospective families.  Perhaps energy traders can switch to Chinese baby futures as it sounds like supplies will be drying up fast!

As we mentioned in comments yesterday, the dollar dropped as the US Treasury (cough, Paulson, cough, cough) "declined to designate China as guilty of currency manipulation…  noting the government in Beijing is moving steadily, though slowly, toward a flexible foreign-exchange regime."  Well isn't that special?

Also going on in the worlds most important economy – Taiwan has given approval to 3 semiconductor companies to invest $825M in China!  In case you are young I will sum this up by saying these guys REALLY hate each other and this is a truly amazing sign of how important China is becoming.

Meanwhile the world's strongest economy (nope, still not us!) is cracking down on corporate tax evasion, cleaning up the environment and stepping in to head off the crisis in Somalia.  There are so many responsibilities for a real world power…

Let's keep in mind that last Wednesday was a big disappointment ahead of Thursday's big gains so no going all crazy!  As with yesterday, please remain seated until the captain has given the all clear signal and we can safely float about the cabin…

We will go back to looking up, as we covered down in yesterday's post:

Oil may be the villain of the day, as it was last Wednesday with an early morning pump that faded fast.  Tune into comments today as the situation is liquid and slippery with all sorts of shenanigans taking place in the energy sector.  March contracts are up $1.38 from last week and I will be watching those more closely than the manipulated front-month contract.

Any downward pressure on February, with 300M barrels on order for delivery at $63.46 will be bad for the energy sector but there is very likely to be a bigger than ridiculously low expectations (1.8Mb) draw on crude so we will make our energy plays after inventories today.

The dollar looks stable (stable being an odd way to describe something that just doesn't happen to be actually falling off a cliff at the moment) and perhaps we'll get a chance to see how gold performs on a flat day.  $630 has been a major block for gold on the way up and, so far, we have nothing more than a weak bounce off $620.

Let's be very careful out there today!



7:52 Update:  FDX earnings look good to me but it's getting killed on lowered guidance!  But these are very good numbers against a fabulous year last year and I likely will be dumping my puts and adding to my longs on this wrong-seeming reaction!

FDX already announced a 5.5% price increase for next year, that’s $1,900M more money for doing the same thing they did this year!  Let’s say that costs them 10% of their clients – that’s the same money for doing 10% less than they did this year.  Even if they fail to scale back 50% of what they should reduce in order to cut back – that’s still $500M+ dropping to the bottom line (currently $2B).

Perhaps FedEx is so busy and the labor market is so tight that they don’t want any more business and raising prices is simply an exercise in pricing power (I ran a service business and made this choice at one point as it made more sense than expanding).

The FDX play we ended up making pre-earnings should do all right.   We have the Apr $110 put for $1.40, which was already well in the money yesterday and protected our the nice cheap (or maybe not!) July $120s that we picked up for $7 and protected further by selling the Jan $115s for $3.50.

I'll be looking for a chance to buy out my caller and abosolutely taking 1/2 of the puts off the table on the early drop as they more than pay for all the remaining postions!  This gives us a free(ish) look into the next earnings!

Meanwhile, these are strong numbers and generally good for the economy, making me want to take a look at UPS as well!


Speaking of space:  This is very cool and not a joke – it's how we will be building massive space stations in the not so distant future!


Forget taking UPS early as the reaction to FDX is terrible!  I think the traders are crazy but this is the classic example of my favorite mantra, which applies to stocks and the market as a whole:

It is not my job to save the markets

I am not the guy who calls the bottom!

Think of the markets as a $22T train that you desire to ride in a certain direction. 

  • You can get to the station and the train may be there or it may not be there – if you haven’t checked the schedule (done research) you may consider this to be a random event.

  • If the train is there, congratulations - you are in the right place!  Now, is it the right time?

  • Again, you should be checking your schedule but I know some of you insist on boarding and will sit there for hours waiting for it to get going.

  • Others will push which, not surprisingly, doesn’t work well…

  • The ones I am really, really worried about though, are those of you who get to the station, see the train isn’t there (at a bounce point) yet but insist on jumping on the tracks with all your money and predicting “it’s going to stop right here!

Squish is an understatement for most of those people!  Please don’t try to be a market hero, there will be plenty of chances to board the train once the whistle blows and it gets moving again.  It remains to be seen whether this week’s action is just a sharp curve on the way up or a real long-term change in direction.

I've posted this before and I will find a home for these tidbits over the weekend but I want to make sure everyone is up to speed on this one!


Let's stay light on our feet today but I see a lot of fear of global slowdown brewing and we need to have our finger on the trigger of DIA Jan $124 puts for $1 – especially if we see a transport failure in the making!

Looking at my virtual portfolio balance, I think I will take a chunk at the open and then decide if I want to turn it into a full cover or take my chances.

Meanwhile, the price of big-screen TV's is down 40% this year but sales are up 10%.  I'm no math wiz but doesn't that mean more units must be being sold?  If that's the case – and I don't know much about engineering either - but aren't TV's made of stuff?  Who do we know who makes stuff that goes in TVs?  TXN Apr $27.50s are still a buy at $3 (down .35) and GLW May $20s were picked up yesterday for $1.60.

NKE reports later and we can take the Feb $100s for $2.20 and sell the Jan $100s for $1.35 while protecting with the $90 puts for .80.  I think even if they have good earnings they will take a dip after gaining 30% since August.  You could take the spread without selling the Jan but I'm still very concerned about a big market correction if the transits tank.  The estimates are not really high ($1.12 vs. $1.14 last year) and they've beat 3 out of 4 quarters, it's possible an extended fall was good for their clothing line (I'd better stop now I'm talking myself out of being cautious!)

Is it safe to get back in the water with DELL?  That's one train I'd hate to miss so I think we should at least pick up the  May $27.50s for $1.65 to test the water with the new management moves – I don't think it solves anything but what matters is what investors think and the stock is running right into the rising 50 dma at $25.50 which will give us a cheap exit signal if it fails.

That's it for now – I'll be in comments if you need me!

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  1. Good morning Phil, I am still ready to go on the AMZN puts when you say the time is right.

    I am thinking of moving some funds to my online account to buy some stocks that I can routinely write options against. Are there any companies that you would recommend for that purpose? Thanks.

  2. FedEx (FDX) reported Q2 EPS of $1.64; excluding labor-related costs, earnings were $1.89 per share. Revenue came in at $8.93 billion, up 10% vs. the year-earlier period.
    Wall Street was expecting $1.76 per share in earnings and $8.91 billion in revenue.

  3. With RBAK out of the picture, where is JNPR headed?
    Are they for sale? Will they buy someone? If they do then who? What companies have the deep pockets to take out JNPR and how deep are JNPR’s pockets? These questions will send the whole sector higher…possibly.

  4. jnpr down pre market

  5. Thanks Pitch, that’s a list worth reviewing!


    Size – I’ll be making a lot of those picks over the holidays – I’m thinking of closing out my existing folder and starting from scratch so we’re all on the same page.


    RBAK isn’t out of the picture – they’ve locked solid into the world’s biggest phone provider and will still be competing for other business.

    Bad news for JNPR initially, plus they still haven’t straightend out their options shenanigans – ask me again at $17.50!

  6. Pitch JNPR is up premarket with decent volume 19.11

  7. qqqq back over 44 soon?

  8. i am showing a bid and ask between 18.94 and 19.04 with yesterdays close of 19.25

  9. MOT 19.50 shortly? MOT has to make a move to the upside SOON! Will it move back to July’s lows? Time will tell.

  10. Goodday Phil:

    Can you tell me what typically happens when Cramer endorses a stock on CNBC, is it the kiss of death as some say, how long does the positive or negative Cramer effect last etc.? I am/was just about to move into ADBE but now he has just given it his endorsement I’m wondering if I now should hold off or move on to something else.

  11. Pitch your rite, my boo boo.

    This is intersting
    Taiwan market: SanDisk to launch V-Mate next month

    Josephine Lien, Taipei; Rodney Chan, [Wednesday 20 December 2006]

    SanDisk’s V-Mate video memory card recorder will hit the Taiwan market next month at a price of NT$4,599 (US$140), according to sources with the company.

    The V-Mate captures video content from an analog source directly onto a flash memory card, allowing playback of recorded video content by simply inserting the flash memory card into a compatible mobile device.

    Card formats that the device supports include SD, MMC, and Memory Stick/PRO/Duo/PRO Duo.

    The sources said SanDisk is aiming to eventually have video memory card recorders replace DVD recorders as the market mainstream.
    SanDisk expects its memory card shipments to the Taiwan market to grow 40% on-year in December, the sources added.

  12. I just noticed you mentioned Cramer and ADBE in Tuesday’s Wrap up but it would still be nice to have a guideline from you on the Cramer effect. Thanks, I appreciate your and other’s input on any trading matters.

  13. Credit Suisse cuts U.S. integrated oil sector to mkt weight

  14. OT – Scottrade will not allow you to sell calls against calls owned, period.

  15. JNPR – see above!


    MOT – you guys keep selling and I’ll keep buying. NOK just spent a lot of money and they can’t keep discounting phones like they did last year.


    When Cramer says buy a LOT of people buy at almost any price, which causes a lot of people like me to take money off the table, which panics the guys who just bought at the top and don’t even actually know why they are in the stock or what level they should be aiming for (since Cramer rarely gives targets or exits).

    The undisciplined sellers start dumping shares according to either the IBD’s 8% rule or almost anybody’s 20% rule which causes technical traders (who pay no attention to Cramer) to see a breakdown and give sell orders to their people who drive the price further down.


    EBAY/YHOO – not helping either pre-market


    SNDK – I love that! If the semis ever recover we should buy some…

  16. The transports will take a thrashing today. Anything worth looking at on the dips?

  17. UPS nice an hammered on FDX earnings.

    I’m telling you – gift cards!!! Also, consumers feeling less flush will use UPS rather than FDX every time.

  18. I’m holding off on DIA puts uless Dow goes negative or goes up and drops back 25% of the gain.

  19. UPS $75s for $1.75 as a mo play!

  20. sorry i forgot the rule of if not specifically mentioned… UPS put or call?

  21. In the DIAs for a buck on the breakdown

    Out of UPS if it goes below $74.74 as it means I am wrong about direction.

  22. Always calls unless mentioned otherwise but I’m already sorry I didn’t wait longer for UPS.

  23. Phil,

    Great idea to start a new folder for the new year!

  24. SOX are flying! Can the Nasdaq lead us out of this mess?

    SNDK spiking up!

  25. Phil,

    Would you consider the later day sucker rally that will likely materialize on NFLD? They’ve only got $2.18 in cash but there are those who’ll buy this thing for a daytrade and rally the chart. Just curious.

  26. Cramer is Wall Street’s answer to the World Wrestling Federation. Stock tips from Mean Gene Okerlund make as much sense.

  27. Adv\Dec on NYSE much stronger than indexes indicate.

  28. I think that’s it for FDX! Half out on the puts at $5

    Buying out caller for $1.10

  29. GE + .37 is the only thing I need to look at to spot underlying market strength!

  30. chuck rofl…

    How do transports react to high oil prices and economic slowdown? Is this the reason they are weak?

    UPS close to your line in the sand, Phil. Trading right at 74.75 now.

  31. Hey Phil,
    Are you going to stop having your picks on the Alpha site. Don’t see why they should be put on there for free even if it is a day late. Or is it for the building process.

  32. Can anyone explain a 5% drop in QLD a double QQQQ ETF? Or could you tell me what you would do if an index ETF that you own is 5% off its tracking stock overnight?

  33. Phil, sorry, what’s your play with FDX and UPS??

  34. FDX and UPS selling done? Bidding for a small momo pos UPS 75s at 1.60, see if I get a fill.

  35. BP $65 puts are just .25 – fun play into inventories on a weak looking chart.

    VLO $55s make a nice cover at $1.50 if you already have too many puts into inventory.

  36. SOX on a tear, NYSE flying – out of my DIA puts already (and very happy about it!).

    I need to hold UPS – those people are just wrong!

  37. Oil puts this afternoon Phil?

  38. Transports – IMHO, given the weakness this morning on the back of FDX earnings, you might want to wait until the oil inventory report shows a larger than expected draw in crude, to take a long position. I think transports will sell off initially when oil spikes on the ” surprise draw down”.

    I am looking into a little better entry on some rails. We will see.

  39. FWIW-
    Since 2002, whenever FDX has gapped down on earnings, it has tended to stay their for the entire session. Will that happen again today? Who knows.

  40. I hate those wacko ETFs that leverage!


    NFLD – I think that was their only viable product… I agree with your bounce logic but I couldn’t, at the end of the day, want to hear myself saying – Yeah I picked up some NFLD today! The only reason it stopped falling is because they ran out of people to buy it, even at this price!


    Bush says go shop!


    Out of the rest of FDX puts at $4

  41. Phil,

    UPS looking good I got filled at 1.50, what about MET… patience?

  42. BSX – Showing a little backbone today.

  43. Phil,

    Did you say FDX Apr 100 Put or 110 Put? Looking at the weekend and Monday posts, it looks like 100?

  44. If oil breaks above 64, will it kill the market today? Has the potential, caution here, on my part.

  45. Seek Alpha will get the above the line (no or very few picks) in the mornings and some picks (the ones we are done with) in the afternoon.

    It is partly for marketing and mainly because they’ve always been nice to me and I don’t want to screw them but once we get to a full membership (around 1,000) – I will have to reevaluate whether I should keep giving out picks at all.


    UPS – Holding for now unless FDX turns back down with the transports.

    FDX – no more puts and bought out my caller so I have a profit and free July $115s (still worth $7!). This is EXACTLY what this strategy is all about… Oh, but don’t just do it on random stocks – there has to be a lot of fundamental strength, the right mix of contracts and numbers that are going to miss irrational expectations. It may sound like a lot but it happens at least once a month!


    Oil inventory in 15 mins and, for the 3rd week in a row, Bush is in the way of the news!


    It looks like a buy program on UPS, notice how the low rises every 5 mins in a pretty nice straight line….


    If XOM had $77.50s I would take the calls ahead of inventories but I’ll content myself with the VLO’s


    Bush – essentially saying Victory or nothing! He doesn’t believe most Americans want us to get out now. While this is true (as in right this second) he seems to think that means we want to stay…

    I think this is all about him not wanting to be the 2nd president in US history to lose a war.


    Ah, there goes UPS!

  46. QLD – And the answer is, unannounced dividend. Of course, why didn’t I think of that.

    They are (in theory) quite useful in IRA’s and such to get market beating performance.

  47. MET – they dropped too fast to sell, it would have been nice to get .80 off the table but I’m willing to ride them out – could just be a shake out.

    I may as well just make a permant footer to the comments that says GNW still going up!


    FDX – oops, I didn’t buy what I recommended! The Apr $100 puts only ran up to $2, a nice percentage too but my personal goal was to get a buck towards the price of the calls.

  48. Analyst estimates for the 1.8 draw were a joke. Over 6 mm bls. Shocker. Gas and distillate inventories rose…that’s the important part . VLO rolling back negative.

  49. BSX now officially flying!

  50. It’s almost as if Bush and CNBC don’t want to talk about fundamentals for oil before the inventories are announced. But, that sounds crazy. Why would they both want oil to go up?

  51. Oil stocks heading slower higher, VLO going green, oil holding up too. Could someone with access to the oil inventory numbers give us the scoop, pls?

  52. I’m using E*TRADE and looking at UPS options. It shows that UPS JAN 07 $75c are bid 2.15, ask 2.20. How are you guys getting filled at 1.75, 1.50? What am I missing?

  53. Now oil turning down again, traders seem undecided about what to think about the report. VLO down 50 cents within two three minutes.

  54. Oil going lower. Products drive prices this time of year. Plain and simple. That was not bullish. We still have plenty of crude on hand and the decline in products halted. I assume refinery utilization was over 90%.

  55. LOL and no CNBC to spin it! What a disaster for oil, the draw should have been 12Mb and the roaches all know it!

    Jumping on COP $70 puts for .95

  56. MRO flying lower. Guess you won’t get to DD at $0.60 Phil!

  57. MUR (the mini XOM but hated by the street) still up. If it breaks $51 look out below. $50 strike puts for a buck!

  58. JAN07 C 75s is now at 1.65 1.75, for some time! I didn t get my fill at 1.60, btw. You must have the wrong option quote, wincom.

  59. WINCOM….i am thinking about opening another brokerage account, would you recommend Etrade? What points would you make positive and negative. Have you used Ameritrade or any other online broker? Love the 5.05 rate etrade is giving. Thanks

  60. U.S. gasoline supply up 1 mln brls: Energy Dept
    U.S. distillate supply up 1.2 mln brls: Energy Dept
    U.S. crude supply down 6.3 mln brls last week: Energy Dept.

  61. Kustomz,
    I was OK with E*TRADE so far. I like trailing and condition orders you can place for options. However, I don’t like them today. It shows me UPS 75s option real time quote as of 12/19/2006 at 3:57 PM. I don’t like that.

  62. Interesting--
    AMZN to start selling MP3 files with variable pricing (something iTunes does not do). AMZN on the move off of this news.

  63. Flim – are you seriously asking why the Bushpuppet wants Cheney’s (and his daddy’s) pals’ companies to go up?

    This is another fearmongering speech on an oil inventory day to allow as many roaches as possible to get out before the roof caves in – he’ll attack Iran if he has to to keep oil over $60…


    They are not even printing oil inventory on CNBC – Pan, I don’t know what charts you’re getting those numbers from but I’m showing red, red, red….


    UPS $75s can be bought right this second for $1.70, if you are really seeing those prices you need to change brokers!

    That’s UPSAO


    I am telling you – the reality of oil is there is way too much of it. The only reason it ever got up to $60 is because Bush bought 250M barrels on the open market in a 2 year period, that’s 3M barrels of oil a week he bought and buried in the ground. Now that the SPR is full and they’re stacked up in Oklahoma and (as Z pointed out) they now have to rent tankers to store excess crude – supply and demand may kick in at some point (not necessarily today, but soon).


    Bush says history will realize he was right, even if “short term historians” don’t like it – that is seriously his closing remark!


    Time for CNBC’s oil spin! Ready to DD on my VLO calls, just in case!

  64. kustomz,

    I have an interactive brokers account. I’m not an expert at all of its features, but if you want feedback, I can provide it.

  65. Jumping with Phil and on zmann´s summary on COP 70 P, for .90. Watching closely what happens, will cut my pos in half if oil “somehow” makes it above 64.50 for a second. -pantarei

  66. I got into UPS AO at 1.56 a little bit ago.

  67. MRO – thanks Z – nice call!

    I agree on MUR as a mo play but let’s wait for the spin machine to take a few swings.


    ETrade etc – price and execution trump commissions every time. Any broker can charge you under a buck a contract if they are stealing 100 nickels from you on each lot! I trade enough where my concern about getting the best price outweighs all other concerns and that’s something you can’t really shop and it’s also very hard to compare.

    If you think a price I print is off, always ask and I’m sure we can all more or less get back a “live” price from a variety of brokers – would be good for all of us to know.

  68. Interactive Brokers here too, quite a wide range of services accessible (stock, options, futures, forex, access to foreign exchanges but no mutual funds) and good pricing although they pass on any fee, such as changing a bid price, unless you’ve completed enough trades in the same day (although it’s the kind of 1 completed = 2-3 cancels).

  69. Phil, forgot to include tongue-in-cheek emoticon. Just can never remember the characters. Bush does nothing to lower the price of oil. He will be soon be judged the worst president in history.

  70. Hi Phil,

    This is what briefing says about oil, it seems to be opposite of your take, can you explain since I’m confused? thanks, Ilene

    COMDX Commodities Trader: Crude draw was 4x the estimate… Crude trading at 63.70 +0.24, down 0.45 from the data spike -Update-

    Despite distillate showing a nice build (1st build in 11 weeks or so) it was largely factored in due to weather but the crude draw is a huge surprise and bullish for energy names.


    10:41 COMDX Commodities Trader: I am very surprised we are not over $64 in crude oil—demand for heat and gas was up and the drawdown was the biggest since 7/7 -Update-

    Crude Oil trading at 63.33 -0.13

  71. UPS still moving along a steady uptrend – FDX at $111!

    Oil is being pushed up so be very careful! I’m stopping out on oil puts that give up 20% of the profits – might get back in EOD.

  72. UPSAO
    I have same issue etrade table shows 2.2 price, you click then you have the 1.7…
    Time to change broker

  73. Schwab showing 1.60 / 1.70 on UPSAO

  74. Personally’ I’ve been using OXPS for a number of years. As an options focused Broker, I don’t think they can be beat. And their customer service is absolutely top-notch.

  75. Phil,

    Out of COP 70 Put also?

  76. jp9102 , fab, Wincom thank you. I am interested in etrade for its interest rate of 5.05%. I find that to be my deciding factor. Most online brokers are very similar these days when it comes to execution.

    TXN looked strong all morning finally making a move.

  77. Wow – oil pump absolutely timed to CNBC comments – not inventory!!!

    When they heck are the Democrats going to take over those oversight committees?


    I think Bush has alread set that record, that’s why it bothers him enough to make comments about it at a press conference. He actually said that people are still judging George Wahsington and he was number one so how can people say 43 is a failure? I think he’s losing it!


    Oil- sadly, there is nary a reporter on the planer who will take into account the fact that the Houston ship channels, which take in 2.3M barrels of oil per day, have been closed due to “fog” for 6 straight days.

    This took over 10Mb out of the market last week so an adjustment would have been made against the “1.8Mb draw” by any sensible analyst.

    Since there are no sensible analysts other than me and Z, you have a bunch of confused reporters confusing the public. This is not an accident…

    Even if I were a mega oil bull – I would be seriously concerned that something was up if a 6Mb draw (4x expected!) didn’t make my energy stocks go higher… Evey once in a while people say to me, why did you get out of that? And I say – I don’t know, it went down and looked scary!

    If something is up and you’re not the first to know, it doesn’t mean you should be the last to react!

  78. Phil – hear ya spin machine in motion.

    Ilene – comdx has made similar bullish (naive) comments in the past. Weather largely factored in? Not if they were expecting a 1 mmbls draw in HO

  79. Holding COP puts and VLO calls ATM – obviously I’d rather they all crash but I want to see some real damage that isn’t there yet.

  80. Phil
    Are you still holding the MRO and OIH puts as well?

  81. I’m thinking of applying for Sharon Eperson’s job. I figure all I need is a lobotomy and a pair of tights.

  82. SOOO happy I held those SUN puts yesterday – you really have to have conviction on both sides of these oil trades or they will eat you alive!

  83. MRO OIH – yes, that’s what the VLOs are covering – I can’t belive this is all they can manage out of a 6M barrel draw!

    ROFL Z! I’d pay to see that….

  84. AMZN moving into our kill zone!

  85. Phil,

    Is the NKE play still on? Up 2.75 now.

  86. NKE – well I got the calls but I haven’t sold the other calls or the bought the puts yet and now its gone too high for the original play… brb!

  87. THIS JUST IN—--
    DNA tests have confirmed that George W. Bush IS Alfred E. Neuman. Laura is horrified and Al Gore demands ANOTHER recount.

  88. NKE – They’re not up all that far from the open $2.90 but they look like they’re just resting. At this point ($3.40) I’m putting a “stop” on selling the Jan $100s at $2.40 with a .40 trail and there’s no point in “protecting” with the puts as I’m in for just .50 (after I sell the Jans) and it is very unlikely I will lose that spread.

  89. I was wrong. I’d have to cut off my head to get Eperson’s job!

    CNBC had Bob Morris from B of A on and he is pretty much right about the products and crude numbers cancelling each other out. I once sharted a long cab ride with him in Cabo and he’s a cool customer and very smart.

  90. HPQ on a tear, I think Dell will make money by accident if HPQ is doing this good! I’m bidding $1.55 on the DLQEY

  91. The 4Q estimates for the refiners will be coming down over the next few weeks. Cracks are lower than originally anticipated and maintenance turns had them offline much longer than expected.

    Natural gas is getting canned in sympathy with the build in heating oil. There’s just not much demand for this time of year. Forecasts continue to be mild and it looks like this week is shaping up to be warmer than originally forecast by the CPC.

  92. Forgot to add BTU looks pretty weak here (again)

  93. “you really have to have conviction on both sides of these oil trades or they will eat you alive!”

    Second that.

    TOM the TA man wrote yesterday GOOG and APPL are leading indicators for where the market will head in a given day. Today both are down.

    Not sure if I second that view. But I keep an eye on it. What do you guys think about it?

  94. Phil and Zmman

    Thank you.

    This took over 10Mb out of the market last week so an adjustment would have been made against the “1.8Mb draw” by any sensible analyst.

    Does this mean there’s a negative draw or buildup, of 8.2 Mb?

    Since there are no sensible analysts other than me and Z, you have a bunch of confused reporters confusing the public. This is not an accident…

    Do you mind if I ask the guy at briefing about it by copying what you said? I would let you know if he answers.

    If something is up and you’re not the first to know, it doesn’t mean you should be the last to react!

    good point.


    Ilene – comdx has made similar bullish (naive) comments in the past. Weather largely factored in? Not if they were expecting a 1 mmbls draw in HO

    They were expecting a 1.8 Mb draw, without counting the 10 Mbs taken out of the market, so when they got 6 Mb (? – forgot already), they should have subtracted the 10 Mbs for the real number? Do I have it?

    Thanks, Ilene

  95. Yes that guy from Bank of America is good. Met him also at an oil Conference in Htown. Not as bullish as the rest

  96. I like how CNBC waited until an hour after the oil inventory report to bring out their oil analyst. Timed with a smallish spike in oil prices to the plus side so she could say “oil is up on a much bigger than expected drawdown in crude oil inventories”

    These guys are the fox news of oil reporting

  97. Panteri
    I think that if Tom’s third GOAX pillar, BKX, is up, even if the other two are down it becomes a sufficient support to prop up the general market, I think that is about what his theory is anyway and right now BKX is up even if only a little — which provides the support but not influencing the trend — I think …

  98. Tom’s been very reliable using Google and Apple as key indicators but I think they’ve had a strong lead and it’s time for others (like the SOX) to catch up.

    Commodities may finally be rotating away and hot stocks like Apple and Google are commodities too and are not the place people will look for bargain shopping. So it money is flowing in, until the markets (not just the Dow) break my levels – the high flyers can be perceived as toppy.

    I know this is tough to follow but it really is a good way to think about things:

    Think of Google (or apple) as satellites (as in moons) of the Nasdaq. They orbit the bulk of the index and are held down by them but also are big enough to exert their own pull that can bring the broader markets up (or down) kind of like the tides are affected on earth.

    That whole system (the Nasdaq and it’s orbiting moons, Apple and Google) is orbiting the Sun (effectively – the “bottom”) and the distance of the orbit is governed by the gravity of the bottom versus constant flow of money that acts as thrust to keep the markets moving foward.

    As in the example last week, you can never really get enough thrust to break orbit entirely (as the percieved “bottom” keeps expanding along with the orbit of the market) so the market (or any individual stock) goes into an “orbit” which expands and contracts based on the thrust (money inflows) available.

    The bigger the market (or a stock) gets, the more thrust (daily dollar trading volume) is needed to keep them in orbit. Even in a stable orbit, there is a perigee and an apogee where it will get farther from and closer to the bottom on a regular basis.

    If you take away thrust as the bottom is nearing perigee, you have the danger of crashing, but if you apply thrust (some sort of pumping event) at just the right time, you can break the stock or market into a higher orbit, which will take some time to stabilize.

    Anyway – that’s another one for the faq folder!

  99. Briefing – well I’d hate to get into a pissing contest with them but sure – go ahead! I’m not really as shy as I seem… ;-)

  100. OMG – Now (after a week) CNBC is finally reporting on the Ship channel delays — to explain away the drop in crude!

  101. CNBC says 80 vessels now wait in GOM (up from 60 on Monday).

    Ship Channel still fog bound today so next week will have at least 4 days downtime (this past reporting period contained 3 days downtime). Houston weather calls for a clearing cold front Thursday so they should reopen tomorrow.

    Meanwhile analysts will probably expect a BUILD in crude inventories next week

  102. Oh sorry, got sidetracked – so 10M barrels don’t get delivered and we still use oil so that should cause a 10Mb draw OVER and ABOVE the 1.8Mb draw that was expected.

    I mean what were analysts saying – that had the 10Mb been delivered we would have had an 8.2Mb build? In the middle of the winter? That would have been such a catastrophe that people would go to great lengths to stop it from happening – maybe even close a major shipping port for far longer than is necessary!

    If anyone lives in Houston, please feel free to explain the Fog that is so evil it confounds our modern instruments for 6 days…

  103. Phil,
    They been talking about the fog in Htown back last week

  104. Phil
    Is the Options Express pricing calculator reliable in your opinion?

  105. OK, Z says only 3 days were counted so that’s “just” 7Mb that weren’t delivered but let’s keep good notes on this week’s action as it will be deja vu all over again next week.

  106. Wow, yes… indeed. That should be elaborated in the faq folder. The metaphor play has merit.

    With the US money press moving on warp speed, where should all of it go? You mentioned the big cos buying back their stock. That is bullish for stock prices.

    Anyhow, oil Feb contract again chipping at that 64 dollar mark. I have in the back of my mind the idea that oil and oil stocks will keep doing well into the beginning of the new year. This against all market logic, as I share Zmann´s and Phil´s arguments about oil being overpriced.

    The arguments are good, except for one thing. As money is probably even more abundant than oil…. :) and we all keep buying that stuff at the pump without flinching an eye (I live in Germany, so four times the price of US gas), perhaps 60 dollar oil is just the new normal level. That is certainly the picture one could make a strong argument for.

    More dangerous than high oil prices is currency mayhem.


  107. Hi..I’ve been out past 2 days……….What are your current thoughts on our ORCL play pre-earnings?

    Any GOOG plays….as it bounces off 460 play?

  108. I never use a pricing calculator, if you remind me on the weekend I’ll play with it.

    I’m out of here for a while – see you guys around 2!

  109. Gas is getting macked. Bye, bye BTU.

  110. Phil, small clarification: The HPQ callsare doing very well. Do you recommend the 20% rule for this play or do you have a fixed target in mind?


  111. Phil:

    Why can RBAK’s stock price go above $25, the buyout price?
    I do not understand it.

    Thx, Edgar

  112. Did Phil say May 07 DELL 27.50 calls???? I’m thinkin about buying it.

  113. DEQ EY, dilemma25

  114. I’m sorry, DLQ EY

  115. ZMANN-
    MUR now at 51.50. What do you think? another round of 50P’s EOD? thx.

  116. Hi, I’m new. Is there a way to receive automatic updates of new comments or do I have to keep refreshing the page? thanks. t

  117. Hi Trestles, I dont think the RSS feeds are working yet..I usually just refresh this place every few minutes

  118. F5 KEY = Refresh

  119. Hey guys, what about BBBY….they report earning afterhours and i don’t think this side of retail has done any good…Thinkin about some puts.

  120. thanks!

  121. trest
    refresh page right click your mouse

    LYO launching up, DD at peak (sold calls this am) -> but DOW still laging -hopefully not for long

  122. dannylee,

    I’m thinking about a DD on MUR but am on the fence on it. With VLO trending lower and the rally in XOM fading I’m getting closer but I’d really like to see a little move on it to the downside as well. It’s sitting tight on low volume and oil is yoyoing about. If the ship channel reopens tomorrow we could get a nice sell off on oil.

  123. trestles and all:

    Regarding auto refresh

    I am running a mini browser called refresher from
    Once the desired time interval is set and started, there is no need for manual refresh.

    If you do not like the idea of running another browser, try yrefresher.
    It is an IE plugin.


  124. Zmann – great post on your site today! Thanks!

  125. dilemma-
    Regarding HPQ, looks to me like it’s moving based on the contract extension they signed yesterday with the USPS and that contract is huge. You’ll notice that DELL is not moving in sympathy. Hate to go against Phil , but I would be real careful with DELL here. Haven’t heard a word as to how q4 sales are going for either.

  126. On the subject of Cramer here is a nice little report:

    It’s a school report so there is a premise apart from the actual effect on stocks (i.e. market inefficiency), and it’s a bit technical but well-explained. The graphs start on page 15.

  127. BBBY-
    dilemma, if your not sure of the move, you could play a Strangle. I don’t think Phil is too crazy about the plays , but in my experience it’s the best way to play earnings, especially if you’re looking for a strong move one way or the other.

  128. CC is stuck at 19.20 for the past 2 hours.

  129. Zman
    is Oil stock started to move down now? any particular reason or just pump effect is now over

  130. HPQ – EVERY OTHER Jan POSITION – stopping out with 20% profit loss unless I feel very strongly about a position, markets look like they are running out of gas!

    We had this last week too and it was very frustrating and I do want to be in mainly cash no later than 12/29

  131. Phil:

    Why can RBAK’s stock price go above $25, the buyout price?
    I do not understand it.

    Thx, Edgar

  132. RBAK, any buyout – there is always the chance of another bidder stepping in and, since $25 has become a pretty firm floor – then someone can gamble $25.09 against maybe a $1 gain with probably no less than a .09 loss.

    When you have enough money, you play for the pennies like that, while you tend to say, why tie up $25 to make .25 in a month – a fund manager says he can put $25M to work to make an annualized return of 12% with a fairly limited downside. The same logic applies to dividend paying stocks.


    DELL – there seems to be no hurry!


    Sorry about the Feed, I know Jared is working on it…


    BBBY high expectations but a great company – I wouldn’t bet against them. They could sell off to $37 but would, barring a disaster, likely rebound to better numbers. You could take the spread of the Aug $42.50s for $3.05 and the Jan $40s for $1.20 but you have to be prepared to lose half of your Jan’s on any good news, which will raise the basis on your $42.50s to $3.75 (about) which puts them $6 out of the money (15%), still tough as revenue growth looks like 15% to me!


    DOW has got to get lower oil prices than this! Nat gas is mitigating the pain for now…


    MUR – waiting for the 2pm pump… and waiting….


    Cool Report Rock!

  133. Any current thoughts on the ebay 32.5′s? I’m not in the position, and they’re at .85 by .90 Wait for more downside? move out to FEB’s.

    I’ve had good luck with EBAY calls in the past, so I am feeling a pull.


  134. P.S. new guy here (I’m sure you noticed), I’ve been reading the blog for some time, and thought it was certainly worth ponying up for.

    Anyway, Howdy from Santa Fe NM.


  135. Hoping VLO gets back to $1.30 so I can get out even on those useless puts!


    EBAYs action today suggest someone read something into Fed Exs tea leaves and didn’t like what they saw. I’m willing to roll Ebay forward so I’m not sweating the drop but it is just .60 above where I would be gravely concerned!

  136. Welcome Gordo!

  137. Looks like the beginnings of the pump (20 minutes late) here. Phil, holding Jan VLO calls. Your thoughts?

  138. Ah, answered before I reloaded. I took a second round at the bottom so 1.30 sounds fine.

  139. looks like the SOX and BKX were able to stay green to keep nasdaq green with aapl and goog weighing down…

    anyone going into RIMM before earnings?

  140. Damn, I knew I should have jumped on SU at $80 – had too many puts…

    Very poor oil pump today, they have nowhere to pump it, I think 303K contracts is a little too much for Feb to handle. The Feb intraday isn’t working but here’s the March:

  141. LEH says oil demand is far more than the IEA and OPEC are projecting. Says targer is $74 for oil next year.

    He says cash flow has not been there to sustain cap ex! WHATTT???

    I say LEH must be on the wrong side of this trade!

  142. What about Amzn phil. Waiting for when to get into puts??

  143. I’m optimistic – this is the same whole lot a nothing we got last Wednesday.

    Tomorrow we get:

    8:30a.m. Initial Jobless Claims, 3Q Final GDP (est +2.2%), 3Q Corp. profits (duh, huge)

    10:00a.m. Nov Chicago Fed (was down in Oct), Conference Board Leading Indicators, DJ Business Barometer for Dec 9

    12:00p.m. Dec Philadelphia Fed

    4:30p.m. Money Supply (so they say!)

  144. Did some xmas shopping at lunch…madness.

    Arnie, I believe the pump failed b/c the near term catalysts are bearish.
    1) the port will reopen
    2) refinery util is up so products will continue to build
    3) ho demand is weak
    4) weather remains mild
    5) plus everything Phil said

    Gasoline demand is rising but so are prices so this should be short term

  145. Still bullish on the qqqq’s for year end?

  146. AMZN is possibly a Friday move but maybe not if we’re on a roll but certainly before New Year


    Picking up Risky Goog Mar $500s for $16, will sell Jans for $5+. Keeping an eye on Jan $420 puts as a momentum play if it turns down Small entry, may DD or bracket on a drop.

  147. Lehman downgraded the group Oct 4

  148. any comments on the ORCL play done pre-earnings?

  149. sorry the energy group…goldman upgraded it a few days later and the stocks never really looked back

  150. BTU continues to suffer the pain of sub $7 gas competition.

    MUR starting to give up the ghost. In fact all day, if you were up early you stayed up. If you were down then you slowly traded off. No those ups are starting to fail. (Ha,Ha in my best Nelson voice)

  151. Are you still in UPS ro did you get out when they hit $74.74??

  152. ORCL – Well my position – the Mar $18s were bought for $1.20 and I sold the Jan 17.50s against them for $1.05 so I had a .15 basis – current value is .60 for the Marchs so I’m way ahead there but I’d have to buy out my caller for .70 to close it out – now way I do that!

    The Mar $17s are currently $1.10 and they were purchased for .70 after adjusting for the sale. In both cases, now is certainly not the time to buy out the callers. I am very surprised they held their value so well!


    UPS – I decided to hold them as FDX seemed to be recovering well but I probably should have stuck to the rule!


    I’m hanging on to VLO calls until the morning, last Thursday was a huge up day in the morning – I still feel safer with the cover, I will take 1/2 off at $1.30 if I can though.

  153. CNBC says consensus gas withdrawal tomorrow is 62 Bcf

  154. AFL good

    CHL is annoying to own!

    Pretty much a so-so day for most of the postions

  155. DDing on qqqq?

  156. Can anyone do some TA on the XOI? It looks to me like weak support at 1,190, better at 1,163. Thx

  157. Energy stocks really saved by the bell.

  158. Shoot, should’ve bought those BBBY puts….Their earnings not as good as expected.

  159. NKE good results….

  160. XOI – it just took a hard bounce off the top of the band at 1,240 and dropped a quick 50 points to the bottom end of the band at 1,190.

    It retraced 50% of the drop to 1,215 yesterday and was rejected by mid-band resistance but the band has turned down and the low end is now going to be right at the rising 50 dma at 1,180 which will have trouble offering support as it hasn’t been there very long (was 1,100 in early November).

    The last time there was a set-up like this for XOI was Aug 28th at virtually identical levels with a virtually identical rising 50 dma at 1,175 (although the 200 dma was just 1,090 but the index punched right through the 50 and the 200, dropping over 15% in less than 30 days.

    Biggest difference, at the time, oil had already fallen from $75 to $70 but, of course, you could argue that, at $64, what the hell is XOI doing back at August highs in the first place?

    God I hate TA!



  161. BBBY – you and I must be reading different reports, looks good to me! .2 miss but nice sales and a $1B buyback (10%). I think they lowballed the earnings ahead of the buyback but I’ll have to read the full report later.


    NKE seems just right for my play as well!

  162. Phil, can we take advantage of the earnings market right now. Red Hat and RIMM all report tomorrow. There’s gotta be a way to play these stocks.

  163. Shhh, don’t tell Tom.

  164. BBBY up 0.82c or 2.05% right now in AH

  165. Did anybody succeed in posting a working link to chart from

  166. Phil:

    Why HET’s stock price has been staying under offer price for about 10%
    but RBAK behaves differently?

    Thx, Edgar

  167. I post from stockcharts all the time but just the basic charts (gallery view), I can never get the detailed ones to work so I end up using Yahoo instead but then they have those annoyingly huge URLs…

  168. HET deal is hedged to not work out as the buyers do not have a gaming license, and they don’t just give those out so there’s some risk the deal will fall apart.

    The RBAK is a deal from a strategic buyer with plenty of cash and no obvious issues so it has nowhere to go but up.


    I’m expecting HET to drift upwards over time but slowly, which is why I ended up taking the not very obvious put position. I’m risking .75 and I collected a small premium but, as long as I am offered over .75 for my Jan ’08 $85 puts (currently $3) on Jan 19th – I’m a winner!

  169. Another question for the oil pros here, I have set up a page in my trading interface, with oil futures, running from the current contract up to 2012, only Jan for the more remote years.

    I see those are only trading up to APRIL 07, the rest of them just shows a closing price. What I find strange is that Jan09 to Jan12, this price is falling, as if there were less time premium as one moves into the future:

    Jan09 68.45
    Jan10 67.90
    Jan11 67.25
    Jan12 66.70

    In fact, if someone could explain this passage to me, it would problaby throw some light into the matter, possibly of interest to others too:

    “Trading Months: Crude Oil Futures trade 30 consecutive months plus long-dated futures initially listed 36, 48, 60, 72, and 84 months prior to delivery. Additionally, trading can be executed at an average differential to the previous day’s settlement prices for periods of two to 30 consecutive months in a single transaction. These calendar strips are executed during open outcry trading hours. Options: 12 consecutive months, plus three long-dated options at 18, 24, and 36 months out on a June/December cycle. ”

    Average differential???

    Can someone sort out the price of a longdated option, say 84 months, on todays closing price of 63.70?

  170. Thank you, Phil, testing… on P&F chart from Gallery View:

  171. Phil:

    Could you explain the stock price behavior diff. between STN and HET?
    STN stock price stays closely below offer price of $82 but HET stays
    about 10% below offer price. Dies it mean that STN deal will not get a competing bid and there is not as much red tapes as HET deal?

    Thx, Edgar

  172. The above chart shows a double top breakout on crude oil, btw.

    Target $77.

    I am more short than long the oil patch, at this time, and we are trading at the top of a consolidation range, so some caution is in order.

    As Phil remarked earlier, what the hell is XOI doing up so high anyways???

    But oil cos did close weak, surprising, as if people didn´t believe the crude oil rally to 64 dollars. All it takes is a break, then those oil stocks may zoom higher in the blink of an eye, even heavy weight XOM, barrelling to an ever higher altitude, to the apogee of the orbital plane.
    If GOOG and AAPL are moons to the Nasdaq, what is XOM to the Dow?


  173. The above chart shows a double top breakout on crude oil, btw.

    Target of P$F method: a timeless $77.

    I am more short than long the oil patch, at this time, and we are trading at the top of a consolidation range, I am cautious, but we should head lower imo, at least ST.

    As Phil remarked earlier, what the hell is XOI doing up so high anyways???

    But oil cos did close weak, surprising, as if people didn´t believe the crude oil rally to 64 dollars. All it takes is a break, then those oil stocks may zoom higher in the blink of an eye, even heavy weight XOM, barrelling to an ever higher altitude, to the apogee of the orbital plane.

    If GOOG and AAPL are moons to the Nasdaq, what is XOM to the Dow?

  174. MOT at a very critical point, i would think that shorts were looking at this 3 weeks ago. There isn’t much to keep this from going to 19 in the coming week(s).
    Keeping a close eye on RIMM earnings, need to see how it effects MOT, this is the only catalyst i see near term. If

    Most chip companies guiding lower lately, if i had more time i would research this more in-depth to get the percentage, but using a quick glance method tells me its not good near term. Then again most of these chip stocks are at their (lows)? VISTA must save the NAZ in january.

    Ultratech Slashes Q4 Outlook; Sees Revs Down 25%-30% Sequentially
    PMC-Sierra Trims Q4 Guidance; Another Victim Of Weak Communications Chip Demand

    1:08 PM Rush of Call Options Trading on AMD

    Advanced Micro Devices (NYSE:AMD) is trading near its lows of the day despite heavy call option volume. In fact, call volume on the stock is more than 15 times respective put volume, and there have been nearly 30,000 contracts of volume at the well out-of-the-money AMD January 2007 25 call. Such a rush of optimism amid rather lackluster price performance could suggest further weakness.

    This tells me traders lining up for release of VISTA.

  175. Phil, wouldn’t a GDP number of 1.6 (later revised to 2.2, of course) just thrash this market?

    Too low to keep up oil demand. Not high enough to cut rates. Maybe too low to justify capex and keeps a lid on tech spending.

    With the Nasdaq pulling back off a double top, late-stage MACD divergence, and to screw everyone positioning for an end of year rally when nothing else has gone the way “the traders almanac” says it should.

    That was what I was thinking all day as I closed one long position after another. Now net short for the first time in a LONG time.

    Let’s see if I can break my streak as a contrarian indicator on these major market moves. And if you could, push that XLE down at the open. Just 50 cents or so would do nicely, but I will take a dollar if you have it.

  176. NKE down to 98.38 -1.40 / -1.40% AH

    ACN up to 35.86 +0.78 / +2.22% AH

    I chickened out on ACN and stayed on NKE. Crap…

  177. Frankly I don’t do commodity trading because of all that confusing nonsense… Also, it is very, very dangerous!

    There are two reasons contracts drop in price – the perception that we are only in a demand bubble that will ease and the general lack of demand for crude, NOW, to be delivered Then (so far away).


    STN is a management buyout – presumably with licenses intact, it’s hard for a competitor to come in against management and, with management on board – who would fight the deal? Notice I didn’t play this one…


    XOM is like the tide that covers the planet Dow and ebbs and flows with it but it suddenly thought it was a moon and took off for the stars and is about to find out why it’s called an Icaras complex!


    Vista – if that doesn’t get the markets going we are going to have one hell of a meltdown!

  178. GDP – actually low GDP = Rate cut which is good for the markets but below 1.8 would be scary. 1.9-2.4 I think is good.

    I’m not sure what these moves are but the volume is trailing off and we may drift into the new year if nothing happens tomorrow.

    XLE – We shall see what tomorrow may bring, I think there will be some upward move through the nat gas data, then – who knows?

    That’s why I have puts and calls!


    NKE – that’s why I’ve been doing a lot of spreads lately – too hard to predict but mostly been negative sentiment.