Archive for 2006

Energy Update

Why is PEIX off 62% in less than 3 months? Oil is up 15% over the same time frame, we just mandated ethanol usage in a broad range of gasoline blends and FBR just gave the industry a general blessing on Thursday (although rated PEIX just “market perform”). Ethanol costs roughly $1.40/gallon to produce and has been selling for over $4 recently yet AVR is off about 40% from its July IPO and VSE has gone nowhere since going public in June even though they actually made a nice profit this quarter. This is not about trading PEIX (which I called a short on way back at $37.88 on May 16th) but about the odd way alternative energy has been behaving during our “energy crisis.” It’s not all about the higher corn prices eroding margins or ADM would be doing better as would CAG (its their corn). Ethanol has its own special problems as there are physical limitations (as in physics) to improve the process so effectively you are just running widget factories here, they are the middlemen who literally turn straw into oil but it’s a process that was used in WW1 so it is doubtful they will get better margins than any toll manufacturer. But it is not just ethanol that is getting no respect from wall street: No one is taking ESLR seriously, down 50% from its March high, or QTWW ($3?) or FCEL (-50%)… Does this seem a little odd to anyone else? Even mighty BTU is down 40% in the past few months, matched by ACI and FDG (who finally found a bottom at $25). Worst of all, GE is going nowhere and they are one of the only people you can go to for nuclear energy – you would think their phone would be ringing off the hook! Something about the price of oil looks very temporary to alternate energy investors… Remember this when you see all the “experts” on TV telling you how dire the oil situation is and how we need to get used to $80 oil from now on. Not even Suncor investors seem to be buying it and that company made a Billion dollars last year. It takes Exxon 9 full days to pull in that kind of money!

Weekend Wrap-Up

We said it could go either way but it only really went one way today, down.

The Dow took bounced weakly off my run away point of 11,050 at 1:15. For the week we lost 200 points with not a very sexy finish:

The S&P gave us a nice, early get out signal with a poor open and finished down about 1% on the week while the NYSE blew right through 8,200 at the open and never saw it again. Although down just a touch overall – this to me was the week’s biggest disappointment.

The Nasdaq’s biggest crime was that it actually looked like it was going to do something on Wednesday but, as the saying goes, “fool me 29 times and I am just an idiot for buying tech stocks!”

I may just get my rock bottom test yet! Can the Nasdaq break 2,000 next week? Will people buy Google anyway? How cheaply will I be able to buy Motorola? Tune in next week for “As the Market Turns (down).”

Oil held $74 on a huge pump job that began about 1:45 and ran to the NYMEX close at 2:35, at which time the buyer mysteriously lost interest. The whole sector was going down on news that BP wasn’t going to get away with a full shutdown with federal regulators breathing down their necks and the terror story (well timed though it was) wasn’t enough to get them off the front page.

With reporters inspecting the pipes up in Alaska, the company officials had to hem and haw to try to explain why 2 totally separate pipelines had to both be shut down simultaneously to do maintenance on 16 out of 1,600 miles of piping.

Since they haven’t bothered to do any maintenance or even inspect the pipes since 1992 (I am not making this up) it just didn’t seem all that urgent to the sharp East Coast reporters who had trudged up to Alaska to see for themselves.

Other evidence of the oil scam keeps popping up as it turns out our friends the Saudis (the guy George Bush holds hands with) have been cutting back production to keep pressure on prices. This is a must read article with good sub links to help understand the oil process:

There is plenty of hard…
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Fickle Friday

Talk about a day that could go either way…

Like I said last night, the reality is that people are still trying to kill us and I would, on the whole, be much happier making a nice bottom than continuing upwards.

July Retail Sales are out today and at 7am (now) I am leaning towards an upside surprise which will boost the markets at least in the mornings.

Asia took the news of Japan’s slowing growth fairly well with mixed results across the Pacific Region. I will take advantage of MTU if it bouncs off the 50 dma at $13.50 again. You can’t blame TM, whose sales are up 39% but I bet someone does and the $110 puts for $2.10 make a nice momentum play ONLY IF the whole market heads down and take a profit and run as this is a great stock! At the same time I will be looking for a good entry on the Sept $115s, hopefully for $1.20 or less but on a big downturn I will switch to the $110s.

Europe is very flat, seeming to have no idea what to do without US direction. Nobody seems to be cancelling trips yesterday and my favorite quote of the day is from a woman from Atlanta who was going to France and said “If we blow up at least we’re going somewhere we love.”

Back to Econ 101 from the Tuesday: Even though we are the actual target, the Europeans need to decide if they fell safer putting their money into say England’s $1.5T economy (#4) , Japan’s (#2) slowing $4T economy or the US’s $12T economy which is growing at “just” 3% (that’s the same as the whole economy of Russia, the world’s 16th largest economy).

Run away if the Dow breaks below 11,050 or if the S&P can’t hold 1,271 or if the NYSE falls below 8,200. I’m going to be watching the SOX which need to conquer 415 and test 420 very closely and could care less what the Nasdaq does unless it breaks 2,110 in which case I will turn bullish.

More dollar strength should give oil a bit of trouble at $75 but the 50 dma on oil is $73.41 so that and $74 should both provide very strong support coming into the weekend.

Gold will also not find many shorts going into the weekend but dollar strength should…
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Not So Terror(ble) Thursday

I have to hand it to Cramer for summing up what happened today:

He said that terror attacks are already priced into the market so a failed attack is good news, not bad…

This logic is kind of like buying season tickets for the Red Sox – you never really expected them to get into the world series but you buy them anyway – then, when they win just one, you get all excited and you’re willing to pay more next year, even though they will probably go back to losing.

We have expected a terror attack since 9/11 and we know there will be another one but we stopped one and that gives us more hope than we had before – it’s a nice point of view!

This is a sort of Indiana Jones moment for the economy where we duck and the bad guy falls over the cliff and we make that big Harrison Ford, self satisfied smile but the music quickly changes and 200 more bad guys come out of the bushes to take his place. I’m not going to put a downer on it so early (the music is just getting started) but let’s try to remember there are people trying to kill us before we get too full of ourselves.

The markets were just great today though! We even got nice SOX action but they couldn’t hold 415 right at the end.

This morning I had to leave early so 3 hours before the market opened I said we should watch for signs to get back in:

The S&P fell below the 200 yesterday and it would be a very good sign if it held the 50 dma at 1,260.

The Nasdaq is very unlikely to hold 2,050 but a good sign if it does.”

I said the NYSE was the strongest and it never came near trouble and I said that the Dow’s 200 dma of 11,100 was a big spot and look what happened to all the indices at 1:30 when it retook that level:

Oil, as predicted had a terrible day but the oil companies generally took a longer view (maybe they’ve seen this movie before) and rebounded nicely in the last hour or so. Natural gas inventories spooked the oil market but it managed to hold $74 for the day. Today was…
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Terror Thursday

Well the US threat level is orange but red at airports.

You are not allowed to carry a drink or a phone or pretty much anything onto a plane as they have arrested 21 people in England in a plot to blow up 10 planes flying to the US with liquid explosives.

Needless to say there will be a bit of a sell-off today.

Hopefully you took my advice to get out of the markets yesterday seriously and you will be saved a lot of heartache. I should have listened to myself more and kept nothing but I was silly and held onto a few positions.

I won’t be around but let’s watch to see if our 200 dmas hold for signs that it is safe to get back in, then buy some of our recent picks on a good entry.

These are the levels we were watching out for:

  • The Dow’s 200 dma is 11,100 and it is also psychological so watch out below!
  • The S&P fell below the 200 yesterday and it would be a very good sign if it held the 50 dma at 1,260.
  • The Nasdaq is very unlikely to hold 2,050 but a good sign if it does.
  • The NYSE has been the strongest index and is far above its 50 dma at 8,071 – below that, the 200 dma is at 8,029 and this is the main point I am looking to hold if there is any hope.

Asia was down slightly but I think this plot came after they closed and Europe is down about 1% across the board but is back from a 2% drop on the initial news.

Oil is dropping as a slowdown in travel is a big demand destroyer (remember I said that the BP shutdown could be made up for by canceling 123 flights a day?).

Gold is very oddly not going up, which gives me a little hope for the markets.

There will be a big overreaction of course so cash in puts like our LUV play early and take advantage of the chance to buy out any callers you sold. Apparently United, American and Continental were the target airlines.

Interestingly, this will add fuel to “the Fed is done” camp and may actually boost the markets but be super careful out there – anything can happen.

Of course Bush will have to have his…
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Woeful Wednesday Wrap-Up

I said this morning that if we got key rejections we should GET OUT and boy was I right. I didn’t take my own advice and held on to a few positions but, as I said earlier, I had my CSCO profits to fall back on, otherwise I would have stopped out of everything at 12:00,%5Enya,%5EGSPC

The Dow tested and failed 11,250 (my exact number) twice, at the open and at 11:50. The S&P couldn’t get back to 1,285 (my number) at the same 11:50 while the Nasdaq failed 2,100 (my exact number)and the NYSE pulled back from 8,300 (also my exact numer).

This is a great example of why a good trader always has shorts ready to trade but I blew it because I got all optimistic thanks to the Fed finishing and CSCO earnings.

We’ll see how tomorrow goes but today was awful on the whole! Part of the blame goes to criminal charges being filed against Comverse execs as this is a time bomb that could derail any company (like Disney).

The other story of the day was the R word we warned about on the weekend and the talk is starting to take hold as the Fed sent exactly the wrong message to the markets yesterday.

I held positions because I strongly felt that VIA, AIG and TGT would give us a boost tomorrow but the level of pullback we saw today left me very nervous. I mentioned in comments that the sell-off looked to uniform to be natural and that is just a gut call but a very profitable one if I’m right for going against today’s grain.

Mark sent me a newsletter which showed someone is buying puts on KSS based on the theory that a 5.9% increase in same store sales won’t find it’s way to the bottom line (where analysts are expecting a whopping 20% growth). There was a big jump in Sept $45 puts and a drop in $45 calls ahead of earnings and I love to watch these things but it’s not too different from putting your chips down on a table because some other guy “had a feeling.”

Oil failed to hold $67 again and perhaps that is partially explained by the action on BPT which went into party mode on word the shutdown may not be as bad as feared. Another factor is the Saudis…
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What Will Happen Wednesday???

Israel is on the march with over 1,000 Lebanese now dead in fighting that has also taken 100 Israeli lives. It’s pretty amazing when you realize that Hizbollah fired over 160 rockets into Israel just yesterday (3,200 total to date) but the threats by Hizbollah that they would begin firing into major cities has put the Israeli army on overdrive this week.

To sum up this war, Hizbollah, which theoretically has nothing to do with the Lebanese government, started taking pot shots at Israel with the new, long-range toys they bought from Iran which provoked Israel to cross a border into a country that they had occupied for 20 years which freaked out the Lebanese people and is being spun by Hizbollah as “the occupiers are returning” which is in turn recruiting people into Hizbollah and giving them more power in Lebanon…,,1840128,00.html

If a day comes when the world of Islam is duly equipped with the arms Israel has in possession, the strategy of colonialism would face a stalemate because application of an atomic bomb would not leave any thing in Israel but the same thing would just produce damages in the Muslim world“, Ayatollah Ali Akbar Hashemi-Rafsanjani told the crowd at the traditional Friday prayers in Tehran.

What a mess!

So oil is not going down anytime soon and you need to stop me if I try to short it (even though it is fundamentally 30% or more overpriced). At some point this will all lead up to a massive and “shocking” collapse in oil prices which will wipe out a lot of hedge funds.

TOL lowered guidance another 10% and Bob Toll said: “It appears that the current housing slowdown, which we first saw in September 2005, is somewhat unique: It is the first downturn in the forty years since we entered the business that was not precipitated by high interest rates, a weak economy, job losses or other macroeconomic factors. Instead, it seems to be the result of an oversupply of inventory and a decline in confidence: Speculative buyers who spurred demand in 2004 and 2005 are now sellers; builders that built speculative homes must now move their specs; and nervous buyers are canceling contracts for homes already under construction. The resulting excess supply has exacerbated the drop in consumer confidence, which first appeared last September, that was already a drag on new home
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Waiting for Wednesday

As usual, Ben didn’t listen to me although he employed the carrot and stick approach from the other (wrong) end. Rather than tighten one more and say that should do it, which would have made him look firm but kind – he instead spared the rod and let us off with a stern warning.

Now I have 2 small children and I will tell you for a fact that those stern warnings really don’t do much to change behavior. He left in my suggested lie about a soft landing in housing but covered himself with the statement “lagged effects” (which I talked about on the weekend) that didn’t make the home builders too happy.

They couldn’t ignore the decelleration of productivity so they stick with inflation being “likely to moderate” (ie. we sure hope it does). They said some risk of inflation remains and that was the statement that killed the markets – we know there’s inflation so the Sept meeting may yet have another hike in it. Only Jeff Lacker was with me voting for a hike, next time I’m inviting him to lunch instead!

The markets were terrible but not terrible enough to stop me from doing some last minute shopping. All of my Monday marks got bounced off of so I took a few trades from this morning in comments as they bottomed out (or so I thought) around 3:20. The Dow held the 50 dma and took a hard bounce off 11,150 despite really bad movement by CAT and BA. The S&P barely bounced off 1,270 right at the end but looked very scary. The NYSE was most encouraging as it bounced off psychological resistance at 8,200, way above it’s resistance levels. Then, of course, there was the Nasdaq, doing what the Nasdaq does best – looking very pathetic. But it did hold 2,050 which is all we asked of it.

As expected, oil could not hold $77 but other than a nice SLB day trade in comments, there was not much money to be made on that. There’s a great article in the Journal that says what I was ranting about last quarter, that XOM and others are dogging their earnings with accounting tricks! Maybe now you’ll believe me:

Our Energy Secretary must be a reader as he used some of my stats to talk down the price of…
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Take-Off Tuesday

I don’t know if the markets are going to take off but I have to.

Big meeting today and I will be lucky to get back in time for the Fed decision fireworks which will be fun to play either way.

There’s hardly any point to even looking at the levels (same ones as yesterday hold up) as nothing will matter until about 2:15.

Asia is up nicely and Europe seems to be expecting us to rally, our own futures are up a little but nervously so and it will be a very interesting day.

Oil pulled back but only a little in overnight trading but gold and other metals lost a point even though fighting is getting worse in Lebanon.

How much oil is off the market? 400,000 barrels. That makes about 8M gallons of gas, this would force our 200M drivers to each cut back on 10 miles of driving per day if it couldn’t be replaced. It is enough jet fuel to fill up 123 747s out of the thousands of trips taken every day. It is enough to heat 300,000 homes per day or would force 30,000,000 homes to turn the heat down 1 degree.

So I maintain that anything over $77 would be a severe overreaction and $80 is unsustainable despite what the alarmists are telling you.


If the Fed does what is responsible for our future and raises rates then I will be shorting oil stocks. SLB, XOM, SU, SUN, OXY come to mind.

If the Fed does what is popular, there are many beaten down stocks that should do very well:

HD Sept $35s seem very resonable for $1.05 and make a nice hurricane play.

I’m a well known fan of SIRI at $3.80 or less.

If there’s a party, you know Vegas is invited so MGM March $40s for $2.35 are resonable with a stop out/don’t play below $34.

HET is way oversold and the comps are going to be spectacular as long as another hurricane doesn’t close them down. The Nov $65s for $1.45 are my anti-hurricane play.

TIF is due anyway but let’s give them a quarter on the Jan $35s for $1.20.

EBAY with a forward p/e of 19? It’s growing at 25%! Oct $25s are a little pricey at $1.65 but that’s less than the Jan $27.50s.

I don’t know if IBM will pop on the pension…
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Brother Can You Spare 420 Billlion Dimes?

We have had many discussions about our $8.4 Trillion dollar debt and how that ultimately has to be a concern to someone some time.

This may be one of those times.

Coincidently this week, the Fed decision coincides with day one of 3 auctions this month where we have to sell $42Bn of notes to finance our monthly debt.

Shocking though it may be to those of us on a budget, our government, in its very finite wisdom, spends $500Bn a year that it doesn’t have. This is why, in a single month, we have to borrow from our foreign neighbors more money than either Bill Gates or Warren Buffet (the richest people to ever walk the planet) amassed in their entire careers.

This is not to say that the Government spends $42Bn a month. $42 Billion represents the amount the government overspent this month. We never discuss the actual amount the government spends – never ever ever – as it is an figure so shocking that the mere mention of the full amount can give you an aneurysm right on the spot!

So to put this in perspective, let’s say you are the richest guy on the block by a mile (US $12T). You have 1 friend who’s rich but not in your league (Japan $5T) and there are several people in the cul de sac who are doing ok (Germany, UK, France, China and Italy – $1-2T) and about 27 other guys who make over $100Bn but certainly can’t afford to get into to your G8 club.

Your two closest neighbors, Canada and Mexico, earn about 1/20 of what you do and that’s mainly because they are able to do a lot of work with you and it just rubs off.

Now as much money as you have, you still live above your means and you really, really, really wanted to buy a shiny new war which you didn’t save up for it but you bought it anyway even though you were still paying for the last one (but your Dad had one and you always said that when you were President you’d get one too!). Also, when you moved into your nice white house you promised 300 Million people you’d give them $300 a year to elect you and you weren’t very good at math (C+) and didn’t realize it would cost you a Trillion dollars over…
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#1 Performing Global Macro Hedge Fund Sees More Shorts Opportunities Ahead As China Bursts

By Jacob Wolinsky. Originally published at ValueWalk.

Crescat Global Macro Fund update to investors on 1/19/2019

Crescat Global Macro Fund and Crescat Long/Short fund delivered strong returns for both December and full year 2018 in a difficult market. Based on ...

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Zero Hedge

Johns Hopkins, Bristol-Myers Face $1 Billion Suit For Infecting Guatemalan Hookers With Syphilis 

Courtesy of ZeroHedge. View original post here.

A federal judge in Maryland said Johns Hopkins University, pharmaceutical company Bristol-Myers Squibb and the Rockefeller Foundation must face a $1 billion lawsuit over their roles in a top-secret program in the 1940s ran by the US government that injected hundreds of Guatemalans with syphilis, reported Reuters.

Several doctors from Hopkins an...

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Phil's Favorites

Divisive economics


Guest author David Brin — scientist, technology consultant, best-selling author and futurist — explores the records of Democrats and Republicans on the US economy in the following post. For David's latest posts, visit the CONTRARY BRIN blog. For his books and short stories, visit his web...

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Kimble Charting Solutions

Stock declines did not break 9-year support, says Joe Friday

Courtesy of Chris Kimble.

We often hear “Stocks take an escalator up and an elevator down!” No doubt stocks did experience a swift decline from the September highs to the Christmas eve lows. Looks like the “elevator” part of the phrase came true as 2018 was coming to an end.

The first part of the “stocks take an escalator up” seems to still be in play as well despite the swift decline of late.

Joe Friday Just The Facts Ma’am- All of these indices hit long-term rising support on Christmas Eve at each (1), where support held and rallies have followed.

If you find long-term perspectives helpf...

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Digital Currencies

Transparency and privacy: Empowering people through blockchain


Transparency and privacy: Empowering people through blockchain

Blockchain technologies can empower people by allowing them more control over their user data. Shutterstock

Courtesy of Ajay Kumar Shrestha, University of Saskatchewan

Blockchain has already proven its huge influence on the financial world with its first application in the form of cryptocurrencies such as Bitcoin. It might not be long before its impact is felt everywhere.

Blockchain is a secure chain of digital records that exist on multiple computers simultaneously so no record can be erased or falsified. The...

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Insider Scoop Explores Strategic Alternatives, Analyst Sees Possible Sale Price Around $30 Per Share

Courtesy of Benzinga.

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Chart School

Weekly Market Recap Jan 13, 2019

Courtesy of Blain.

In last week’s recap we asked:  “Has the Fed solved all the market’s problems in 1 speech?”

Thus far the market says yes!  As Guns n Roses preached – all we need is a little “patience”.  Four up days followed by a nominal down day Friday had the market following it’s normal pattern the past nearly 30 years – jumping whenever the Federal Reserve hints (or essentially says outright) it is here for the markets.   And in case you missed it the prior Friday, Chairman Powell came back out Thursday to reiterate the news – so…so… so… patient!

Fed Chairman Jerome Powell reinforced that message Thursday during a discussion at the Economic Club of Washington where he said that the central bank will be “fle...

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Members' Corner

Why Trump Can't Learn


Bill Eddy (lawyer, therapist, author) predicted Trump's chaotic presidency based on his high-conflict personality, which was evident years ago. This post, written in 2017, references a prescient article Bill wrote before Trump even became president, 5 Reasons Trump Can’t Learn. ~ Ilene 

Why Trump Can’t Learn

Donald Trump by Gage Skidmore (...

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Opening Pandora's Box: Gene editing and its consequences

Reminder: We are available to chat with Members, comments are found below each post.


Opening Pandora's Box: Gene editing and its consequences

Bacteriophage viruses infecting bacterial cells , Bacterial viruses. from

Courtesy of John Bergeron, McGill University

Today, the scientific community is aghast at the prospect of gene editing to create “designer” humans. Gene editing may be of greater consequence than climate change, or even the consequences of unleashing the energy of the atom.


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Mapping The Market

Trump: "I Won't Be Here" When It Blows Up

By Jean-Luc

Maybe we should simply try him for treason right now:

Trump on Coming Debt Crisis: ‘I Won’t Be Here’ When It Blows Up

The president thinks the balancing of the nation’s books is going to, ultimately, be a future president’s problem.

By Asawin Suebsaeng and Lachlan Markay, Daily Beast

The friction came to a head in early 2017 when senior officials offered Trump charts and graphics laying out the numbers and showing a “hockey stick” spike in the nationa...

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Swing trading portfolio - week of September 11th, 2017

Reminder: OpTrader is available to chat with Members, comments are found below each post.


This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...

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Free eBook - "My Top Strategies for 2017"



Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:


·       How 2017 Will Affect Oil, the US Dollar and the European Union


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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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About Ilene:

Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

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