Archive for 2006

Great Googly Moogly! How low can it go?

GOOG is taking a beating in the after market on leaks of a Barrons article (cover maybe) that is going to savage them this weekend. I ended up short again today (accidently, no one wanted my puts at the close) so I have my fingers crossed. Here is a link to what I think will be the final draft: The problem the analysts have is that, unless there is a fundamental change they can point to as “new information,” they can’t flip flop positions after just one earnings miss. That’s why every analyst on the planet has been pumping google for 2 weeks, they all had $500 targets and look like morons if this thing actually tanks. Jim Cramer (Dr. UNH) is also the guy who wrote GOOG on his knuckles. There’s nothing wrong with loving a stock but you have to be willing to say the party’s over at some point. You might forget the guy who cost you $2.50 on TXN or $5 on XOM but you will never forget the idiot whose analysis you relied on to buy Google at $450. Don’t forget people pay big money for these guy’s advice! (which reminds me, please visit our sponsors 8-) We’ve discussed valuation before with this stock but it amazes me that, even with the last earnings miss, they are still expected to earn $9 next year. I don’t see how earnings will go from: $1.29, $1.19, $1.32, $1.22 (2005) to $9 this year – A 100% increase every single quarter? It will require $6Bn in additional revenues this year (more than all of Yahoo’s revenues) in order to hit 2006 projections, Google has to take Yahoo’s entire market share while maintaining their profit margins and, of course, not making any mistakes. This is what I feel will ultimately undo Google this year. The company took in $6Bn in 2005 and earned $5 per share – very nice. The same analysts who expect Google to make $9 per share in 2006 project revenues to increase to “just” $6.5Bn. This means that Google is expected to increase margins by over 50% this year. In 2007 they are expected to earn $12 per share on just $9Bn in sales, maintaining the same phenomenal 60%+ margins as they grow. What really scares me is that nobody is talking about this. What is it that analysts…
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Weekly Wrap-Up

Pfizer didn’t have a very strong finish but the rest of the market did.

The Dow went from another bounce at 10,825 at 11 am all the way up to 10,950 just after 3 pm. The bounce off a higher point than before is very significant:

The other indexes followed suit only not as dramatically so I wouldn’t read too much into this because it was a small bounce on the whole and we are looking very oversold. This does fall within what you would expect to see with rotation but a rotation into the Dow will be very interesting!

Oil broke our $61.90 target at the end of the day but Valero shooed us out of our positions when it turned sharply up at 2pm, which worked out to be about the low for the day. It looks like the oil stocks are just in weekend denial. Lack of a supply interruption over the weekend will probably send us below $60 next week but we need to wait and see.

There is simply nowhere left to put oil and gas in this country. We are bursting at the seems with the stuff and there are 500 tankers on the way here with more, whether we want it or not!

SLB wins the recovery of the day award, going from $114 to $120, this is why I don’t short them other than intraday!

Gold stopped at $550, down $20 for the week but the gold stocks are trading lower than when gold was at $500 so something has to give next week.

It looks to me like the markets are ready to rally providing no one blows anyone else up at the Olympics this weekend! The oil traders think all will be well or they wouldn’t have let the price drop this afternoon so enjoy your weekend, Monday could be very exciting!


There’s not much to review since we cashed everything out but here’s a study list for the weekend in case Monday really is a time to buy.

I’m not going to bore you with going over the many many 100-400% returns we made on oil puts this week. Just want to say that this is the reason I say keep cash available – you never know when an opportunity like this will come up. It’s only a shame that builders picked the…
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Fabulous Friday?

Today should be much improved – if not, we need to find a nice mattress to put our money in for a while because you can’t ask for better conditions today. Consumer confidence is up to 96.1 from 78.2 last month this is the best since Oct. 2004 (when the Dow gained almost 200 pts). Jobless claims are at the lowest level since April 2000. Oil is dropping again due to “demand destruction” fears (funny when the fear is on the other side). Consensus on rates is way down (this will come back to bite us if there are in fact 2 more hikes but for now, let everyone get excited). A full 40% of Americans now approve of Bush’s job performance (yes, I’m being sarcastic – I should just say 60% of Americans are now sane). This is all fabulous stuff! The note sale went great yesterday so everyone still wants to put money in the US and Asia continues to be weak and the dollar continues to be strong. We saw some warning signs yesterday on the global rotation front as money got stuck in Europe on the way over here from Asia but that is clearly not happening today. As far as sector rotation goes, we clearly have the pullback we expected on oil and commodities but no clear leaders have shown up yet. I am very concerned about any kind of rally that doesn’t involve tech but I have to weigh that against the possibility that I’m prejudiced towards tech (like many) so I will try to keep as open a mind as possible. Anyway, if we do not get a good day today we can blame Pfizer, who has a major analyst meeting this morning, because there is not much else that should sink this ship. A weak market today will put phenomenal pressure on Monday as we are currently right back where we topped off in December, a break either way will be significant. CNBC has jumped on the oil scare bandwagon today (again, suspicious timing) with “Oil Shock Scenarios” that they are repeating endlessly. I hope John Grisham is working on the book that connects all these players together… If we are weak, but not too weak (less than .3% drops), I will be taking up small positions but maintaining 70% cash because Monday can be big either way and it would be…
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Thursday Wrap-Up

What a crazy day that was!

The Dow was way up, almost 10,950, then back below 10,900 like it is no support at all. The S&P was worse, hitting 1,275 like a brick wall and bouncing back negative while the Nasdaq was beyond sad.

On a timing issue, it all sort of tied in to the 1pm 30 year note sale we talked about, even though the auction went very well, with rates ending up at just 4.53% (indicating huge demand). I suppose investors took this as a confirmation of a highly inverted yield curve renewing fears that the Fed has overdone it and trashed the economy. I see it as simply supply exceeding demand on a new issue.

I certainly hope my readers don’t wait for me to tell them to cash out their positions on a day like today! Especially with commodities staying low and oil heading further down, there was no reason for this kind of weakness.

Anyone who checked in on my 11am comment on the morning’s column should have made out like a bandit shorting oil again but, not being greedy, I cashed 1/2 out at 3:20 when XOM and VLO turned up. I may get back in tomorrow but, as we saw yesterday, the bounce backs can really kill you.

I sold my COP $60 puts and left 1/2 the profits on $55 puts (just .15 each) and I still have UPL $60 puts and XOM $57.50 puts but I will be very pleasantly surprised if they actually work out with so few days left.

Fridays are bad days to bet against oil as traders hate to go into the weekend without long positions in case something blows up. Again, I really think we have a long way to go down but only for day trades at the moment.

Gold was up but gold stocks chickened out mid day as we failed to get back over $570, still looks like it will break up to me.


I got out of the ADM trade because it made lots of money and it expires in a week. You should never really hold any option within 7 days of expiration as they deteriorate too fast. Unless, of course, you are buying it during that period for a short-term trade. If you like the position so much, roll it into the next month.

Google was very very…
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Thursday Morning

Big direction day today. Will the Dow hold 10,800? Will the Nasdaq hold 2,250? Will the S&P hold 1,265? I think yes, not only that but I think we have to look at higher targets again: Dow 10,900, Nasdaq 2,100, S&P 1,275. These are the numbers that would put us firmly back in rally mode. Hopefully we can get back to these levels next week. Asia is bouncing for the most part but not the sort of dramatic comebacks we have seen before. Europe is having a very big day with greater than 1% gains on many exchanges. While I worry about this sucking up some of our market’s money, it is also a sign of the global realignment of capital we have been hoping for as it is the European’s money that is the fulcrum of the world markets. Gold is rebounding today, regaining 50% of this week’s loss. On the whole, it looks like gold is forming a long flag up and we should take advantage of this dip to take long positions. Oil, on the other hand, is consolidating for a move down but we shouldn’t play this either way until we get a confirming move. A strong market can lift all ships, including tanker-sized oil stocks. Oil is up today on lower Mexican production forecasts – this is why I hate to hold oil puts overnight! It is way beyond suspicious that this December study was released just as oil was threatening to go back below $60 a barrel… Natural gas inventories are out at 10:30 and they expect a draw down of 88Bn. Less than 70Bn drawn will send oil prices even further down. The big story of the day is that we are selling $14B worth of 30 year notes today. Big demand at these low rates (4.7%) will be a very good sign for the markets. Expect a good sign because the 30 years haven’t been available for 5 years so there have to be at least $14Bn worth of buyers who need it for whatever reason. I would take any great exuberance coming from this sale to be fairly irrational. On a day like today though, traders like to have an excuse to buy and this will be a good one. Remember the Iran crisis? Try and find that in the news today. Like I said last week, fear only lasts so…
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Wednesday Wrap-Up

It looks like my global rotation theory is panning out!

I’m as amazed as you must be that I seem to have actually figured out what’s going on in the World that I am still thinking I must be wrong so let’s stay just a little cautious because, if I’m really right, we have a very long rally ahead of us.

We retook a lot of technicals today with the Dow zooming right back through 10,800 and the Nasdaq opening well above 2,250 and then using it as a floor on the way to 2,266. The S&P bounced nicely of 1,255 twice before gaining 10 pts for the day so we’ll call that the new floor.

The real turning point of the day was when the NYSE turned up sharply at noon and then again at 3pm.

Oil was down almost all day and the Valero traders weren’t buying it for the most part. The stock never really recovered but I ended up stopping out of most of my oil plays so I took a few new positions that are detailed in today’s comments. More significant than todays drop below $63 is the March contracts finished down another .54 (after $2.02 yesterday) to $63.09. This backs up my thinking earlier today (comments) that oil prices were being artificially supported.

Another clue that the market manipulation was the fact that my SU Mar $75 puts actually gained value while the stock went up over $1 this afternoon. That indicates behind the scenes activities are playing out.

Gold held firm at $549 despite negative comments from our former fed chairman who feels he still needs to pontificate.


So what a day we had today!

It turns out that Whole foods is just a grocery store! Who’d have thought? I’ve been saying it since they were at $155, perhaps now people will stop buying this stock. Although they only missed by a penny, expectations were already lowered and margins are clearly contracting.

HYDL is worth watching again tomorrow as it inexplicably went up 2% today but the $75 puts gained 30% in value – go figure.

OIS continued down another 2% today. WHQ also never recovered. I hope you took the 100% profit on SLB before it turned on us but the March $120 puts are still $6.50, up $2.50 from yesterday. This is why I like the extra month,…
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Oil Report

Slight drawdown in crude (-300K) but a huge build in gas (+4M) indicates that manufacturers have stopped buying oil and are trying to get rid of as much as they can (gotta make it into something).

VLO seems to disagree but it often headfakes in the first half hour afer the report. Still I am very nervous and have my finger on the sell trigger!

Demand numbers are still coming in but if VLO goes back under $55.50, we can get back into all the puts we discussed but over $56, I don’t want to take any chances.
ps – check the comments here for updates.

Hump Day

It is hump day in so many ways, make sure you read the column below this to see where my head is at. Look for an early bounce in some oils, especially HAL, SLB and drillers as the logic is that we may still be looking for oil next year. The key is the 10:30 inventory where they are now expecting large builds so even 1M barrel builds will not shock the markets at this point. The initial reaction to oil numbers is often wrong but keep tight stops on your profits, we can always reenter positions – if oil goes lower, there will be plenty of opportunities. The real key is whether there is a build in distillates. That is the one place a draw is expected so a build there would be devastating. Of course, we never try to outguess the Valero Rule! More bad news for housing today on even lower mortgage applications. Apple shocked the chip market with it’s new pricing on IPods. The logic is that manufacturers must be dropping their shorts for them if they can knock 30% off their prices (Apple never drops their margins). Lots of opportunities I will get to later but here is a good article on the subject: Anything less than a nice move up today (.5%+) will be very bad for the markets so let’s trade carefully out there. In a market like this I am inclined to take a 20% profit off the table (setting a very tight stop as soon as I cross 20% and upping it every 5%) and have virtually no tolerance for losses. ===================================== SNDK is resting right on its 50 dma of $62.30. We called the top on this one way back on Jan 4th when the stock was at $79 so it is hard to go back short at this price but it should be watched because it is a long way back to the 200 dma of $45. PFE is really taking off this morning. With luck the March $25s will still be available for .75. CSCO is blowing through resistance and heading right back to the recent high of $19.43. Once it breaks $20.25 it has a very good shot at $22. Back on Dec 8th we took the Jan ’08 $15s for $5 and they should be slow movers if you want to jump in. The March…
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Global Cooling?

We are in very dangerous waters today. The Nikkei dropped 450 pts, don’t think that can’t happen here – it is their 4th major correction of the year, leaving Japan flat to the year’s open and showing technical weakness. Other Asian markets down as well and Europe is weak, although coming back at the moment. US futures are up a bit but don’t confuse a pathetic bounce with a rally. The S&P looks awful, having broken right through its 50 dma support at 1,270 and now eyeing the 200 dma of 1,225. 1,250 is psychological support only. The Nasdaq has fallen below its 50 dma of 2,265 and has no reason not to test 2,150! The key indicator now, the only one we can hope for, is the NYSE which is still above its 50 dma of 7,900. If the S&P gives this up then it’s duck and cover time. We need to get into a defensive mode until things look better. Really, really conserve your cash and let’s not leave long positions overnight unless they are balanced by shorts as well – losing 10,800 on the Dow was a big deal and should not be taken lightly! Now that I’ve said that, there is a ray of hope: It is still possible that my initial thesis of global sector rotation is correct. That means that the previously hot Asian markets, which are up 40% and more last year, could be topping out as their economies enter a more normal growth phase. London gained 35% while the S&P slept since ’04 and Germany picked up 35% this year alone. We already know Asia has been killing us and the whole world made a double in oil, gold and other commodities this past year. If the world were your virtual portfolio and you were up 100% in commodities, 40% in Asia and 35% in Europe, would you perhaps want to take a little of the table to start the new year? Let’s put our global goggles on: Japan may begin raising rates – we know how that kills an economy. China can’t keep growing at 10% a year. Australia is basically a commodity play. Europe has done well but has a worrisome 8% unemployment rate and bird flu is a big concern in all of Europe and Asia. The Middle East’s economy lives and dies on oil and that may be…
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Tuesday Wrap-Up

Booyah! Yes I just have to give myself a self serving shout out for today’s calls!

I said get out of gold and gold collapsed. I said housing was bad and it was awful. I said stocks are bad and they were bad. I said oil was going down (for a week now) and people were awed by the devastation today.

Best of all, I said to trade the following:
XOM $62.50 puts entered at $1.60, up $1.05 (60% profit)
OIS March $35 puts entered at .60 up .80 (130%profit)
SLB Mar $120 puts entered at $4 up $3.20 (80% profit)
WHQ Mar $35 puts entered at $1.35 up $2.15 (65% profit)
OII Mar $60 puts entered at $3.70 up $2.70 (66% profit)
SU Mar $80 puts entered at $4 up $2.60 (up55%) – sorry about that one!

If you are still in these after the close you are amazingly greedy but I will admit I held a few too (XOM, SU and COP) but only in so far as I am letting profits ride. We should still be playing the market for 20% gains and keeping at least 75% in cash at the end of each day.

You have to expect at least a bounce back tomorrow, which is why, other than XOM, we stuck to the March puts – lest we get killed by a pipeline explosion or some such.

Okay, I’m done loving myself for the moment (sorry but you have to imagine how great of a day I had 100% listening to my own advice) so let’s see if we can figure out what happened today…


On the whole it was a pretty good day considering the devastating drop in the oil sector, commodities and home builders.

There was tech strength including SYMC (told you so!) and CSCO, who reported a very nice quarter this evening but, on the whole, not enough to get me to commit my cash at the moment.

TM did well but nothing like what it should,the Jul $100s are still attractive at $10.20.

You would have thought that builders were pumping gas the way they were hit today, I will take a look tomorrow for laggards but the whole sector looks wasted.

Monday’s feature DIS spread let us out of the March $25 put at .40 for a .30 loss but the March $25…
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Zero Hedge

Americans' Economic Hope Has Collapsed

Courtesy of ZeroHedge. View original post here.

Which came first, the confidence or the stock market rally?

One thing is for sure, the crash in stocks in December has crushed the hope of Americans that their economic future is going to be better under President Trump.

Overall confidence dipped to 58.1 - a 4-month low, but, U.S. consumers this month were the most downbeat on the economy since November 2016, a third straight drop after expectations reached a 16-year high just three months earlier, as the partial government shutdown wears on toward a fourth week.


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Kimble Charting Solutions

Triple Breakout Test In Play For S&P 500!

Courtesy of Chris Kimble.

Is the rally of late about to run out of steam or is a major breakout about to take place in the S&P 500? What happens at current prices should go a long way in determining this question.

This chart looks at the equal weight S&P 500 ETF (RSP) on a daily basis over the past 15-months.

The rally from the lows on Christmas Eve has RSP testing the top of a newly formed falling channel while testing the underneath side of the 2018 trading range and its falling 50-day moving average at (1).

At this time RPS is facing a triple resistance test. Wil...

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Phil's Favorites

Brexit deal flops, Theresa May survives -- so what happens now?


Brexit deal flops, Theresa May survives -- so what happens now?

Courtesy of Victoria Honeyman, University of Leeds

As the clock ticks down to March 29 2019, all of the political manoeuvring, negotiating, arguing and fighting is coming to a peak. In the two and a half years since the 2016 EU referendum, views on both sides have hardened and agreement still seems as far away as it was the day after the referendum.

With Theresa May’s withdrawal agreement disliked by all sides, and voted down by an unprecedented majority in the House of Commons, everyone is wondering what can and should be done next?


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Digital Currencies

Crypto-Bubble: Will Bitcoin Bottom In February Or Has It Already?

Courtesy of Michelle Jones via

The new year has been relatively good for the price of bitcoin after a spectacular collapse of the cryptocurrency bubble in 2018. It’s up notably since the middle of December and traded around the psychological level of $4,000... so is this a sign that the crypto market is about to recover?

Of course, it depends on who you ask, but one analyst discovered a pattern which might point to a bottom next month.

A year after the cryptocurrency bubble popped


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D.E. Shaw Investment Calls For Leadership Change At EQT

By ActivistInsight. Originally published at ValueWalk.

Elliott Management has offered to acquire QEP Resources for approximately $2.1 billion, contending the oil and gas explorer’s turnaround efforts have done little to lift the company’s share price. The company responded and said that a thorough review of the proposition is imperative in order to properly act in the best interests of shareholders, “taking into account the company’s other alternatives and current market conditions.” The news came only a month after Travelport Worldwide agreed to sell itself to Siris Capital Group and Elliott’s private equity arm Evergreen Coast Capital for $4.4 billion in cash and two months after Athenahealth was bought by Veritas and Evergreen for $5.7 bi...

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Insider Scoop

UBS Says Disney's Streaming Ambition Gives It A 'New Hope'

Courtesy of Benzinga.

Related DIS Despite Some Risks, Analysts Still Expecting Double Digit Growth From Communications Services In Q4 ... more from Insider

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.

Market Shadows >>