Archive for January, 2007

Wild Wednesday Wrap-Up

Hey that was really fun?  Can we do it again?

Let's not get too excited yet, we did finish 8 cents below tha all time high on the Dow – still not bad for a day we got hit with the GDP, the Fed, more than half the earnings are in and we were told by SNDK that there is a semi glut.

What's most important here is that we are doing it this week without a lot of M&A activity, January has been, on the whole pretty quiet, maybe the calm before the storm.  All is well in techland, the SOX recovered from a nasty dip Google came in with stunning numbers (67% more revenues, triple profits) that got a big ho-hum in after hours trading

It was a very exciting day, Big GDP (3.5%), calm inflation, a happy Fed, Bush came to Wall Street, Michael Dell came back from wherever he went, MO is finally spinning out Kraft, the Dow touched a new record and oil is back to $58.

 

Things are certainly looking up in the markets but let's not get ahead of ourselves:

Oil gained another 2.1% today, closing at $58.14, which is the biggest 2-day gain since December '04 yet the energy sector barely budged (less than .25%) as the inventory build was again a bearish surprise.  NYMEX March barrels came down to 385M but they had to trade 279M barrels (30% more than yesterday) to add just 1,000 contracts.  Despite all the trading, just 4,000 contracts were added to April, 2,000 to…
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Wednesday Virtual Portfolio Moves

Posted January 31, 2007 at 10:18 am | Permalink (Edit)

MO officially announced the spin-off of Kraft, it’s not news so expect a “sell on the news” to about $86 but that will make the $90s super cheap (maybe .40) and earnings are coming!

  • MO $90s for .45
    • will take half off at .65+
Posted January 31, 2007 at 10:38 am | Permalink (Edit)
  • Half out of MO $90s at .65
Posted January 31, 2007 at 12:31 pm | Permalink (Edit)
  • I’m bidding on more MO at .30 but it got away from me so far…
    • only going to risk a dime here.
Posted January 31, 2007 at 1:05 pm | Permalink (Edit)
  • EXPE – selling the $22.50s for .50 if possible against July $22.50s
Posted January 31, 2007 at 2:22 pm | Permalink (Edit)
  • Taking out my FXI $107 caller at $1.70 (sold at $4) 
  • buying FXI $107s for $1.70 for myself!
Posted January 31, 2007 at 2:26 pm | Permalink (Edit)
  • added MER $95s for .75
Posted January 31, 2007 at 2:59 pm | Permalink (Edit)
  • ADM Feb $30 put out at .30
  • CY Feb $17.50 puts out at .10
  • DHI Feb $25 puts out at .05
  • EOG $55 puts done at .10
    • (will buy March tomorrow probably)
  • GRMN $50s stopped out at $2.20
  • HES $45 puts out at .05
    •  (will reposition)
Posted January 31, 2007 at 3:07 pm | Permalink (Edit)
  • GOOG Buying Mar $530s for $14
    • selling $520s for $12.75
  • GOOG Buying Mar $480 puts for $13.50
    • selling $490 puts for $12.90
  • NDAQ $35 puts – stopped out at $2.10
Posted January 31, 2007 at 3:37 pm | Permalink


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Which Way Wednesday?

I might have half my answer at 8:30 when the GDP comes out.

Asia had a big sell-off today as investors became concerned that China would turn it’s attention on the markets in general after taking steps to rein in the construction industry.  The sudden jump in oil prices didn’t help matters either…  Just one day after gaining 4%, CHL dropped 3% in overnight trading – reason #100 why I hate Chinese stocks!

The Hang Seng took a big 350 point hit while the Nikkei gave back 100 but we need to keep in perspective that the Shanghai Composite Index was up 134% last year so small pullbacks in Asia are to be expected on any bumps in the road!

HMC had an 8.8% rise in net on "record US demand" (at teast we’re buying cars from someone) and raised guidance.  This will be good for our calls but let’s be careful as today’s news may reverse a positive trend.   Sharp posted an 8.5% rise in net but what caught my eye was a 28% increase in sales in the A/V division.  The company very cleverly went for the high-end market with their Aquos TVs but their chip business dragged the company down, as did Toshiba and Fujitsu, all three blaming price declines.   As I said last night – bye bye SOX!

Europe is only having a mild decline ahead of the GDP report but they need to make a decision based on that alone as the Fed comes after their markets close.  The credit card wars continue in Europe and we are still just too far ahead of the game on our MA shorts as they are trying to spin this so they RUN the new credit system but, even if they do, rate and fee cuts are the primary goal of the EU.

Back home, we could easily go up and down 100 points today so get ready for a bumpy ride I will be shocked if the GDP isn’t at least at my 3% mark, despite an expected drag in the auto sector:


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Vista’s So-So Debut

In comments today we discussed how the launch of Microsoft’s Vista operating system was a "sell on the news" sort of event.

We already have our close calls off the table but we still have two longer plays and I came very close to closing out our April position on today’s dip but we already called a top there and sold the $30s for .95 against them, a call that, unfortunately for MSFT, seems to be on the money.

As with Apple’s IPhone announcement and, it seems, anything popular, there are always critics anxious to take them down.  Today it seems that it was time to complain about the fact that Vista doesn’t run certain downloadable games because they look like "malware," a form of virus that Vista’s beefed up security just says no to.

There was a noticeable lack of lines at the stores for the "Vista Release" as it turns out that most serious people who want it either got the beta months ago or simply downloaded it rather than sit outside Best Buy in freezing weather waiting for the store to open.  From the coverage given by the press, you would think Microsoft had remade Ishtar in 3-D!

We know Vista is already under attack in the EU, a rehash of that same old anti-trust suit that was such a yawner in 2003, 2004, 2005 and 2006.  IBM, Nokia, Sun Microsystems, Adobe, Oracle, Corel, RealNetworks , Linspire, Opera and Red Hat are all getting along on this issue – something needs to be done about Microsoft! 

"Vista is the first step of Microsoft’s strategy to extend its market dominance to the Internet," the ECIS statement said.  It said Microsoft’s XAML markup language was "positioned to replace HTML," the industry standard for publishing documents on the Internet. XAML would be dependent on Windows, and discriminatory against systems such as Linux, the group said.

"The end result will be the continued absence of any real consumer choice, years of waiting for Microsoft to improve—or even debug—its monopoly products and of course high prices," said Thomas Vinje, lawyer for ECIS, in the statement.  

I can’t say I really disagree with them.  While it’s good to have a "universal operating system" it is not good for it to ruthlessly crush competition and stomp out innovation.  Speaking of innovation – check out…
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Tuesday Wrap-Up

Well that was a little better.

 

Of course oil going up to $57 really killed my day.  We expected it, we planned for it, but we didn't really want it to happen!   We didn't take any new oil trades as crude opened in our danger zone of $54.60 and never really looked back but we have some February puts that are likely to be past recovery now.

The markets, on the other hand, did OK and a lot of our positive plays got more so:

On the whole, a pretty good Tuesday but it's all about the Fed tomorrow.  The met and met and met today, seems like a lot of bother over 10 or 12 new words in the policy statement but let's watch the fun tomorrow as those 10 or 12 words rock the global markets!

Rule # 1 in energy trading: Listen to ZMan!  In today's column he said he was down to 20% of his normal puts (all March) as he expected them to play up the gas draw.  He also said:  "TSO Had A Blowout, Best In Show Quarter Yesterday. No stock is changing hands on the acquisition of a west coast Shell refinery and several hundred service stations and I’m told accretion amounts to 20% in 2007. Debt to cap will be under 50% after the deal and I’m holding off on taking action here until the shine where’s off a bit."  TSO was good for another 4% today!

We checked out the NYMEX stats yesterday and let's see how they changed today (1 day lag):

  • March


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Tuesday Virtual Portfolio Moves

Posted January 30, 2007 at 10:24 am | Permalink (Edit)
  • FDX – out of the April $100 puts with a tight .15 stop once they get even ($1.40)

I will also spend $1.90 to move my July $120 calls down to $115 calls

  • Selling FDX July $120s for $3.30
    • waiting to buy in the $115s as cheap as possible.
Posted January 30, 2007 at 11:42 am | Permalink (Edit)
  • YRCW - selling Feb $45s at $1.45 against 1/2 of my April $45s
    • will sell the rest at $1.30 or .20 trailing stop 
      • adding that to the $1.50 I’m already ahead is plenty plenty on a $1.10 roll!




Take off Tuesday???

 

P&G's numbers were great!

They posted a 12% rise for the quarter and raised 2007 guidanceWhen a company that sells everything you use in your home; Duracell, Gillette, Crest, Tide, Bounty, Pringles, Charmin, Pampers, Folgers… to the tune of $75Bn a year tells you that they are keeping cost down and doing better than ever, then perhaps the economy is in better shape than you think!

Business Week published and article on "The World's Most Innovative Companies" back in April and, of the group, only SBUX, GOOG and Samsung haven't gone up huge in 2006.  We'll hear from Google and Starbucks this week and Samsung is just piled in with the poor Semi sector and gets no respect.

On the other hand, UPS only posted in-line earnings and was a little light on revenue and guidance – all the better for our FDX calls as their earnings are behind them and were actually very good.  I go back to my gift card thesis with UPS, there is no way a 10% increase in gift cards doesn't cost them money as you just stick a card in the regular mail or (lol) FedEx it!

While I know that UPS takes overnight letters too, I know very few people who use them for that purpose, just as far less people use FedEx for package shipping.  There's nothing wrong with UPS's numbers, they just don't have any major growth drivers (which, unfortunately may spook investors).  We put off buying them ahead of earnings hoping for a nice dip and it looks like we'll be getting it!

Sony had a decline in profits on strong sales but we expected the PS3 to be a loss leader, the question is what did the shareholders who bid them up 20% since Thanksgiving expect?  They raised guidance and I would be very pleased with this report if I were a Sony shareholder but I'm sure glad I'm not!  Again, how unhealthy can the economy be when this entertainment conglomerate's sales gain 10% for the year to 2.61 Trillion (yen, that is)?

Our HMC jumped up ahead of earnings and managed to offset Sony's disappointing bottom line to keep the Nikkei flat.  CHL gained 3% (yawn) and makes up 8% of our FXI which is holding up well even though…
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The Three Vices of Trading

Do you have one of The Three Vices of Trading?

Dr. Brett Steenbarger (psychiatrist) who wrote "The Psychology of Trading" (which is a book club selection)list’s just 3 (although I can think of a few more) "negative behavioral patterns" that get in the way off good trading.  I very much agree with his statement:

"Remember, observing and interrupting your patterns are the first steps in altering them! Your patterns lose control over you as you become better at not identifying with them. When you become an observer to your patterns, you are separating yourself from them. What great progress that is!"

Perfectionism: Perfectionism is often the chief culprit when the pain of losing exceeds the pleasure of winning.  Even when there’s a profit on a trade, perfectionists will look for the portion of the move that they did not participate in.  If they caught most the move, they will reprove themselves for not trading a larger position.  By focusing on the portion of their performance that doesn’t match their ideals, perfectionists transform successes into defeats, losses into failures.

Beating myself up” is how many perfectionists describe their self-talk.  The way to beat perfectionism is to make a concerted effort to talk to yourself the way you would talk to a good friend in a situation where things went wrong.

Ego: When traders invest their feelings about themselves in their trading, they are operating with maximum emotional leverage.  It inevitably affects decisions about cutting losses, letting profits run, and entering and exiting in a timely fashion.  The successful trader wants their trades to work out; the ego-involved trader needs them to be profitable. 

If trading has us truly depressed, we know that it’s not just our trading account that’s hurting.  Market success can be the frosting on the cake of your successful life, rarely can it substitute to the cake itself.

Overconfidence: Because they’re so eager to make money – and so sure they can make it – overconfident traders generally trade impulsively. They won’t wait for the setup to form; they’ll jump the gun – and get whipsawed in the process. Instead of being patient and waiting for short-term patterns to align with longer-term patterns, they will take every trade, enriching their brokers in the process.

Overconfident traders overtrade. They fear missing opportunities more than they fear
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I do belive in Semis – I do, I do!

Nothing bothers me more about the lack of market movent than the SOX!

I've been complaining about the SOX since the Summer and, although they've recovered about 50% off their July lows, the semiconductors are still a far cry from last year's highs, which came in the late winter.

It was the turn in the SOX, back in Mid August, that gave me the confidence to call for a "Major Upswing" in the markets at the time when I said: "If we get the same kind of breakout on transports (another 100 pts) we could be seeing a new all-time high for the Dow and S&P."

The actual Philadelphia Semiconductor Index contains just 19 companies and today it was not possible for BRCM (+.73%), INTC (+1.75%), KLAC (+.59%), IFX and MRVL (both flat) to hold up the 14 losers, led by TER (-2.4%), LLTC (-1.7%) and AMD (-1.7%).

Teradyne managed to drop 2.4% despite an upgrade (well, to neutral) by HSBC Securities.  They had dreadful earnings on Thursday but I think they are mostly being dragged down by the sector with their close competitors just bottoming out, all well below TER's flat YTD performance.

Linear Tech is also scraping rock bottom as they missed estimates and lowered guidance while AMD is a lost cause on many levels.  So the best we can hope for from these two is that they stop going down at some point.

 

But I do believe in Semis – I do, I do – and if we all clap our hands and say it loud enough perhaps we can revive them before we are left with nothing but a sad pile of nano-sized fairy dust.

All the wonderful toys we get are all made out of mysterious little semiconducting do-hickeys (the technical term) and it is fairly inconceivable that our modern economy can actually function without them since I now need them to brush my teeth and shave and my car no longer works without them, nor does my camera, my phone or even our dog (well, he is a robot-dog…).

Semiconductors are not an obscure side-show to the GDP of the country, they are almost as important as oil although, unfortunately for the 14 losers
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Monday Mop-Up

Hey – we didn’t go down!

We got a little Nasdaq leadership but it only came right at the end after a really pathetic start and the Dow gave up a nice early gain to finish up just 4 points and we can’t even blame Exxon this time as they were down just .41 as oil fell $1.41 to $54.01.  I blame the dollar today which was dragged back from 85.38 all the way back to 85.10 because, if you think people stand to lose a lot with collapsing oil, that is just nothing compared to what is being bet on the dollar NOT rising!

So we must blame someone for the Dow’s decline (as this is a blame culture) and it wasn’t CAT (up 1%), HPQ (up 1.75%), INTC (up 1.75%) or even VZ (up .5%) but the rest of the group were just weak with AA, C, GM, MRK and PFE all giving up about a point in some pretty lackluster trading.

So I choose to make GM the scapegoat, as they have way more Dow weighting than they deserve and are a very poor excuse for an auto company and need to be removed from an index that is meant to track the health of US industry.  Edmunds says US auto sales are up in January, oil is back below $55 and this company still can’t get out of its own way!  Please Dow index makers – please replace GM with TM so we can get a true picture of the health of the economy!

How did the rest of the markets do today?

  • TERRIBLE!  We are nowhere close to any of the levels we set this morning.  So sad I’m not even going to review them!  Go down to the morning post and see for yourself! 

Moving on then… 

Oil was it’s usual fun and exciting self – the oil patch got off to a great start when TSO reported huge profits as it turns out (funny story actually) that while the crude prices they paid fell over 10% from Q3 and close to 20% from Q2 – they forgot to pass those savings along to the consumer (see, I told you it was a funny story!).  Net profits for TSO were up 129%, despite the fact that they actually produced less product than last
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Phil's Favorites

How Does the Stock Market Bottom?

 

How Does the Stock Market Bottom?

Courtesy of 

Despite the recent selloff, things are still relatively fine. I know nobody wants to hear this right now, but the S&P 500 is still up double digits over the last year and 36% over the last three years. What has people shook, understandably, is the speed of this decline.

Depending on where stocks close today, we could be looking at a 10% haircut in just five sessions. Over the last 20 years, this only happened during the Yuan devaluation in 2015, the Eurozone crisis in 2011, the GFC (global financial crisis) in ’08 and ’09, and the dotcom bubble in ’00, &rsqu...



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Zero Hedge

NYSE Announces Disaster-Recovery Test Due To Virus Fears

Courtesy of ZeroHedge View original post here.

In a somewhat shocking sounding move, given administration officials' ongoing effort to calm the public fears over the spread of Covid-19, The New York Stock Exchange has announced it will commence disaster-recovery testing in its Cermak Data Center on March 7 amid coronavirus concern, Fox Business reports in a tweet, citing the exchange.

During this test, NYSE will facilitate electronic Core Open and Closing Auctions as if the 11 Wall Stree...



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ValueWalk

Cities With The Most 'New' And Tenured Homeowners

By Jacob Wolinsky. Originally published at ValueWalk.

Homeownership is a major investment. Not just financially, but when a person or family purchases a home, they’re investing years – if not decades – in that particular community. 55places wanted to find out which real estate markets are luring in new homebuyers, and which ones are dominated by owners that haven’t moved in decades. The study analyzed residency data in more than 300 US cities and revealed the top 10 cities with the most tenured homeowners – residents who’ve lived in and owned their home for more than 30 years – are sprinkled across ...



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Kimble Charting Solutions

Financial Crisis Deja Vu: Home Construction Index Double Top?

Courtesy of Chris Kimble

Most of us remember the 2007-2009 financial crisis because of the collapse in home prices and its effect on the economy.

One key sector that tipped off that crisis was the home builders.

The home builders are an integral piece to our economy and often signal “all clears” or “short-term warnings” to investors based on their economic health and how the index trades.

In today’s chart, we highlight the Dow Jones Home Construction Index. It has climbed all the way back to its pre-crisis highs… BUT it immediately reversed lower from there.

This raises concerns about a double top.

This pr...



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Insider Scoop

A Peek Into The Markets: US Stock Futures Plunge Amid Coronavirus Fears

Courtesy of Benzinga

Pre-open movers

U.S. stock futures traded lower in early pre-market trade. South Korea confirmed 256 new coronavirus cases on Thursday, while China reported an additional 327 new cases. Data on U.S. international trade in goods for January, wholesale inventories for January and consumer spending for January will be released at 8:30 a.m. ET. The Chicago PMI for February is scheduled for release at 9:45 a.m. ET, while the University of Michigan's consumer sentime...



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Biotech & Health

Could coronavirus really trigger a recession?

 

Could coronavirus really trigger a recession?

Coronavirus seems to be on a collision course with the US economy and its 12-year bull market. AP Photo/Ng Han Guan

Courtesy of Michael Walden, North Carolina State University

Fears are growing that the new coronavirus will infect the U.S. economy.

A major U.S. stock market index posted its biggest two-day drop on record, erasing all the gains from the previous two months; ...



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The Technical Traders

SPY Breaks Below Fibonacci Bearish Trigger Level

Courtesy of Technical Traders

Our research team wanted to share this chart with our friends and followers.  This dramatic breakdown in price over the past 4+ days has resulted in a very clear bearish trigger which was confirmed by our Adaptive Fibonacci Price Modeling system.  We believe this downside move will target the $251 level on the SPY over the next few weeks and months.

Some recent headline articles worth reading:

On January 23, 2020, we ...



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Promotions

Free, Live Webinar on Stocks, Options and Trading Strategies

TODAY's LIVE webinar on stocks, options and trading strategy is open to all!

Feb. 26, 1pm EST

Click HERE to join the PSW weekly webinar at 1 pm EST.

Phil will discuss positions, COVID-19, market volatility -- the selloff -- and more! 

This week, we also have a special presentation from Mike Anton of TradeExchange.com. It's a new service that we're excited to be a part of! 

Mike will show off the TradeExchange's new platform which you can try for free.  

...

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Chart School

Oil cycle leads the stock cycle

Courtesy of Read the Ticker

Sure correlation is not causation, but this chart should be known by you.

We all know the world economy was waiting for a pin to prick the 'everything bubble', but no one had any idea of what the pin would look like.

Hence this is why the story of the black swan is so relevant.






There is massive debt behind the record high stock markets, there so much debt the political will required to allow central banks to print trillions to cover losses will likely effect elections. The point is printing money to cover billions is unlikely to upset anyone, however printing trillions will. In 2007 it was billions, in 202X it ...

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Members' Corner

Threats to democracy: oligarchy, feudalism, dictatorship

 

Threats to democracy: oligarchy, feudalism, dictatorship

Courtesy of David Brin, Contrary Brin Blog 

Fascinating and important to consider, since it is probably one of the reasons why the world aristocracy is pulling its all-out putsch right now… “Trillions will be inherited over the coming decades, further widening the wealth gap,” reports the Los Angeles Times. The beneficiaries aren’t all that young themselves. From 1989 to 2016, U.S. households inherited more than $8.5 trillion. Over that time, the average age of recipients rose by a decade to 51. More ...



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Digital Currencies

Altcoin season 2.0: why bitcoin has been outgunned by crypto rivals since new year

 

Altcoin season 2.0: why bitcoin has been outgunned by crypto rivals since new year

‘We have you surrounded!’ Wit Olszewski

Courtesy of Gavin Brown, Manchester Metropolitan University and Richard Whittle, Manchester Metropolitan University

When bitcoin was trading at the dizzying heights of almost US$2...



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Lee's Free Thinking

Why Blaming the Repo Market is Like Blaming the Australian Bush Fires

 

Why Blaming the Repo Market is Like Blaming the Australian Bush Fires

Courtesy of  

The repo market problem isn’t the problem. It’s a sideshow, a diversion, and a joke. It’s a symptom of the problem.

Today, I got a note from Liquidity Trader subscriber David, a professional investor, and it got me to thinking. Here’s what David wrote:

Lee,

The ‘experts’ I hear from keep saying that once 300B more in reserves have ...



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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

...

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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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Ilene is editor and affiliate program coordinator for PSW. Contact Ilene to learn about our affiliate and content sharing programs.