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Monday Mop-Up

Kudos to Matrix today for his great observation at 11:06 this morning:  "That Bob Pisani on CNBC seems to be less of a cheerleader than before. . Normally has a real bullish mood about him, but you could tell between the lines that he thinks this rally is just a headfake. .. "

We had a few clues ahead of Mr. Pisani’s lack of enthusiasmAt 9:53 CNBC put of some frightening numbers on sub-prime delinquencies, which are accelerating by more than 100% since October.  The transports were lethargic despite oil being down $1.26.  At 10:05 I said: "Home inventories up 5% highest since 1992 (8.9 month supply), prices down 2% from last year. Overall sales off 10% from last year. This is horrible but expected but still horrible so somehow you would think that’s the overriding consideration… "

As far as head-fakes go, this one was a big one but we weren’t buying it and at 10:22 MJ23 noted: "Markets up and guess what the VIX is also up! Not a good sign?At 10:47 I warned: "There is no way I take a long based on today’s trading. We’d have to at least retake Friday first.At 12:26 I said under 13,500 was not a Dow recovery and the last straw for us was at 2:12 when I said: "Now BSC really breaking down. That means sub-prime not over. Make sure you have protects if you don’t already!"

To some extent oil pushing back over $69 was also to blame but most of the energy sector stocks weren’t buying that price so why should the broader markets?  It’s all about the housing/lending crisis and it will be interesting to see what kind of spin the Fed puts on this in Thursday’s statement but for now we’ll just check our levels:

 

Day’s

Must

Comfort

Break

Next

Index

Current

Move

Hold

Zone

Out

Goal

Dow

13,352

-8

13,000

13,300

13,500

14,000

Transports

2,878

8

2,800

2,900

3,000

3,250

S&P

1,497

-4

1,470

1,505

1,530

1,550

NYSE

9,807

-41

9,400

9,800

10,000

10,250

Nasdaq

2,577

-11

2,525

2,550

2,600

2,750

SOX

497

-7

480

490

500

560

Russell

827

-7

810

830

850

900

Hang Seng

21,853

31

20,250

20,750

21,000

22,000

Nikkei

18,031

-56

17,400

17,700

18,300

18,500

BSE (India)

14,487

20

13,500

14,100

14,725

15,000

DAX

7,930

-19

7,300

7,600

8,000

8,200

CAC 40

6,002

-20

5,750

6,000

6,100

6,300

FTSE

6,588

-21

6,400

6,550

6,600

7,000

 

Only a strong close in Europe kept our chart from drifting over 50% red so we need to keep a very close eye on the CAC tomorrow as well as the our own NYSE, SOX and Russell as they struggle with critical levels.

The dollar is not getting any interest as very poor housing numbers put a damper on demand for cash and a brief retest of 52.50 was quickly rejected.  Gold got stuck at $655 and oil made a spectacular recovery from a low of $67.55 to finish the day at $69.18.

Needless to say I’m less than enthusiastic about picking up new positions.  Although we made a few good day trades in our intraday chat session, on the whole I’m just sitting on the sidelines trying to guess which way the tide is going to go.

Description

Cost

Open

Sale

Sold

Gain/Loss

Gain/Loss

Basis

Price

$

%

200 JUL 47.00 QQQQ PUT (QQQSU) $13,410.00 6/22 $11,990.00 6/25 ($1,420.00) -10.60%
10 SEP 510.00 GOOG CALL (GOPIU) $13,010.00 4/18 $43,990.00 6/25 $30,980.00 238.10%
50 JUL 80.00 XOM PUT (XOMSP) $260.00 6/21 $4,240.00 6/25 $3,980.00 1530.80%
150 JUL 135.00 DIA CALL (DAWGE) $24,910.00 6/22 $27,740.00 6/25 $2,830.00 11.40%

 

 


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Comments (reverse order)


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  1. Dollar – Phil, you mentioned :
    “The dollar is not getting any interest as very poor housing numbers put a damper on demand for cash and a brief retest of 52.50…”

    Is it 82.50?


  2. Asia Markets : Tuesday, June 26, 2007

    Japan*

    18066.11
    -21.37
    -0.12%

    Hong Kong*

    21803.57
    -18.78
    -0.09%

    DJ Shanghai*

    409.28
    5.89
    1.46%

    S.Korea*

    1749.55
    -8.18
    -0.47%

    India

    14504.36
    16.64
    0.11%

    * at close
    Sources: Dow Jones, Reuters


  3. WSJ – The following news item is making me anxious for I fear, that each time I read WSJ, I have to take it with a grain of salt. A very big grain. Sadly, I do not like the idea, information should be channeled through one source. Reminds us of Soviet Union. 100 odd years of legacy would simply evaporate.

    http://tinyurl.com/38kwoj
    Dow Jones & Co. and News Corp. were on the brink of agreeing late yesterday on editorial protections for Dow Jones, an accord that would pave the way for the sale of the publisher of The Wall Street Journal to Rupert Murdoch’s media conglomerate for about $5 billion, according to people familiar with the matter.


  4. ramana,

    Def 82.50 for the buck……I would be concerned about only 1 source for info and “unbiased” reporting if we did not live in the technological world we do. We joke most every day about the “oil bias” on CNBC, only because we have access to numerous other sources telling us they are full of bullspit. Personally, I don’t know why Murdock is so infatuated with print media anyway. I suppose he has so much $ he can choose as he wishes, but I would prefer for him to acquire CNBC from GE first.


  5. Good morning all
    Phil
    Goog
    am just catching up here in Asia. Your earnings play for GOOG is of interest to me. What bracket is applicable if in the money? Have you got also a slightly later play i.e. Sept.?
    DIA
    You mentioned bracketing down in the puts. I am still holding AUG 136.- does that apply for any time range or only the ones on the current month?
    Thanks Henkl


  6. Talk about hitting close to home with the real estate implosion….I live in Sarasota County (inbetween Manatee and Charlotte Counties):

    Foreclosure Surge Signals Uncertainty (Florida Herald Tribune, June 24th): “The number of foreclosures in the region spiked during May, and Manatee County was fifth among all Florida counties in terms of per-capita foreclosures. However, the number being repossessed by lenders remains relatively small in the region, at about 5% of all homes in foreclosure… Several lenders, including some of the area’s largest like SunTrust and Washington Mutual (WM) declined to be interviewed about foreclosures, saying it has negative connotations… The number of foreclosure actions filed in Manatee County during May rose 164% from April. In Sarasota County, foreclosures rose 104%. Charlotte County foreclosures rose 74%.”


  7. Dollar – damn! I thought I was getting better. Yeah 52.50 would be pretty bad. 82.50 is right.

    WSJ – You have to imagine that money is the last reason Murdoch is doing this deal. He could be looking for a marquis name for his obituary, which would be the best case. Other than that he is either looking for personal power (otherwise editorial control shouldn’t be a big deal) or political power – either one of which does not bode well. I hardly think he’ll turn the Journal MORE conservative but then again I’ve thought that about FOX for 10 years yet he tops himself year after year after year. My real issue with Murdoch and the Journal is that I may not agree with the WSJ’s opinion all the time but I never feel the need to question the underlying facts they present. That is certainly NOT the case with FOX:

    http://www.outfoxed.org/trailer.php

    GOOG – I’m not sure which play you mean but I do like the Sept $550s still, selling the July $550s on any good run which should put you in for about net $10 with 2 months to go so as long as Google stays above $500 it shouldn’t wipe you out.

    DIA Aug $136 – is that puts? If you have puts that are deep in the money you are not really doing yourself any good holding them unless you intend to sell other puts against them. With those you are tying up $3.90 and pretty much get a .50 per 100 point correlation. July $134 puts, on the other hand, are $2.05 and lose .40 if the Dow gains 100 points but gain .55 if the Dow drops 100 points. There is no formula for this, every day you need to scan positions for the best risk/reward combination but I’m sure you can see that since you have 1/2 the capital commited, a 20% reduction in downside exposure and a 10% improvement in upside movement that this is a pretty simple one to pick out. This is, of course, assuming you are using it as a cover play where the % move is irrelevant otherwise, of course, you are doubling the position risk (but still a good risk/reward tradeoff).


  8. The fact is FOX is counterbalancing the liberal bias of ABC, NBC, CBS, and CNN. The reason you don’t like it is because it doesn’t happen to agree with your views of the world, but at least someone is presenting the other side, and, in my opinion, the “rest of the story”.


  9. good morning phil,
    hope you’re feeling much better.

    XOM july 80 puts mentioned in the article above bought on 6/21 and sold yesterday – could you please mention the price of the option when bought and when sold? i thought i was following this but don’t understand the percentage of gain. i thought it was purchased at $.047, not sure of the selling cost. thanks for clarifying.


  10. Target guided sales to lower end of a 3-5% range

    The consumer is getting very tired, losing home equity, paying higher food and energy prices and saving up for iphones,


  11. Phil,

    Glad to see you are feeling at least a ‘lil better….you must be since you’re here, I hope?


  12. Synopsis of premarket analyst calls:

    AYE raised to Buy at Jefferies.
    BIIB cut to Equal Weight at Lehman.
    CELG raised to Overweight at Lehman.
    CKNN started as Buy at Merriman Curhan Ford.
    CMG started as Equal-Weight at Lehman.
    DLB raised to Overweight at JPMorgan.
    DLIA started as Neutral at First Albany.
    EAS raised to Hold at Jefferies.
    EIX raised to Buy at Jefferies.
    GENZ raised to Overweight at Lehman.
    HGSI cut to Equal Weight at Lehman.
    MLNM cut to Equal Weight at Lehman.
    RATE started as Neutral at Oppenheimer.
    SMSI started as overweight at JPMorgan.
    TLVT cut to Neutral at Merrill Lynch.
    TRBN started as Mkt Perform at FBR.
    WINN raised to Outperform at FBR.
    YSI raised to Market Perform at Wachovia.
    ZOLL started as Buy at Sun Trust Robinson Humphrey.


  13. Phil

    If you factor out energy earnings and stock buybacks what would the recent growth (now slowing anyway) in earnings actually look like?

    Rising rates will make it h


  14. Oops

    Rising rates will make it harder for companies that borrow money for buybacks in order to engineer earnings and hide slowing organic growth.

    Who are the worst offenders?


  15. Bill P

    The argument that anybody who is critical of Fox has a Liberal Bias is getting very old. The concentration of media in this country and its use to manipulate public opinion is terrifying whether you are a “patriot” or a “terrorist supporter”.


  16. Phil – Hope you are feeling better this morning
    Talk about going to the consumer for info..asked my teenage daughter last night if the iPhone is worth the money?…and would she buy one (with her fathers money, of course). “are you kidding….yeaaaahhhhh” was the answer that immediately blurted out. Then, may a minute later, she thoughtfully says, “but I’m going to wait 2 or 3 months for the version that works.” asked why, she goes on to say she doesn’t want to go through the same thing that happened with the ipod. Apparently she had bought the “insurance” AAPL sells with the new devices, and went through 4 ipods over the initial three months before “they got it to work right”


  17. Karm, I am up in Volusia County. If you still have that article on foreclosures, are there any Central Florida counties at the top of that list? Thanks.


  18. Ditto Bill P.

    Phil, just keep CNN and MSNBC on, its an alternate universe over there.

    The Dem/Liberal obsession with Fox is absurd. Since they can’t win in the marketplace of ideas and ratings (whither Air America ?), they resort to name calling, boycotts, and anti-democratic tactics to legislate their way back to a monopoly of liberal bubble group think.


  19. Good Morning Phil:

    Hope you’re feeling better. Notable Calls reports that GS downgraded ADBE
    from buy to hold. I’m long Oct 42.5 calls (down $1.30) and short Jul 42.5 calls
    (up $2.80). Close it out or make some move? Thanks.


  20. Lithium … I’m sorry, but other than a bunch of lefty celebs, Bill Clinton, Dem pols, left leaning columnists at the Times, Wapo, etc., CNN, NBC, etc., who exactly are the non-Liberal bias critic/complainers about Fox ?


  21. size123,

    here’s the link but it is typical journalistic scribe for this area (lots of bad/sad stories without much data to possiblly explain the real particulars)….Still not a bad article though

    http://www.heraldtribune.com/article/20070624/REALESTATE/706240445


  22. albo,

    He is thinking ADBE will be a bounce candidate, so keep that in mind when determining any trade you might jump into.


  23. I saw that. Thanks, Karm.


  24. Can’t log in to the zman tab to post this morning.

    New post here:

    http://zmansenergybrain.com/


  25. Thanks Karm.


  26. Welcome back Zmann; hope you had a great vaca.

    How exactly would you bet against gasoline ? TIA.


  27. Morning, all.

    VMSI shareholders aren’t recommending the Roche bid. Stock is up over 25 points. Would this be a good short play candidate?


  28. Cap – the paired trade in the newsletter – long VLO and short FTO and scaling into both. That RBOB chart looks like a possible double top to my laymen’s TA eye.


  29. karmcon,
    Thanks for the morning notes.


  30. APPL upgraded RBC 160 price target
    GOOG upgraded Bernstein 635 price target
    now we need a RIMM upgrade


  31. Cap

    My comment was not about the source it was about the response. The fact that media outlets on either side are staunchly defended by political advocates indicates there is a problem.


  32. Good morning!

    New post is finally up – I’ll be caught up shortly!


  33. Anyone have thoughts about BRCM for apple iphone launch?


  34. FOX/CNN/MSNBC

    Switching back and forth between Fox and CNN provides a stark contrast and leaves you feeling that one or both of them (personally I think one of them) is putting agenda before truth. Its one thing to spin the news with the words you choose – its another thing to only report that which supports your views.

    As far as patriot or terrorist, I like to believe we are all patriots, and our personal views make us lean to the left or right — if you find that your views are determined by your party affiliation rather than the other way around then you have it backwards. If you are a government official and continuously boost the morale of our hateful enemy then you may not be a terrorist, but you surely arent a patriot. A patriot would expresstheir reservations behind closed doors rather than practically yearn for the war to go bad so they can benefit politically. A patriot would not undermine our government standing by making trips to Syria to talk to our enemies.

    Its likely never as sharp a line as either being a patriot or a terrorist – but you approach being a terrorist when you aid in their victory of hate — to me harry and nancy approach that — but thats just me.

    As usual it falls to personal resoponsibility I think. Its up to us to divine the real truth – and this should probly involve getting our ‘facts’ from several sources, and forming our best thought of where the truth is. If we want to approach one source or the other as gospel then we risk our world falling apart when its found that our 1 source was spinning, misreporting, or ignoring important aspects and facts.

    I know which news outlet I think is more honest, but frankly Im pretty sick of all of em – when they cater to the weaker side of our characters and base what gets on how sensational it is then they are suspect. I guess that makes all of em suspect.

    I was in the military. I know how frustrating it can be when our real patriots and their mssions are undermined by those with only personal gain in mind.

    I have reservations about the war, yes — I have no reservations about strongly and publically supporting it.

    My $.02


  35. XOM – as far as I can remember at the moment it was 100 bought and 50 sold on momentum with the profit credited back to the remaining basis leaving it at .05. Once the remainder is sold the full trade profits are realized.

    All better thanks, lot’s and lots of tea and chicken soup does the trick.

    Lithium – worth looking into on the weekend if you remember!

    ADBE – well sounds like you’re in good shape anyway but this should help us find the real bottom for these guys. Where was GS 10% ago while they still had a buy rating? I killed my spread position and will reenter at the bottom but you can roll down to the $40s (both you and your caller) for just .35 if you want to stay in it from where you are, which keeps you in pretty solid position for a recovery (hopefully not until after July 19th, which is less likely with the GS downgrade).

    Sorry Z – I thought you weren’t posting yet!

    Fox – notice how I am refusing to engage in this “debate.” Very proud of myself (pat, pat)


  36. Fox – yes I noticed Phil … good job; I’m done on that one for now.

    AMZN, looks to me like this baby is rolling over. Pull up daily chart. Next target $63.60.


  37. djczing – Well said! I’m former military also, and understand completely where you are coming from.

    Now, back to making some nickels!


  38. Well I sold some hedge this morning, then bought the DIA 134s when the 10am numbers came out.

    Last note on patriot or terrorist — Leaving our borders wide open and leaving the potential for all manners of ‘bad people’ to come over that border without so much as flinching or addressing the issue seriously is not being a patriot, or even a responsible government or president. There. Equal time.

    Sorry Phil – and glad ur feeling better.

    Ill stifle.


  39. Quotes from my favorite American liberal:

    “He who knows nothing is closer to the truth than he whose mind is filled with falsehoods and errors”

    “Ignorance is preferable to error, and he is less remote from the truth who believes nothing than he who believes what is wrong.”

    “The moment a person forms a theory, his imagination sees in every object only the traits which favor that theory. ”

    “No government ought to be without censors; and where the press is free no one ever will.”

    “The spirit of resistance to government is so valuable on certain occasions that I wish it to be always kept alive. ”

    “I never submitted the whole system of my opinions to the creed of any party of men whatever in religion, in philosophy, in politics, or in anything else where I was capable of thinking for myself. Such an addiction is the last degradation of a free and moral agent.”

    - Thomas Jefferson


  40. OIH back near its 20-day MA.

    What an amazing beast – 2 days ago I feared for my short 180 calls — now Im starting to fear for my short 170 puts.
    Previously the 20-day was the place to buy OIH. Last time it actually played a little below the 20 before snapping back up.

    Gold: Yawwwn

    Ive always loved the richness of thought and expression in colonial-era documents. I suppose wehn you arent constantly being bombarded with external stimuli you can devote more into generation and expression of original thought, rather than putting all your energy into filtering out garbage.

    Jefferson was a patriot, of course – as was Kennedy. As was Reagan. All men of vision. All with their problems, but all with the right motivation. I dont think party affiliation matters anymore – what matters is vision and motivation. Someone who wants whats right for this country, rather than what will advance his/her power base personally – and someone with the vision and the spine to honestly tackle the difficult issues. I think the American people would be willing to sacrifice what needed to be sacrificed if htey could just know that our leaders had a direction, vision, motivation and integrity.

    I wasnt gonna carry the conversation any further, but its quiet in here.

    Ah heck. Paris is out of jail. Life is good ! Carry on !