Archive for July, 2007

Terrible Tuesday Wrap-Up

Oh dear!

I find it mildly amusing that there is a huge headline in the WSJ reading: "Murdoch Wins His Bid for Dow Jones" on the same day we find ourselves on the brink of a stock market apocalypse.

What no one found mildly amusing was the movement of the market today, which pretty much sucked.  Fortunately my morning sermon, "Be led not into temptation" was followed by most of the members and we enjoyed yet another profitable disaster as I called the top at 10:22 with: "XOM cannot get it together, nor can BA, CME pulling back, FDX treading water, SHLD not buying consumer confidence (or is real estate falling off a cliff?) and the DIA $135 puts at $2 are my put of choice at the moment. If the Dow can’t hold 13,450, I’ll grab the $134 puts a little early because $77.55 is a lot of money for oil, even in Euros…"

We also got great, but sad, news as our OLED's are being taken away from us for $12 a share, this is one of the few actual stocks we buy on a regular basis.  Back on Dec. 30th this great small company was one of the only straight stocks I picked as a set-up for the new year:

  • "OLED – the old rule on them is buy them on the 10th of the month (arbitrary) whenever they are under $6 and sell half whenever they get to $7, we’ve owned this stock for over a year that way and it’s one of the few proper stock positions I maintain.
  • "This stock will one day be at $25 but that day may be a very long time from now as the very cool technology is still in development but I’m betting they will be a winner in this field.
  • We did do a full dump in October when they topped out at $7.50 after having gone scary low on us but we came back in on 11/10 at $5.75 with another shot on the 10th of this month and a sale of 1/2 yesterday at $7 that reduced the basis to $4.50. Next time I buy at $6 I’ll be in for $5.25…"

The doom and gloom mood of the day did not stop us from buying more AAPL as it
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Tuesday Virtual Portfolio Moves

Posted July 31, 2007 at 9:39 am | Permalink (Edit)

LDK – don’t forget what you are ALWAYS supposed to do!!!

NMX flying! Beat by .02, I thought they’d do better so I’m selling the $130s, now $3.65 against for the moment. I’ll take some off if we break $127 but not otherwise. XXX

Posted July 31, 2007 at 9:52 am | Permalink (Edit)

VLO didn’t last long. XOM cannot get it together, probably because refining was a good portion of their weaker-than expected profits.

Cramer on again, another sign not to trust the rally – it’s always scary when they put a tie on him…

NMX – I lucked out so far as it turned up before I got my sell in, I’m sticking with my plan but I’m waiting to see how far up it goes first of course. XXXX

IMB 8-(

TASR – I’m getting worried about the $17.50s I sold! Will buy out 25% while they are way low. XXX

OSTK – great call MrN! Their loss narrowed, yipee! Losing “just” .58 a share vs. .78 last year on declining revenues – woo hoo! Just remember the reality of what you are holding and ALWAYS sell into the initial excitement!

GRMN – expectations are way high but, if they beat them, look out! Your $90s are $4 of pure premium and if they should miss by a penny they will probably lose 50% or more of value before you can sell them so you might want to consider taking some off the table of moving to the Sept $90s at $6 and selling 2/3 the Aug $90s which would be the same as taking about half off the table but would leave you with a pretty good upside and less downside volatility (but still screwed if they miss).

Posted July 31, 2007 at 10:17 am | Permalink (Edit)

IMB – I’d take some off the table if you were behind and rolling to catch up but I also want to hear the CC. Remember, the reason we took these guys is the CFO was ADAMANT that they did not have default issues and he said they reiterate guidance which, at the time, had them going to…
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Tempting Tuesday Morning

The pre-markets are soaring!

As of 7:30 am the Dow is up over 100 points in pre market trading as everything that was a catastrophe last week is suddenly just a speck in our rearview mirror.

The hardest thing we have to do as investors is to be patient but we have plenty of bullish plays in place (I mentioned yesterday that we had 3 times more calls than puts) so we can afford to wait before jumping back on the bandwagon.  Yesterday we grabbed the SPY $150s at $2.80 as a new upside hedge to our mattress plays but a weak open left us with less than we would have liked and the run-up in the afternoon forced us to sell half at $3.40 as it triggered our 20% rule for the day.  It is MUCH easier to get in and out of index puts and calls on momentum than it is to go in and out of multiple trades so we use them to "mattress" our other plays in both directions.

I find the pre-market movement very surprising ahead of what is going to be a very heavy data week.  Next Tuesday at 2:15 we have the FOMC statement and investors are now betting heavily on a softening which I don't believe is possible, especially if this week's data comes in heavy:

Date ET Release For Consensus Prior
Jul 31 08:30 Personal Income Jun 0.5% 0.5% 0.4%
Jul 31 08:30 Personal Spending Jun 0.1% 0.1% 0.5%
Jul 31 08:30 Core PCE Inflation Jun 0.1% 0.2% 0.1%
Jul 31 08:30 Employment Cost Index Q2 0.9% 0.9% 0.8%
Jul 31 09:45 Chicago PMI Jul

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Monday Virtual Portfolio Moves

Posted July 30, 2007 at 10:02 am | Permalink (Edit)
I’m adding SPY Sept $150s at $2.80 as they had good movement last week so they will make a good momentum cover. XXX
Posted July 30, 2007 at 10:17 am | Permalink (Edit)

X is making a move, we never took the X and NUE trades from last week but they make nice recovery plays down here with the X Jan $105s at $9, selling 3/4 Aug $100s at $3.80 and NUE Jan $57.50s at $3.85, selling the Aug $55s for $1.32 XXX

Posted July 30, 2007 at 10:24 am | Permalink (Edit)

NYX – I’m in the Jan ‘09 $85s at 11.90, now $13.60 and I sold the Aug $75s for $4.30, now against half. You can still take the leap but I’d like to see it test $77.50 before I sold Augs if I were going in fresh but I wouldn’t let the $75s slip below $3.50 – If you are lucky, you’ll get $3+ for the $80s in a nice spike. XXX

XOM – good time to buy those Sept $90s for $2. You can sell the Aug $85s, now $2.60 either immediately against half or as a downward momentum play if you are good at that stuff.

Posted July 30, 2007 at 10:41 am | Permalink (Edit)

Sadly there was not much gas in this rally’s tank- be VERY careful here. I am watching and waiting. If OIH is going down with spectacular sector-wide earnings, what’s the real hope for the rest? If I were not very heavily hedged with index puts I would be stopping out of things, even IBM and AAPL as this market is about as unattractive as I’ve seen it since Q2 ‘06 when bad news was a disaster, good news caused a sell-off and great news would give a stock a 2 hour pop before turning back down. That was a 1,000 point drip but we’re 40% higher now so that would be 1,400 for a similar correction, right to my 12,500 target coincidentally!

Not chasing those SPYs or X or NUE but I will leave

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Monday Mop-Up

That was a pretty good day.

Unlike last Monday, we had some pretty good overall strength in the markets, spurred on by GMAC beating low expectations with "only" a 63% drop in profits, driven by its Residential Capital unit "only" losing $254M this quarter, much improved from the $910M loss last quarter.

The financial sector finally made a bit of a comeback, with the XLF recovering off a low open to finish just under Thursday's gap down, indicating a possible fill of that gap may be in the cards tomorrow.  MS's credit rating was also raised by S&P, which should also give the financials renewed strength for at least a day or two.

We also had a "nice" comeback in the oil patch with crude finishing just under $77 and XOM got an upgrade to Buy from AG Edwards, a move we expected as we flipped bullish on that stock last week.  The premise for taking up positions in the Aug $90s and Sept $95s was that XOM would hit the 50 dma at $86 and had taken a huge bounce off that mark in late June as well as their usual option expiration shenanigans.  We'll see if we get the follow-through today as breaking below $86 will be tragic (we still have our Sept $90 puts as a hedge).  We'll keep a close eye on $88 and $90 as a failure at either of these points can lead the stock to a serious correction – it will likely be up to the lemming-like analysts, who are likely to follow AG Edwards in declaring XOM undervalued.

On the whole, we got a weak move from the Nasdaq and a strong move from the S&P:


When things don't do what you expect it's best not to jump in so we took few positions yesterday but they were all bullish ones, so that is a good sign (assuming, of course we have a clue) for the markets.  One stock Happy Trading and I have been watching closely is LVS, which had a nice breakout yesterday, brutalizing our poor Aug $85 putter (which we sold against our Jan $80 puts last week).

My underlying concern remains the same as it was in the morning as this rally was sparked by low…
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Monday Mourning?

Is it time for bottom fishing?

Not on a non-merger Monday!

Oh sure VZ bought someone for $757M and South Korea’s Doosan is buying Bobcat from IR for $5Bn but come on – what is that?  After the $100Bn we discussed last Monday (which gave us a whole 90 point, one day boost) we are pretty much at zero one week later.  The market likes BIG deals and we can not lie and the other bourses can’t deny when a deal comes in with an itty bitty premium then investors won’t be buying in (I can keep going but at this point you either get it or you don’t!  Click Pebbles for clues).

So the BOTTOM LINE is that the thrill is gone and without someone to show us the money, either in blockbuster earnings or on the M&A front, this is no time to be diving back into the market.  If you are ahead then this is a good time to count cash, watch sectors for signs of strength and select a second half strategy (see this week’s newsletter for our first sector pick), if you are behind, it’s a good time to be thankful for what cash you have, reviewing the behavior that got you here and looking over your losers for possible hidden gems.

Some of our biggest misses of the year are likely to be the second half’s biggest gainers.  That’s because I’m generally a fundamentals player so when a company we’re betting on misses, we don’t tear up our tickets and go home – we reanalyze, reposition and redeploy our capital looking for a better opportunity down the road.  As option traders, we are acutely aware of the fact that timing is everything and we don’t blame a good stock for going down nor do we get too excited about a poor stock going up – we just like go get a little ahead of the game and then go with the flow.

So this week we are going to shake it, shake it, shake our virtual portfolio and decide which of our babies are coming back (this song is going to be stuck in my head all day!).

Asia’s got back today with the Nikkei making a spectacular end of day recovery from an early 170-point drop and Hong Kong also got a nice, non-suspicious boost at the close much like…
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Weekly Wrap-Up

What a wild week that was!

For the second week in a row the rewards of being bearish were very rich indeed despite our move to a substantially cash position.

I think I really nailed the market's direction in Monday's wrap-up when I posted this picture and said "That was the least exciting 90 points we ever gained."  It was a tired and pathetic attempt to get to 14,000 and, if anything, made us even more bearish on Monday as we loaded up on mattress plays, the index puts we use to cover our virtual portfolio.

That led to a huge lucky (some would call it skill but I'm not that delusional) break on Tuesday as the market began a 700-point, 4 day decline that generated incredible returns on what were originally intended to be covers on our remaining calls.  The nature of the drop was such that we had a scare on Tuesday, a chance to get our calls off the table on a rebound on Wednesday (that caused us to buy even more puts, including XOM et al!) followed by 500 additional points of decline on Thursday and Friday when we were pretty much all bearish.

How could we not have had a great week?!?

As Bryan E said in Tuesday's comments: "Today reminds me of that Barrons commercial…”The market goes up you make money, the market goes down you make money….but this time it’s because of PHIL, HAPPY, and ZMAN."

We were so hot predicting this week's action that we even nailed the titles for the day with "Whip around Wednesday,"  "Thursday Thump" and "Freaky Friday" so I won't even bother going into detail on what we said as there are no highlights – the whole week was a highlght!  Option Sage got the week started  with his excellent title "The Four Horsemen (of the Apocalypse?" which warned us that Apocalypse isn't traditionally a BUYBUYBUY celebration.

Far be it for us to fight the markets, we just like to go with the flow and enjoy the ride and what a ride it was this week!  Fundamentals really did start to matter in the market and even the mighty XOM corporation felt the pull of gravity as the company shed…
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Navigating the Stock Market – Isn’t it Ironic?

"It's like rain on your wedding day
It's a free ride when you've already paid
It's the good advice that you just didn't take
Who would've thought … it figures"

Alanis Morissette

It's been a very bearish two weeks for me and the last few days in particular I started to get the feeling the party was over, at least for the short haul, as I didn't like the look of the last leg of our rally to 14,000 and I especially did not like the look of the first few days of this week.  As I said on Monday: "That was the least exciting 90 points we ever gained."

Barry Ritholtz published a great cartoon that summarized yesterdays action quite nicely:


While we are not entirely immune to this sort of behavior on the member site (yesterday, for example, we decided to do shots every time the Dow crossed 13,400 in either direction, leading to 6 shots between 2:15 and 3:00!), we do try to keep a level (if not sober) head about this nonsense.

If you've been keeping up with us this week, you know we loved yesterday's action.  Despite the fact that we wish the market would recover, we always keep our post-it firmly affixed to our monitor which reads "It is NOT my job to save the market" which kept most of us from hitting the buy button during the 4 "recoveries" we got in the past 48 hours.

The members were certainly pleased:

biodieselchris – Posted July 27, 2007 at 12:37 pm | Permalink

"Phil I’m up 28.2% over 2 days and you can FP that number if you want, I blew away the other guy you quoted last night by 2X, much thanks to PSW!"

jeddah62 – Posted July 27, 2007 at 3:00 pm | Permalink

"Phil, really looking forward to more emphasis on the LTP! For the most part, my spread positions have been pretty good but I keep getting dinged on swing trading and now have to stop it. I’m one of those who needs a good working port like the LTP that doesn’t require constant attention all day
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The Mircowave Oven Theory of Behavior

I started the day with a very simple statement:

Don't you wish other people would be that honest with us?  It's very hard for people who give opinions for a living to stand in front of an audience and say: "I don't know."   Somehow they seem to feel that they have to know and, what's worse, once they force themselves to make a decision, they somehow feel obligated to defend it, even if new evidence comes out to the contrary.

This is exactly what's wrong with financial reporters and analysts, especially the clowns on TV (as well as pretty much anyone who makes a living giving you their opinion).   My members are familiar with something I'm going to share with you now.  It is a Nobel Prize-worthy theory that I feel helps make me a better trader and I thought this would be a good time to share it with you:

People love to make random decisions and stick to them like they were directly given it as a commandment!

How does this relate to microwaves? Well, aside from the fact that our brains are constantly being fried by the things every day (ever drive on the highway and see one of those dishes aimed right at you?  Do you know birds die if they fly too close to them?), this is what I observe:

You put something in the microwave, say pizza, and you put in a time, say 3:33 (or maybe you are a whole number person and do 3 or 4 minutes). Now, unless you are a chain store pizza buyer your pizza slice is probably not always the same size or maybe it has different toppings etc., but you probably put in the same number every time.

Theory number 1:  People tend to repeat behavior, especially if it was successful in the past.

So the light goes on and the little thing spins and you are either a watcher or a walker (as you may have guessed - I hit the button and leave the room!), but either way you usually end up standing by the oven with 20 or 30 seconds to go waiting for it to stop.

Here's where the Nobel Prize committee has to recognize me:

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Friday Virtual Portfolio Moves

Posted July 27, 2007 at 9:40 am | Permalink (Edit)

CROX – I don’t think yuou guys get the fact that we only spent .05 on this play so we have a ton of options. If we had the margin for it the proper move would be to take a couple of Septs off the table into the initial excitement (the naked play is gone already) then wait for the same thing that happened ot AMZN and BIDU to happen to our boy but, in the case of the $10KP the best move is to roll the Sept $52.50s to 2X $57.50s and roll the caller from the Aug $50s at $8 to the 2X the $55s at $4.35 XXX

Posted July 27, 2007 at 9:46 am | Permalink (Edit)

IMB – missed your chance to get out even already! Maybe a flush on the way down… 8-(

In general – remember what I said yesterday about trading curbs leaving a lot of sell orders backed up at the brokerages. If we don’t get off to a good start then those orders will be reupped today so we let the DIA and Q calls die and don’t take the puts off the table until we break positive. Until we get back to 13,600 nothing we see will be more than a minor bounce.

CVX is going down on those earnings so what does that tell you?

This time I’m not going to miss shorting Google against 1/2 my longs, probably the $510s, possibly the $500s as a mo play down. XXX

Posted July 27, 2007 at 9:53 am | Permalink (Edit)

Emergency White House “Economic Summit” will attempt to spin the GDP and the economy this morning so watch those puts in case we have to dump them.

Posted July 27, 2007 at 10:00 am | Permalink (Edit)

Rolling logic – only the assumed margin restriction of a $10KP. If CROX takes off, that will be our next roll, rolling the caller up to 2x the $60 calls, which right now are $2.55 of pure premium and already outgaining the $55s.

VLO – great call Z! They are already turning off…
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Zero Hedge

Brexit: The Endgame?

Courtesy of ZeroHedge View original post here.

With parliament suspended and the UK's EU withdrawal process in enforced stasis, the next major stop on the Brexit road map is the EU summit in Brussels on 17 and 18 October. As we have become accustomed, no one knows what will happen now.

This flowchart though, based on analysis by The Independent's John Rentoul, runs through the most likely scenarios, starting first with the question of whether the meeting bears fruit in the form of a new Brexit deal.


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Phil's Favorites

Wall Street is ignoring the omens of recession - here's why


Wall Street is ignoring the omens of recession – here's why

Why is this man smiling? AP Photo/Richard Drew

Courtesy of Jay L. Zagorsky, Boston University

The world is on the brink of a recession, if all the breathless headlines are to be...

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Insider Scoop

Economic Data Scheduled For Wednesday

Courtesy of Benzinga

  • The MBA's index of mortgage application activity for the latest week is schedule for release at 7:00 a.m. ET.
  • Data on housing starts and permits for August will be released at 8:30 a.m. ET.
  • The Energy Information Administration’s weekly report on petroleum inventories in the U.S. is schedule for release at 10:30 a.m. ET.
  • The Federal Open Market Committee will announce its policy decision at 2:00 p.m. ET.
  • The Fed Chairman Jerome Powell will hold a press conference at 2:30 p.m. ET.

Posted-In: Economic Data... more from Insider

Kimble Charting Solutions

Crude Oil Create A Panic Peak This Week?

Courtesy of Chris Kimble

Yesterday Crude Oil rallied nearly 15%. How often does Crude rally this much in a day? Not often!

How many times has Crude rallied nearly 15% in the past 20-years? Only one other time, which suggests that yesterdays move was a rare event.

This chart looks at Crude Oil on a weekly basis over the past 2-years. Last year Crude Oil created a bearish reversal pattern at the 2018 highs and a bullish reversal pattern at the 2018 lows.

Earlier this year, Crude created a bearish reversal pattern (bearish wick pattern), while testing its 61% retracement level of last years hig...

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The Technical Traders

VIX To Begin A New Uptrend and What it Means

Courtesy of Technical Traders

The news of the drone attack on Saudi Arabia over the weekend prompted a big upside move in Oil (over 10%) and a moderate downside rotation in the US major indexes/stock market.  Although prices had recovered slightly by the opening bell on Monday, September 16, the shock wave resulting from this disruption in oil supply is just now starting to play out.

The long term uncertainty in the markets, as well as the rotation in the US Dollar and other foreign currencies, could play a bigger role in the type of volatility and extend of the immediate price rotation that may result from this external news event.  Our VIX predictions and ADL predictive modeling system are suggesting volatility wi...

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Lee's Free Thinking

Is The Drone Strike a Black Swan?

Courtesy of Lee Adler

Pundits are calling yesterday’s drone strke a “black swan.” Can a drone strike on a Saudi oil facility, be a “black swan.”

According to Investopedia:

A black swan is an unpredictable event that is beyond what is normally expected of a situation and has potentially severe consequences. Black swan events are characterized by their extreme rarity, their severe impact, and the practice of explaining widespread failure to predict them as simple folly in hindsight.

I seriously doubt that no one expected or could have predicted a drone strike on a Saudi oil facility.

Call Me A B...

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Chart School

Crude Oil Cycle Bottom aligns with Saudi Oil Attack

Courtesy of Read the Ticker

Do the cycles know? Funny how cycle lows attract the need for higher prices, no matter what the news is!

These are the questions before markets on on Monday 16th Aug 2019:

1) A much higher oil price in quick time can not be tolerated by the consumer, as it gives birth to much higher inflation and a tax on the average Joe disposable income. This is recessionary pressure.

2) With (1) above the real issue will be the higher interest rate and US dollar effect on the SP500 near all time highs.

3) A moderately higher oil price is likely to be absorbed and be bullish as it creates income for struggling energy companies and the inflation shock may be muted. 

We shall see. 


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Digital Currencies

China Crypto Miners Wiped Out By Flood; Bitcoin Hash Rate Hits ATHs

Courtesy of ZeroHedge View original post here.

Last week, a devastating rainstorm in China's Sichuan province triggered mudslides, forcing local hydropower plants and cryptocurrency miners to halt operations, reported CoinDesk.

Torrential rains flooded some parts of Sichuan's mountainous Aba prefecture last Monday, with mudslides seen across 17 counties in the area, according to local government posts on Weibo. 

One of the worst-hit areas was Wenchuan county, ...

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The Big Pharma Takeover of Medical Cannabis

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


The Big Pharma Takeover of Medical Cannabis

Courtesy of  , Visual Capitalist

The Big Pharma Takeover of Medical Cannabis

As evidence of cannabis’ many benefits mounts, so does the interest from the global pharmaceutical industry, known as Big Pharma. The entrance of such behemoths will radically transform the cannabis industry—once heavily stigmatized, it is now a potentially game-changing source of growth for countless co...

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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:


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Members' Corner

Despacito - How to Make Money the Old-Fashioned Way - SLOWLY!

Are you ready to retire?  

For most people, the purpose of investing is to build up enough wealth to allow you to retire.  In general, that's usually enough money to reliably generate a year's worth of your average income, each year into your retirement so that that, plus you Social Security, should be enough to pay your bills without having to draw down on your principle.

Unfortunately, as the last decade has shown us, we can't count on bonds to pay us more than 3% and the average return from the stock market over the past 20 years has been erratic - to say the least - with 4 negative years (2000, 2001, 2002 and 2008) and 14 positives, though mostly in the 10% range on the positives.  A string of losses like we had from 2000-02 could easily wipe out a decades worth of gains.

Still, the stock market has been better over the last 10 (7%) an...

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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 >>