Archive for July, 2007

Freaky Friday

Which way will we go???

I was just laying out my DIA puts and calls and my QQQQ calls in member chat and I realize that those positions clearly indicate that l have absolutely no idea what's going on.

As I expected last night. the GDP data gave us a nice Goldilocks set of numbers but the PCE including food and energy, which the Government likes to ignore, was up 4.3% for the quarter, up from 3.5% in Q1.  The "core" PCE is up just 1.4% for all you non-eating, non-energy using citizens so let's all party like we are Amish people on a hunger strike!

I can kid about the Amish because they'll never read an electronic document but, for the rest of us, I still urge caution, caution and more caution as the DIA calls and QQQQ calls we took were UPSIDE PROTECTION, meaning they are there to protect our terrific gains on the put side.  We could make money on both ends of this trade today as we wait for some Federally funded BS to hit the markets from Paulson, Bush (oh no but, yes, he's speaking!), Bernanke et al who'd better say something positive before we start making Asian-style declines.

The Hang Seng missed my down 1,000 target by 222 points and recovered 127 into the close so kudos to them for making it back over 22,500.  The Nikkei dropped 418 points, also with a 100 point gain at the last minute so I'm taking all of Asia with a grain of salt this morningNTT's profits dropped 25% as they experienced the kind of cost inflation that our government doesn't believe in.

Europe is off about a point ahead of our open and has been gathering strength in their afternoon, so we will watch that finish with great interest but it will take a lot for us to jump back in and BUYBUYBUY.  We certainly have the cash on the side ready to do it but we're going to need clear tech leadership, not energy leadership, to even consider jumping back into this very chilly pool:

 

We actually played OIH to the plus side yesterday.  Happy Trading says they still have room to run and we do not argue with Wang's World, as he's
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Thursday Virtual Portfolio Moves

Posted July 26, 2007 at 9:40 am | Permalink (Edit)

Mattress plays – I hate to talk about them while we’re dropping as the worst thing you can do is initiate a play in a panic – NEVER buy into the initial excitement! But, if you don’t already have them the rule of thumb is to take 2X of whatever costs $2 and 1X of whatever is one bracket below that. Right now that is the Aug $136 puts at $2.05 and the Aug $135 puts at $1.67. When the $135s get to $2 you add 1x to them, sell 1X of the $136s and add 1x of the $134s setting .25 stops on the whole group (your 2x position in the Aug $135s will have a blended basis of $1.84.

Posted July 26, 2007 at 9:45 am | Permalink (Edit)

Sorry, very important to mention that I am currently scaling into 1x DIA $137 CALLS as an upside play and I will roll these down if the $136s get cheap and then possibly DD.

AAPL – WOW! $140s opened at $10 and are now $8.45. Tough call if you didn’t sell yet but if they hold $145 I guess it’s worth riding a little. Obviously the opposite is true for callers – now way do I pay them unless I have to!

Posted July 26, 2007 at 10:02 am | Permalink (Edit)
New home sales down 6.8% in June and May is revised to down 2.2% so they lied to us then too! Median prices are still dropping as well and inventory is up to 7.8 month’s supply – this is worse than terrible!!!!
Posted July 26, 2007 at 10:17 am | Permalink (Edit)
GM – I hope those are put leaps! I haven’t sold against mine as I am very nervous that they will drop $6 in one day if, perhaps, someone sees their books… If they start going up, I would sell, for example, 1/2 the $32.50 puts as a momentum play but only that.

Buyers are coming in but it remains to be seen whether they run


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Thursday Wrap-Up

"Thanks gang. Also…thanks for the training that set me up to be up 13.5% on a down day like today. That NEVER would have happened without the day to day classes all of you have been giving." – KeyserSoze Posted July 26, 2007 at 4:48 pm | Permalink

What can I say?  I'm very proud!

We had a fantastic day as everything went perfectly for our short positions, especially our mattress plays that usually protect our virtual portfolio but today were the stars.

It also didn't hurt that we've been short on oil for the month and it finally paid off in spades, especailly our old buddies XOM, who lost about $26Bn in market cap in what can only be described as a rough day.  As I mentioned in yesterday's wrap-up, we were keying on XOM and the XLE for put plays, capitalizing on the strategy Zman and I have been playing up for weeks – that producing less oil leads to less profits! 

Our MN1 broadcast pick, the PTR $150 puts, had a fantastic day as well as they doubled on the $5 dip.  We held onto those, hoping for a very hard slap in Asian trading to drive the stock back to the 50 dma at $143.

Our Apple plays (also reviewed last night) went off spectacularly, with the stock coming in right at our sweet spot and we closed out $135 calls for a 20% loss, the $140 calls for a 105% profit, and the $135 puts with a 50% loss leaving us open  with the Jan $150s with a 121% profit, the Oct 140s with a 223% profit and the Aug $150s with a 32% profit in the Complex Spreads Virtual Portfolio, putting it up 135% for the year, an 11% gain on the week.  We also still have the Jan '09 $140s, up 20%, against which we sold the Aug $140s and $145's in the Long-Term Virtual Portfolio.

Tomorrow it will be our CROX Sept $50s that make us very, very happy as the earnings were so good they had to halt the stock!  We also have a spread of the Sept $52.50s and the Aug $50s in the $10KP that cost us a nickel so we'll be looking for a dollar or…
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Thursday Thump???

"When the M&As start to unwind it is time to be all cash or short the market – this is that time!!!" – Me, in noting the problems with the Chrysler funding, yesterday at 10:50

[chart]5 minutes later I said: "Transports off a cliff even with declining oil prices. I’m letting the rules dictate what I get out of with Aug and Sept stopping out on 20% of the profit pullbacks (which is most of them). The DIA puts are in great shape again but at this point I’d rather take a fresh look at things in a couple of more days than try to “save” things now."

11:16: "So this is why I work off stops, as soon as I started setting them, the market stopped dropping but I am raising them with every tick up and will be getting the hell out if we fall again."

11:50: "The VIX is calming down now pretty consistently going down when the markets go up, indicating up is still the right direction but things seem pretty out of control to me if XOM can go up and down $5Bn in value 3 times in 2 hours."

12:16: "XOM – I am adding back puts into earnings. If they miss then $1.75 for the $90 puts will be a real bargain. There is what I consider to be an irrational expectation that they will earn 14% more money despite tha fact that sales are down 1.5% (at least). Now these guys can make their numbers say anything they want them to as they take in $100Bn a quarter in revenues but politically I think they wouldn’t mind a miss this Q as it will carry them all the way through the Summer able to tell Congress how they are just a poor struggling energy company that’s just trying to make a nice return for all the widows and orphans who own the stock. They do have 5% less shares than last year but I think costs are way up. If they miss, it will be a Dow disaster."

3:38: "S&P needs 1,520 to make this thing real. Dow needs to get back to 13,850 to make up 1/2 its losses
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Wild Wednesday Wrap-Up

Wheee, what a day!

We broke 500 comments on the member site for the first time so you know a lot was going on.

The trades were flying fast and furious but I considered it very lucky that we had gone long DIA and QQQQ right at the end yesterday and I decided today was a good day to go further into cash.  Right at 9:32 I said: "This is a good time to take stuff off the table that was killing you yesterday. Nothing has really changed other than a few companies that were supposed to have great earnings having great earnings so be realistic."

The timing was great for cashing out our oil puts just after the inventory as that sector turned around sharply (for no good reason) and the energy sector made up much of the afternoon rally.  We messed around with some new oil positions on both sides but, other than XOM $90 puts at $1.40 ahead of earnings, much lighter than we have been in a long time, as I said in the morning post: "We picked up so much downside action in oil yesterday I’m more concerned about a negative surprise."

We got that negative surprise today as oil flew up $2.32 (only in the front months of course as the farce continues) but it's all up to XOM tomorrow who will have to justify what is now a $522Bn market cap.  XOM has gained over $50Bn in market cap since June 27th, more than the entire value of VLO ($38Bn), SU ($43Bn), OXY ($50Bn), the newly combined RIG ($33Bn) & GSF ($17.5Bn), or the total combination of SUN ($8.5Bn) + TSO (7Bn) + CHK ($16Bn) + GSF ($17.5Bn) so it will be very interesting to see how they manage to justify this runaway valuation.

The Dow was up and down 100 points four times today but ended up nowhere in particular, closing under 13,800, but at least 13,700 seemed to form some sort of a floor.  We will be watching the S&P closely tomorrow as Happy Trading and I were disappointed we couldn't close above 1,520:

 

Our AMZN bear call spread is working out nicely so far as the $85s went off at $6 on the morning jump and have already calmed…
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Wednesday Virtual Portfolio Moves

Posted July 25, 2007 at 9:30 am | Permalink (Edit)

GSK – we have to see where they go in the morning but naked selling into the excitement is the way to go. Right now it’s AMZN time!

Posted July 25, 2007 at 9:32 am | Permalink (Edit)

This is a good time to take stuff off the table that was killing you yesterday. Nothing has really changed other than a few companies that were supposed to have great earnings having great earnings so be realistic. STM and GLW were disappointing but no one seems to care…

Posted July 25, 2007 at 9:43 am | Permalink (Edit)

I’m surprised they expect a 1.9Mb draw in crude – that’s a number that can disappoint but they really took Aug NYMEX barrels off at the last minute so perhaps they are creating an artificial shortage in Cushing.

AMZN – took 40 $90s for $1.45 and will sell 20 $85s, now $3.50 and am holding Oct $80s, now $8.60 so I’m now in with 40 Oct $90s, sold 20 $75s, now 9.75 and the 20 Oct $80s. Once I am sure there is no short squeeze, I will cash at least 1/2 my Octobers and sell 10 more Augs. xxx

Posted July 25, 2007 at 9:47 am | Permalink (Edit)

AMZN – another nice way to get out of the Oct $80, Aug $75 play is to roll yourself to 2X the Oct $90s and roll your caller to 2X the $85s – this is a near even roll and puts you in much better margin position. XXX

Posted July 25, 2007 at 10:01 am | Permalink (Edit)

COP calls flying, that was a good choice and SUN calls still available if you need cover ahead of inventory. I’m very disappointed with the lack of returns from my DIA and QQQ calls so I’d have to say sentiment is still VERY bearish. So the way we play covers like COP is we sell them into the initial excitement and then use that gain (.30) to augment the stops on the now naked puts we’re…
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Whip Around Wednesday

This is why we use cover plays – One day does not a trend make!

We had a very bullish stance going into the weekend and, while we certainly trimmed down a little, we kept a very bullish stance, especially on GOOG, which we left uncovered after buying back our callers and the LTP, which got of relatively unscathed in yesterday’s carnage.

We found ourselves a little too bearish at the end of yesterday (because we had made too much money on uncashed puts) and switched to upside index covers on the DIA ($140s) and QQQQ ($50s) as we expected good things from tech and we covered our oil shorts with COP $85s.  These single index (or sector leaders in COP’s case) plays make a lot more sense than flipping in and out of individual positions whenever a market breeze blows against us.  If you get your portions right, they can give you just enough protection without impeding your ability to make more money once the market gets back on track

Sometimes, like yesterday and it looks like again today, your covers can accidentally make you money, but it’s important to remember that is not why you bought them and to treat these gains as a very lucky bonus since you took them to protect you if the market DID NOT do what you thought it would do!  As I often say to the members – "Remember why you took your position in the first place, don’t lose site of your goals."

Let’s not forget that yesterday was a TERRIBLE day in the markets with 90% of the very heavy volume coming to the downside so the expected boost we will get from BA (terrific earnings) and AMZN (up 24% pre-market) early on may not be enough to override the very cold slap in the face we got from CFC yesterday.  We’ll be watching out for profit taking into the rally, especially with AMZN as I am one relieved investor after yesterday’s scary fall!  On our Oct/Aug spread, I will be leaning towards selling the Octobers into the rally and waiting to buy back the Augs when the stock turns down.  Margins can be dealt with by buying $95 or $100 calls to turn the position into a bear call spread and we will discuss more complex plays as well as some new plays in chat…
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Tuesday Tear-Down

Bryan E
Posted July 24, 2007 at 3:33 pm | Permalink 

"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."

 

Well that sure makes us feel good!  Thanks!

We had a fantastic day on the member site as we played yesterday perfectly by loading up on the puts, especially on the oil sector but our DIA mattress plays paid huge dividends today as well, pushing the STP up over 300%, up from 277% on Friday.

Will the markets do it again tomorrow?  I'm betting not.  Our last play of the day was to grab DIA $140s for a dollar and QQQQ $50s for .60 as I was concerned that AMZN could spark a tech rally and we could be good for at least a 50 Dow point bounce, even if we are going to head lower for the day.  Those Q calls were trading at $1 around lunch and at $1.25 last week so they seemed nice and bouncy and, at this point, we were more in need of upside protection than down.

Pundits are blaming CFC for a very poor report and an even worse conference call (I highly recommend reading Barry's summary) but I say that's just shooting the messenger as CEO Angelo Mozilo says that the "company is seeing home price depreciation at levels not seen since the Great Depression."  For those of you who don't remember, the Depression was a bad time to be in the markets… 

Oil did just what I've been predicting it would do for the past week and the action was so good there that we were even able to add an intraday double on WNR.  Our morning Apple play went perfectly as we got our dip, our recovery and another dip and IGM was indeed a saving indicator as the sharp turndown at 12:30 kept us firmly on the short side but NOW the Sept $60s make a nice gamble at .65

Happy Trading kept us on our toes yesterday with this 12:10 chart – reiterating the cash call we've been going on about since last Tuesday:

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Wednesday Virtual Portfolio Moves

Posted July 24, 2007 at 9:41 am | Permalink (Edit)

X – I’d be getting out even in this mess – this could turn horribly ugly if we break below the levels I set in the morning post – only gold is up, not a good sign. Don’t forget to layer your mattress plays!!

Posted July 24, 2007 at 9:51 am | Permalink (Edit)
We held 13,820 again, that’s a good thing! Let’s watch that NYSE 10,000 too! We lost the Nasdaq and the S&P and if they don’t retake their levels, it will most likely be a matter of time before the others follow them down.
Posted July 24, 2007 at 10:03 am | Permalink (Edit)

HOC off a nice cliff!

T has turned, AAPL should follow. They are holding $138.50 (last Wed’s highs before the jump) so this is really just a gap fill if they hold it. They want you out of your calls REAL bad… I’m not giving up on my puts but I smell the same rat in Apple’s dip as I did in oil’s rise last week.

Took profits on DIA $140 puts, usually there’s a good chance to rebuy and, if not, I’ll just switch to the $139 puts. GOOG is UP! SHLD is up. YHOO is up… Someone is buying the dip! XXX

Posted July 24, 2007 at 10:19 am | Permalink (Edit)

SUN – why do I keep forgetting to play them (kick, kick).

BA – if they blow it let’s just all vow to cash out and get on a slow boat to China as this country is over.
Just because I love them, doesn’t mean you shouldn’t cover 1/2 with the $105 calls at $2.40!

EDU – well, I said I will happily roll down.. looks like I lied about the happy part!

Uh oh! Dip buying runs into relentless selling, DIA $138 puts are nearing $2 buy point but I’d rather wait until we actually break below 13,800. XXX

BIDU really taking off, if they break $185 things could get interesting but who in their right mind would pay those option prices?


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Tuesday Morning

Let’s see how much of yesterday’s gains we end up giving back…

We have lots of earnings disappointments (see last night’s post) including TXN, who reported soft demand, as well as BP – the first in what I have been predicting will be a series of disappointments from the majors as the service companies’ record profits translate into integrated oil’s record costs.

Had BP not sold a refinery (who needs those?) and a pipeline (did they have one that was operating?) they would have "only" made $5.35Bn, down 12% from last year as the endless string of various (and very coincidental) supply interruptions finally begins to outweigh the benefits they gain from supporting the price of crude by failing to supply it.  Isn’t economics fun?!?

Economics have also finally kicked in at our favorite lemonade cartel as OPEC President Mohammed al-Hamli said that a "fair price" for oil is between $60 and $65 a barrel or, as I said last week, they simply can’t sit by and collect 20% less dollars per barrel than they did last year while pumping 10% less oil.

Unfortunately for us, the energy sector has grown like a cancer on the markets and now comprises over 20% of the S&P so a correction there will take down the whole market – especially as we don’t have any real new leaders ready to step up – in large part due to the fact that energy costs have finally reigned in consumer spending, driven up costs and damaged the other 80% of the market.  It’s a cancer that has to be removed but the operation will be very painful as we try to correct the damage done to the broader markets.

Brent crude dropped $1.13 in overnight trading but is a LONG way away from normalizing as it still sits over $75 (up 50% for the year) but our WTIC broke that barrier yesterday after last week’s forced march to $76 finally abated.  Keep in mind that the charts do not reflect that we are making significantly lower highs in Euros, which is the chart most of the world is looking at.  It remains to be seen whether my 7/16 call that this last run was a "blow-off top" was premature or right on the money.

Demand destruction is indeed evident in Asia as even Nissan says they can’t
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Phil's Favorites

Legal cannabis celebrates its first anniversary in Canada: What's next?

 

Legal cannabis celebrates its first anniversary in Canada: What's next?

Montrealers hold up a Canadian flag with a marijuana logo on it outside a government cannabis store in the city Oct. 17, 2018. THE CANADIAN PRESS/Graham Hughes

Courtesy of Michael J. Armstrong, Brock University

This week marks the first anniversary of Canada’s recreational cannabis legalization. It’s an appropriate time to review what happened last year and consider what’s coming next.

Legalization brought big changes for some folks. About 9,200 employees now work at cannabis producers, with ...



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Zero Hedge

Pork-Panic Sends China CPI To 6 Year Highs As Factory Deflation Deepens

Courtesy of ZeroHedge View original post here.

China's producer prices deflated for the 3rd straight month, slumping 1.2% YoY - the biggest deflationary impulse since July 2016 - but, thanks to the explosion in pork prices (as 'pig ebola' spreads), Chinese consumers are facing the worst inflation since 2013.

  • China Sept CPI +3.0% YoY (2.9% exp and 2.9% prior)

  • China Sept PPI -1.2% YoY (-1.2% exp and -0.8% prior)

...



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Chart School

Review of Andrew CardWell RSI with Wyckoff price waves

Courtesy of Read the Ticker

RSI measures relative strength of price action of a set period versus prior set periods. It helps review the price swings or waves, the power of each price thrust into new ground, or lack of it. Price thrust like many things relies on energy, and energy is not a constant, it has a birth, a life and a death and relative strength helps us see that cycle. 

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Chart in video

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Kimble Charting Solutions

Banks Should Send Critical Message To Stocks This Week!

Courtesy of Chris Kimble

Bank earnings could go a long way to impacting the broad market in a big way this week. Wells Fargo, Goldman Sachs, Bank Of America, JP Morgan, Morgan Stanley all announce earning the next couple of days.

As these earning announcements are to take place, the Bank Index (BKX) finds itself facing a key breakout test.

The index remains inside of bullish rising channel (1), as it has created a series of higher lows and higher highs over the past 8-years.

The index has little to brag about over the past 20-months, as it has created a series of lower highs and lower lows inside of falling chan...



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The Technical Traders

Daily Market Analysis and Trade Setups

Courtesy of Technical Traders

CLICK HERE TO GET REAL TIME TRADE ALERTS!

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Insider Scoop

22 Healthcare Stocks Moving In Tuesday's Pre-Market Session

Courtesy of Benzinga

Gainers
  • Reata Pharmaceuticals, Inc. (NASDAQ: RETA) stock surged 45.2% to $146.07 during Tuesday's pre-market session. The market value of their outstanding shares is at $2.8 billion. The most recent rating by Cantor Fitzgerald, on October 15, is at Overweight, with a price target of $180.00.
  • Aphria, Inc. (NYSE: APHA) stock increased by 18.6% to $5.16. The market value of their outstanding shares is at $1.8 billion. According to the most recent rating by CIBC, on July 26, the current rating is at Underperformer.
  • ...


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Digital Currencies

Zuck Delays Libra Launch Date Due To Issues "Sensitive To Society"

Courtesy of ZeroHedge View original post here.

Authored by William Suberg via CoinTelegraph.com,

Facebook is taking a much more careful approach to Libra than its previous projects, CEO Mark Zuckerberg has confirmed. 

“Obviously we want to move forward at some point soon [and] not have this take many years to roll out,” he said. “But ...



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Lee's Free Thinking

Look Out Bears! Fed New QE Now Up to $165 Billion

Courtesy of Lee Adler

I have been warning for months that the Fed would need new QE to counter the impact of massive waves of Treasury supply. I thought that that would come later, rather than sooner. Sorry folks, wrong about that. The NY Fed announced another round of new TOMO (Temporary Open Market Operations) today.

In addition to the $75 billion in overnight repos that the Fed issued and has been rolling over since Tuesday, next week the Fed will issue another $90 billion. They’ll come in the form of three $30 billion, 14 day repos to be offered next week.

That brings the new Fed QE to a total of $165 billion. Even in the worst days of the financial crisis, I can’t remember the Fed ballooning its balance sheet by $165 bi...



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Biotech

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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Promotions

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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.

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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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