Archive for July, 2007

The Four Horsemen (of the Apocalypse?)

OptionSage submits:

Phil often uses physics to describe movements of the markets and this weekend might be an appropriate time to review one lesson in particular from December 20, 2006:

“The larger the Apogee (the point at which the market is furthest above "normal") the more terrifying the drop back to the Perigee (underperformance) will seem, even though there are literally trillions of astronomical bodies that go through this cycle every single day without crashing!

“The perigee is a good time to eject excess mass (nervous investors) as you prepare to leave them, and previous market highs, behind”

The market’s move on Friday has spooked a lot of investors and perhaps rightly so.  If we restrict ourselves to earthly objects for a moment then we know well that gravity dictates:

“What Goes Up Must Come Down!”

Unless the market swings from its respective Apogee to its respective Perigee and rebounds with strength, gravitational pull can be deadly and parachutes need to be deployed quickly as the earth approaches quickly when traveling at terminal velocity and nobody wants to feel that thud upon impact!

What does it mean for us traders?  Firstly, be cautious of the flagship stocks that garner mass attention after they have run up tremendously.  For example, Cramer anointed Apple, Research in Motion, Google and Amazon as his Four Horsemen.  I don’t know if Cramer really wanted to follow through with that description as the typical reference to the Four Horsemen is “The Four Horsemen of the Apocalypse” and refer to the forces of man’s destruction:  Pestilence, War, Famine and Death.  Surely Cramer didn’t miss this so it proves to be a particularly fascinating description of his favorite stocks! 

It’s especially interesting because as the old boxing analogy goes “the bigger they are the harder they fall” and Apple, Research in Motion, Amazon and Google have all had big runs.  In fact, Google might have been the first to


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Monday Mop-Up

That was the least exciting 90 points we ever gained.

We were not very happy with that rally as it was just the typical M&A Monday sort of thing without the broader participation we would have liked to see that would have indicated a run-up to new highs.

Our finish was very weak and we failed to retake Friday's open with the poor Russell still stuck in the mud, down 1.5% for the past 5 days.  We are still up about 5% for the month (with poor Russell dragging us down) but the SOX have given up their leadership and no new index looks anxious to take their place.

That was surprising as there was EVEN MORE M&A activity than I reported in the morning as URI agreed to go private for $7Bn and NOK/SI is offering $7Bn for TLAB (if $7Bn is some sort of magic number I will humbly offer PhilStockWorld up for consideration!).  When $105Bn is offered up to the markets in one day and we can't hold  a 100 point gain - that is not a day we can crow about!

35 of the Dow's 92 point gain came from MRK, who ran into heavy selling near the close and the post-market reporting was bad to say the least with AXP missing by .03, TXN just in-line, NFLX guiding down, AMLN in-line and ALTR reporting declining revenues.  None of that really matters as tomorrow morning is a very busy day with morning earnings from AKS, BIIB, BJS, BNI, BP, BTU, CFC, CME, DD, EDU, KMB, JBLU, LLY, LM, MCD, NOC, OXY, PEP, SVU, T, X, UAUA, UPS, USG, WAT and XTO followed by AMZN, AFL, BXP, CAKE, CB, CTX, PNRA, RDN, STM and RHI at the close so we'll check our levels and see how things are shaking out:

 

 

Day’s

Must

Comfort


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Monday Merger Mania

It's Monday and the money is flying on Wall Street!

Thank goodnees SLB chased us out of shorting most of the OIH group last week but I still have some leftover RIG puts that are never coming back now that they announced a $53Bn mega-merger with GSF$15Bn is going back to the shareholders in a very large financed buy back so both companies should go up on this news and the OIH may make a nice momentum play in the morning.

Our faith in CCJ may be rewarded as Electricité de France SA said Friday that it will buy an interest in CEG in order to develop next-generation nuclear reactors in the US – well, if we're not going to invest in our own infrastructure at least foreign companies are starting to make some investments!  Constellation and EDF said they aim to build 1,600-megawatt nuclear machines designed by French state-run engineering company Areva SA and which are being reviewed by the U.S. Nuclear Regulatory Commission for licensing.  Also, there has been nice progress on our negotiations to power up India – all bad news for the oil pushers.

TFX is buying ARRO for $2Bn in cash, German lender Hypo Real Estate is buying Depfa Bank for $8Bn ($4Bn cash) in a risky dillutive move I'd love to play, TomTom is buying Tele Atlas for $2.7Bn after announcing a 37% increase in sales and a 79% increase in profits, the $5Bn bid for EMI Group has been extended, European insurers Friends Provident and Resolution are in a $17Bn merger and HPQ is spending $1.5Bn for OPSWAnother Monday, another $25Bn in equities coming off the market and another $91Bn in transaction for GS et al to collect some fees on.  Hard to be short on a day like today – I always try to keep things in perspective by multiplying Monday's deals by 52, to see if it seems strong for the year and $91Bn x 52 is $4.7 Trillion, so I can state with virtual certainty that this is indeed – A BIG DEAL DAY!

I'm not even mentioning that BCS has upped their bid for ABN to $93.2Bn because that mostly cash deal alone multiplied by…
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Weekly Wrap-Up

41 Monopoly ManWhoopie, yet another amazing week put to bed.

It’s always great when pretty much all of our major bets work out:

Last Friday Zman pointed out some refiners that had gotten ahead of themselves and we decided HOC Aug $75 puts at $2.25, now $2.88 and WNR Sept $55 puts at $2.12, now $3.50 made good plays.  We also liked BHI Aug $85 puts at $1.62, now 4.15 from the 12th and the BHI July $85 puts at .30, which finished the month at $2.60.  That was the last of our official "Free Picks" but there were so many good plays lest week we still found a couple of new ones to play.

In last week’s wrap-up I outlined Dr. Brett’s concerns about the market and nothing that happened last week changed our opinion of that.  On Monday morning I promised a thrill ride for the week and that’s exactly what we got with the Dow; up 150 by Tuesday afternoon, back down 175 to 13,850 by noon on Wednesday, up over 14,000 again on Thursday morning and back down to 13,800 at 1pm on Friday.  Since we went into the week with a pretty good strangle on DIA puts and calls (which we spent the whole month working into), it’s no surprise that they were the stars of our virtual portfolio, accounting for much of the week’s gains despite the fact that they are there mainly for "protection."

In Monday’s wrap-up I pointed out that the dollar could go further down and that gold could go further up, and they did.  Finally all that discussion about China and the Euro and the carry trade starts to pay off for us! 

Someone was interviewing me last week and they asked me if we specialize in energy and I said no, it’s just hot so we talk about it.  I explained to him that if medical devices were hot my members would know every last detail about drug coated stents because, over the long haul, THAT’S HOW WE MAKE MONEY, we take the time to learn the sectors that are in play because this is not roulette, this is the market and there are market forces at work and understanding those market forces allow us to make sensible bets over time!

On Tuesday, Happy and I were concerned and I said: "I don’t
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Friday Virtual Portfolio Moves

Posted July 20, 2007 at 9:37 am | Permalink (Edit)

Sorry, concentrating on GOOG.

In with 40 $520s at .75, will sell 1/2 at $1.50 and buy 20 $530s as a roll. Puts are too expensive so far but will buy 20 $500 puts for $1, preferably .75.

Posted July 20, 2007 at 9:38 am | Permalink (Edit)

VLO turning down sharply again.

NOV $115 puts at .10, just a feeling!

Posted July 20, 2007 at 9:45 am | Permalink (Edit)

GOOG – sorry was shooting up while I posted. Already a free ride – this is why I posted the strategy last night, you need to buy into that initial dip. Now going the other way. NEVER chase these the time to buy the puts is when its going up and the time to buy calls is when it’s going down – don’t be a sucker, don’t spend more than a craps bet and don’t violate your intended amounts until you are ahead (and then never risk your nut).

Posted July 20, 2007 at 9:46 am | Permalink (Edit)

XOM – sold $95 puts against my $90 puts for a mo play, praying to get even.

Posted July 20, 2007 at 9:57 am | Permalink (Edit)

AMD being slapped right back down. Internals look ugly, nobody would pay me for XOM $95 puts 8-( I am just screwed on that position! Going to funnel my frustration into more Aug $90 puts. I no longer X these as I do not generally recommend them as they are only good plays if you can afford 3 month’s worth of DDs and rolls.

ICE popping back up.

GOOG – very dangerous here as many many people are playing this channel so there will be a lot riding on expiring right at $515 but I’m trying to get the $510 puts for $1.50 or less and will buy more $520s at $1, looking to be 40/40 ahead of lunch and cutting back to 20/20 through the end of the day. Every time I get a double on either side I take half off and…
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Thursday Virtual Portfolio Moves

Posted July 19, 2007 at 9:48 am | Permalink (Edit)

SIRI – no, I’m frozen into a roll.

Let’s make sure the S&P breaks 1,555 or it is time to roll up our DIA puts back to the Aug $140 puts. If the Nasdaq can’t hold 2,710 that will be a concern too but I don’t like the Q puts as the Nas could really pop with GOOG/AAPL.

As usual the XLE’s are pokey so we can play the $75s to either side if we get a strong signal from XOM/COP/CVX. VLO tanking and TSO may follow so the Aug $55 puts at $2.30 are a nice downside play. XXX – but only if you need a downside play!

I looked at the upside and, other than XLE, I can’t get behind them – even with oil up here. OII would be the best of the bunch as they are consolidating at $55 and the Oct $55s are $4.85 and can be offset by the Aug $55s, now $3.05 on a downturn. XXX

Posted July 19, 2007 at 9:58 am | Permalink (Edit)

XOM – no I think I am screwed, I think that was stupid and my premise broke long before the close and I should have taken my lumps and gotten out with half. I’ve taken up a heavy position in the Aug $90 puts to start a proper following roll on them but, for the most part, I simply wasted a lot of money.

UNH – they are still paying $2.33 for the Aug $50s so we may as well take it as damage control and hope they stabilize (against leaps of course).

HOC giving a nice entry on Aug $75 puts at $2.30 XXX these will be great if the gas build is in the high 80s or better.

Posted July 19, 2007 at 9:59 am | Permalink (Edit)

Oh, if oil goes down they will take the S&P with them so don’t get too excited if XOM does start to tank until you cover the rest.

Posted July 19, 2007 at 10:00 am | Permalink (Edit)

OIH – I took the $2 of course for selling…
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Final Exam Friday

Now we get the big test:

A "miss" by GOOG, a BIG MISS by CAT (on record sales and profits), a big beat by SLB (which should rocket the OIH so let’s look at the $185 calls out of the box), a big beat by WHR, a mixed report from MSFT and nice earnings from C and BAC.

It’s oil day with Criminal Narrators Boosting Crude as they had our man Phil Flynn live first thing in the morning and hourly updates on T Boone’s China trip where they actually tried to explain that China’s Three Gorges Dam, which came in 10% under budget at $22.5Bn and will pay for itself in 10 years while generating 100 Terrawatts per year, isn’t such a good idea.  The energy generated by running water through a turbine with zero pollution is saving 31 Million tons of coal per year and cutting the emissions of 100M tons of greenhouse gas.

Relative position of the Three Gorges Dam .While some people (1M) were relocated to build the dam and some environmental damage was done to the surrounding region, the fact is that the project controls downstream flooding and protects over 50M acres of farmland in areas where millions of people have had to abandon on several occasions.  While T Boone and the CNBC crew seek to highlight hydroelectric’s problems, the fact of the matter is that this profitable government vernture will supply the electricity needs of 90M people and 4 more dams are in the works that will supply another 180M people’s needs with another (and I’m not kidding) 16 dams in early stages.  This project began in 2003 – while we were marching off to war for oil, China began a war on oil consumption and pollution that could meet the electricity needs of the entire United States for less money than the latest "troop surge" cost us

What is making T Boone and Phil Flynn so nervous?  Perhaps it’s the fact that China is now exporting this technology, with a project already scheduled in Burma that will produce 4Bn kilowatts annually.  If this catches on they’ll have to switch from crying "peak oil" to "peak water!"  Don’t worry boys, this solution will only work in countries where they have rivers.

Speaking of Mr. Flynn, apparently he now feels the need to directly address whatever Zman and I say in the mornings as his
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Thursday Wrap-Up – Google Goes Down!

Happy 14,000!

I said this morning that nothing mattered until we hear from Google but the market did do it’s leveling best to look like it mattered today.

We made it through Uncle Ben’s testimony and the Fed minutes relatively unscathed and we shook off some very shakey leading indicators (-.3%, down from +.3%, -.1% expected) and a pathetic 9.2 reading at the Philly Fed, down from 18 last month and far lower than the 13 expected.  So Q3 starting with a real downward turn but the party seems to march on with an unstoppable momentum but I’m worried it’s going to be like a New Year’s party where the action really heats up around midnight (pick your target level), even though everyone is tired, and then quickly breaks up, leaving a very big mess.

Google’s topline revenues rose 62% but they made the unforgivable mistake of investing in the future by hiring 1,500 very highly paid employees (+13%) AND expensing the bonuses paid to capture the best and the brightest.  In the conference call Eric Schmidt said:  "We have continued to make significant investments, as we have previously discussed. We are growing rapidly, building the best infrastructure, hiring the best to extend our footprint internationally, all the things that we talked about. Building better and better products and invest in doing so in the model that we’ve talked about: 70/20/10, 20% of the time, and that sort of thing."

That’s right, they are doing EXACTLY what they said they would do and missed earnings by .03 out of $3.59 and took a $15Bn hit in after hours trading for it.  I have been blaming corporations for ruining this country by focusing more on stock buybacks and bottom line earnings than capital investment and R&D but now I’m going to blame — YOU!  What is wrong with you investors?  Are you people 5 years old?  If you don’t get the results you want every single quarter do you just have a little temper tantrum and dump a stock?  Apparently so…

Oh well, Mr. Buffett and I thank you for your skittishness!

Seriously people, I know that attention deficit disorder is some kind of national disease but isn’t this taking things a little too far?  Here is a list of the wealthiest Americans who ever lived, adjusted for inflation.  Mr. Buffett is only…
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Through the Roof Thursday?

Are we ready for takeoff?

I've written several articles outlining my theory of stock market physics and we do indeed seem to be appoaching escape velocity as the Paulson/Bernanke plan that led me to make my Dow 15,000 call in December bears (oops, don't say bears!) fruit.

As I predicted yesterday when we bought FXI calls on the member site, Asia responded well to our minor dip and the Hang Seng jumped 174 points to close back above 23,000, now outpacing the Dow by 9,000 points since both indices stood at 8,000 back in April of 2003 (hey, isn't that around when we went into Iraq?).  Well we're still over there but the Hang Seng (and the rest of the world) decided not to wait and started a global party without us.  As we discussed on Monday, there are very good reasons for China to be enthusiastic about their decision to choose butter over guns in the new millennium.

"We can do without butter, but, despite all our love of peace, not without arms. One cannot shoot with butter, but with guns." - Joseph Goebbels

"Guns will make us powerful; butter will only make us fat." – Hermann Goering

China announced this morning that Q2 economic growth accelerated to 11.9%, up from 11.1% in Q1.  This is what Cramer likes to call ARG, or Accelerating Revenue Growth and it's his number one reason to invest in a company.  Costs (inflation) are running a little high at 4.4% over last year but sales (exports) are up 28% with "continued heavy investment in new factories and infrastructure."  It's amazing what can happen when the government and corporations work together to build an economy rather than their balance sheets isn't it?

It's not just China, Bessemer Venture Partners are earmarking 1/3 of their new $1Bn fund for India while other US venture capital firms are setting up specific funds for China and India.  So we gather money from US investors and invest in foreign corporations, where all the real growth investments are being made.  This is the begining of the Dollar Carry Trade I talked about yesterday and, while it's not exactly great news for the US, what do you expect investors to do…
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Wild Wednesday Wrap-Up

That wasn't so bad was it?

You know the markets have clearly left orbit when a $20Bn hedge fund blowing up barely causes it to pause.  While he didn't hurt the market, I wouldn't say Bernanke helped the market, as he flat out stated the housing slump had deepened and "Upside risks to inflation are [the Fed's] predominant policy concern."  Woo hoo – party on Ben!

Here's some of the great things Ben said that don't seem to matter to investors:

  • Mr. Bernanke added a new inflation risk to the ones he has cited in the past: Productivity growth has "slowed somewhat," he said.
  • "Month-to-month movements in inflation are subject to considerable noise, and some of the recent improvement could also be the result of transitory influences."
  • "Sizable increases in food and energy prices have boosted overall inflation and eroded real incomes in recent months… PCE inflation ran at an annual rate of 4.4 percent over the first five months of this year to a level that would clearly be inconsistent with the objective of price stability."
  • "Yet another risk is that energy and commodity prices could continue to rise sharply, leading to further increases in headline inflation and, if those costs passed through to the prices of non-energy goods and services, to higher core inflation as well."
    • Nonetheless, the Fed lowered their official 2008 core forecast to between 1.75 and 2%.
  • "Declines in residential construction will likely continue to weigh on economic growth over coming quarters, although the magnitude of the drag on growth should diminish over time."
  • "Nevertheless rising delinquencies and foreclosures are creating personal, economic, and social distress for many homeowners and communities--problems that likely will get worse before they get better." 
  • Fed officials lowered their forecasts for economic growth both this year and next by a quarter percentage point from their February view.

Ian Shepherdson of High Frequency Economics is quoted by the journal saying: "To us, Mr. Bernanke has a pair of rose-tinted spectacles clamped firmly to his face, not least when he said that the housing drag will “diminish over time” and that the
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Phil's Favorites

Opposite of Conventional Wisdom

 

Opposite of Conventional Wisdom

Courtesy of 

There was an article in the New York Times that highlighted the reversal of previous findings in medicine.

Of more than 3,000 studies published from 2003 through 2017 in JAMA and the Lancet…more than one of 10 amounted to a “medical reversal”: ...



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Zero Hedge

WTI Extends Losses After Smaller Than Expected Crude Draw

Courtesy of ZeroHedge. View original post here.

Oil prices plunged today as Trump and Pompeo defused some tensions with Iran and geopolitical risk premiums were squeezed out suddenly.

“Bullish catalysts are in short supply,” analysts at London-based broker PVM Oil Associates Ltd. said in a note to clients.

“The Gulf Coast of Mexico hurricane premium is fading as offshore operations in the region resume. At the same time, the U.S. shale engine continues to give oil bulls a sleepless night.”

API

  • Crude -1.401mm...



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Kimble Charting Solutions

U.S. & Euro Financials Lagging Big Time! Should Stock Bulls Be Concerned?

Courtesy of Chris Kimble.

Historically its been positive to see Financials doing well at the same time the broad market is pushing higher! If financial stocks are lagging bit time, should stock bulls be concerned?

This chart compares banks and in the U.S. (XLF) & Europe (EUFN) to the S&P 500 over the past 18-months.

Currently, XLF is lagging the S&P by more than 11...



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Insider Scoop

Earnings Scheduled For July 16, 2019

Courtesy of Benzinga.

Companies Reporting Before The Bell
  • Goldman Sachs Group Inc (NYSE: GS) is projected to report quarterly earnings at $5.00 per share on revenue of $9.13 billion.
  • Domino's Pizza, Inc. (NYSE: DPZ) is expected to report quarterly earnings at $2.02 per share on revenue of $836.92 million.
  • JPMorgan Chase & Co. ...


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Digital Currencies

Bitcoin Breaks Back Below $10k, Crypto-Crash Accelerates As Asia Opens

Courtesy of ZeroHedge. View original post here.

Update 2010ET: Having briefly stabilized after this morning's weakness, cryptos are tumbling once again as Asian markets open.

Bitcoin has broken below $10,000 again...

*  *  *

While all eyes are on Bitcoin as it slides back towards $10,000, the real mover in the last 12 hours has been Ethereum after...



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Biotech

DNA testing companies offer telomere testing - but what does it tell you about aging and disease risk?

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

 

DNA testing companies offer telomere testing – but what does it tell you about aging and disease risk?

A telomere age test kit from Telomere Diagnostics Inc. and saliva. collection kit from 23andMe. Anna Hoychuk/Shutterstock.com

Courtesy of Patricia Opresko, University of Pittsburgh and Elise Fouquerel, ...



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ValueWalk

Professor Shubha Ghosh On The Current State Of Gene Editing

 

Professor Shubha Ghosh On The Current State Of Gene Editing

Courtesy of Jacob Wolinsky, ValueWalk

ValueWalk’s Q&A session with Professor Shubha Ghosh, a professor of law and the director of the Syracuse Intellectual Property Law Institute. In this interview, Professor Ghosh discusses his background, the Human Genome Project, the current state of gene editing, 3D printing for organ operations, and gene editing regulation.

...

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Chart School

Gold Gann Angle Update

Courtesy of Read the Ticker.

Charts show us the golden brick road to high prices.

GLD Gann Angle has been working since 2016. Higher prices are expected. Who would say anything different, and why and how?

Click for popup. Clear your browser cache if image is not showing.



The GLD very wide channel shows us the way.
- Conservative: Tag the 10 year rally starting in 2001 to 2019 and it forecasts $750 GLD (or $7500 USD Gold Futures) in 10 years.
- Aggressive: Tag the 5 year rally starting in 1976 to 2019  and it forecasts $750 GLD (or $7500 USD Gold Futures) in 5 years.

Click for popup. Clear your browser cache if ima...



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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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Mapping The Market

It's Not Capitalism, it's Crony Capitalism

A good start from :

It's Not Capitalism, it's Crony Capitalism

Excerpt:

The threat to America is this: we have abandoned our core philosophy. Our first principle of this nation as a meritocracy, a free-market economy, where competition drives economic decision-making. In its place, we have allowed a malignancy to fester, a virulent pus-filled bastardized form of economics so corrosive in nature, so dangerously pestilent, that it presents an extinction-level threat to America – both the actual nation and the “idea” of America.

This all-encompassing mutant corruption saps men’s souls, crushes opportunities, and destroys economic mobility. Its a Smash & Grab system of ill-gotten re...



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OpTrader

Swing trading portfolio - week of September 11th, 2017

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

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Promotions

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.

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