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Wild Wednesday Wrap-Up

Well that went pretty much as expected!

As BillBigD noted in yesterday's chat, it's "Amazing what 700 points does."

We stopped just short of my 13,250 target with a strong 50-point move into the close but we got everything we wanted this morning with better than 1% gains across the board giving us new green boxes on the big chart in the NYSE, Transports, 2 on the Nasdaq, and the SOX while stopping us just short of our green levels in the S&P (6 points to go) and the Russell (1.5 to go).

Europe had a good showing as well but the CAC and the FTSE had a long way to go so we MUST have follow-through leadership over there if we are going to continue to rally over here.  As I said this morning, we also need Japan to show us something special as they are dragging Asia down and mSquare reports from India that the market there is taking a cautious tone and expecting further corrections.  The Bombay Sensex was looking strong at 14,248 and we really don't want to lose our levels there.  They are in our comfort zone at 14,100 but they must hold 13,500 or it is likely that they will become the downside leader for Asia so we will watch them with great interest!

I said in the morning that this rally was the result of a massive global effort on the part of the central bankers to bail out angry rich folks like Senator Kent Conrad (and his string pullers), who wants to fire Fed officials who let the market drop.

On the whole We're getting close to a 50% retracement on the Dow Jones World Index from our peak around 313 to the drop at 278 and we are going to be retesting our February high (remember 2/27?) tomorrow. Once we clear 290 we can expect a full 50% move to 295 (which is the same center point you would get if you threw out the spikes..).  How we act there will really tell the tale of the markets.

Meanwhile, our FXI calls from the 16th look to be in good standing but they should be rolled at this point the $125s are up over 400% and it doesn't make sense to risk it so the best move is to take 75% off the table and roll to whatever cost $4 where we will capture most of any continued upside with just our original bet at risk to the downside (and a 50% stop will lock in 80% of our gains!).

We'll see what tomorrow's markets will bring but there wasn't much driving this rally other than a general sense that the Fed was going to step in and save the markets, this is not what I got out of yesterday at all!  If oil stays down and the Nasdaq keeps leading, I will be happy but we MUST break 13,250 or this becomes just another bounce on the way down a long staircase… 

Oil closed at $69.26 but the energy sector held strong while gold made a slight gain to $668 and the dollar fell back to 81.25, the 50 dma I warned about in yesterday's wrap-up.

The big news of the evening is BAC stepping in to bail out CFC but, as I said to members in comments: "I am reminded of BSC and GS bailing out earlier sub-prime blow ups but it turned out they were trying to hide the mess they were in…  You’ve got to love the AH reaction, up 20% on a 7.5% loan that converts to owning 16% of the company at $18 a share – nice dillutive event down the road! Also, a 20% jump in price on top of the 10% recovery they already had pretty much guarantees Buffett wouldn’t touch them with a 10-foot pole."


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  1. Phil,
    What are you doing with your CFC puts now? DD or standing pat?

  2. Two things –

    IWM – seems to be wanting to gap up over resistance of 80 bucks. . If this happens, we could have some real buying pressure and surge the Nasdaq and small caps.

    XLF – 50 MA is around $34.9, if it gets above that, might rally some. .

  3. BBD/Dragon, any trades for GPS today – they report ATC today?

  4. Hi Phil, are you going continue reviewing portfolios ??
    any chance to get whose of this trades you think still worth to entry in ??
    I’m wiring funds to my OPXS account to start on monday, interest in 10K (a start is a start !!) and left some money to happy plays

  5. JBL
    I don’t play that one! I was going to ask you if you wanted to meet up next Tuesday for a drink. I was waiting to ask if you wanted to meet this week but I guess you had kid duty.

  6. Phil, I didn’t reply to your question about why I bought QQQQ puts because I had to go to an appointment and missed the last 45 mins of the session. I bought indext puts because I don’t believe last weeks low was the bottom, at least not without retesting and/or building a base for a few weeks. This correction has unfolded too fast and the snap back last Thur/Fri was so fast and sharp I didn’t believe it could be the start of basing without retesting. It appears I went short too soon but I am going to stick to my guns for once. right or wrong. I picked the QQQQs because they seemed to have the most fliers and furthest to fall if we get another strong down leg, I could have been wrong on that but I am trying to stick with one index to keep it simple. I think my biggest mistake was build the position too big and too fast, but we had been violently changing direction every two or three days and I had been too slow reacting since the beginning of the correction and getting whipsawed. All I wanted to do while waiting for the correction to end and start buying again was practice the mattress strategy during this correction and haven’t done very well with my efforts thus far.


  7. CFC puts! Wow am I glad I had a tight TS & stopped out early w/ a small profit yesterday while gone to lunch. This a.m. lesson for me is “don’t get so worked up about leaving a few dollars on the table if you get out safe w/ profit – nothing in this market is a sure thaaaannnnnnnng!”

  8. TXN

    Phil, yesterday you indicated you were looking to pick up TXN. Chart looks very nice! Is this for LTP or STP and how would you structure a position. The April 35′s @ 3.25 / Sep 35′s @ 0.60 look pretty good.

    Thanks – Brian

  9. Looks like I’m going to regreat sitting on my hands on JOYG though! “MrN keep repeating the previous lesson!!!!”

  10. JPL- not sure on GPS. Id rather wait and see. The movement on ZUMZ says something to me.

  11. BBD, that would be great – it would be nice to have a drink and meet you. I am in the Knox Henderson area, and I know you are North Dallas, so pick a spot and I will meet you there.

  12. BBD – you play BUCY don’t you? Is it worth a shot since it’s trailing JOYG?

  13. Happy: What do you think of the weekly chart of KO – breakout? could this be one of the new leaders when the correction ends? Appears to have been very strong during this correction.


  14. CFC – watching and waiting but I’ll likely roll to a $25 put if it gets up to $26. Just looking to get out even though….

    I reveiw the LTP regularly and the 10KP once in a while but the others are subject of intraday comments (and would take way too long for a proper review). I am going to reset the Free Picks portfolio as a $25K portfolio where we can take more risk than the $10KP.

    QQQQ – sticking to your guns (with prudence) is a good idea when you get whipped like this but what you want to do is make sure that a 30-50 point dip will give you a chance to lighten back up and get even otherwise you are asking for too much.

    Good lesson MrN!

    TXN/Whole market – getting away. At this point I would only want to do spreads but not going to be confident if we can’t break 13,300.

    On to the new post please – I’m still working on it though!

  15. Thanks Phil: I think 30-50 point dip will get me more then past even, I hope (don’t really know how to figure that out)? My cost basis on the Sept QQQQ puts is: 47′s at 1.30, 46s at 1.06 and 45s at .58. Even if they all expire worthless it is a 10% hit to total portfolio, which is too much and I don’t want to take but won’t wipe me out either.


  16. Starting on JOYG earnings prerun 55 calls schnitzel.
    Starting on JCG earnings strangle hybrid with the 55 calls.

  17. dragon, are u buying the JCG 55 calls and 55 puts?

  18. KO
    greg, I think breakout could be likely above 55.

  19. Thanks Happy!

    PS I will be subscribing to your site when I can sign up for Zmans at the same time. Hopefully soon. I want to follow your longer term buy recommendations as soon as this correction ends.


  20. Thanks Greg!

  21. Coventree’s woes mount

    Abandons plans to open a retail bank or invest in any new operations as revenue sources dry up; stock falls 26% 10:16 AM

  22. What about adding MCO to the watchlist of recovery candidates after the correction? It has fallen very hard due to the sub prime issue, yet (IMO) should be in even greater demand to rate debt as a result. It is holding at what looks like a very good inflection point right where it broke out in July 05. Look at how it recovered after the 6/06 and 2/07 corrections.

    Anyone see potential here?


  23. SYNA – “correction, we don’t need no stinkin correction” Look at this one fly.

    fotoadict: are you familiar with SYNA’s Foveon image sensor chip? It is used only in a Sigma camera. Any thoughts about this chip revolutionizing digital photography?