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Which Way Wednesday?

Yesterday was a real wild one! 

I called it "Testy Tuesday" in the morning post and we tested both our upside (3 times) and downside (once) levels during a wild trading session.  Our patience paid off as we got to our 8,200 goal where we did a little more bottom fishing, including a perfect flip to short on the SKFs right at our $200 goal on that ETF.  In the morning post, I said to watch Dow 8,400, S&P 860, Nas 1,500, NYSE 5,400 and 455 on the Russell as the levels we wanted to break over for the day – while we touched those levels around noon, we were skeptical, even as we played the upside as I had told members that the mythical Plunge Protection Team would try to make Paulson look good during his testimony (and here's the CNBC clip discussing it yesterday).

Sure enough, once Paulson was done we finally got our dip and we played the market like a fiddle in our intra-day chat – hitting pretty much every turn on the nose as we stayed predictably range-bound all day.  At 11:56, as the Dow and the Nasdaq tested our levels, I warned members: "Do not forget to ignore the Dow and focus on the NYSE, RUT and S&P in that order as they are less manipulated than the Dow and the Nas, we need real breakouts across the board for it to be real(ish)" and, an hour later, we went bearish again as I said: "Now if the Dow doesn’t get back over 8,400 soon we are likely to head back to at least 8,250 and the S&P and RUT and Qs would have me leaning that way.  If anything, I would say that the volatility of this market is underpriced." 

It seems crazy to predict up and down 100, 200 and 300 point market moves all during the same session – it's something we used to predict for the month!  We are still in an amazingly profitable day-trading environment and, while It was depressing to give up 300 points off the morning rally (even though it was BS), we stuck to our plan and I listed 15 stocks at 1:21 for our bottom fishing expedition (following our hedged entries, of course).

This market has really beaten a lot of people up and the sentiment of our members was getting very negative after lunch, so I gave one of my motivational speeches at 2:19, answering Fab's question as to whether it's good to buy into the flush, saying: "Buying the flush/Fab – That’s kind of the whole point.  Our goal was to turn from 60/40 bearish to 60/40 bullish at 8,000 so around here (8,200) the idea is to start cashing in some successful short-side plays and picking up some more calls (hedging, of course).  If we don’t turn back up around here, we won’t be over-committed to the upside but if it does hold and we head back to 9,000 – then it couldn’t be more perfect."

Of course we picked up our usual QLDs and UYGs at the bottom and we hit the turn on the nose at 2:56 as the S&P held the 2.5% rule at 830 and then we ran with the bulls BUT…  BUTBUTBUT – we did NOT break out past our levels so that left me saying at the close: "Still no GOOG $300 and no AAPL $90 so what kind of rally is this?"  Today could go either way – I noted yesterday that we have a lot of data points to look at today and tomorrow and we got the slight downside follow-through in Asia with both the Hang Seng and the Nikkei looking like they are trying to put in a bottom, each down about half a point.

Shanghai bounced back 6.3%, regaining all but a point of what it lost Tuesday.  China was led higher by oil refiners on hopes that a fuel tax would help improve refining margins so I'm not sure how great that news is.  The really great news in Asia is that the Baltic Dry Index finally seems to have bottomed out above 800, down 95% from it's June high.  While it may not seem like much, the index is not a stock but rather an indication of the cost of moving dry cargo around the World and I echo the very simple observation of Howard Simons: "People don't book freighters unless they have cargo to move."  We'll be watching this closely as this may be our second indicator that global markets are thawing (LIBOR is already successfully down).

Europe is trending down over 2% ahead of our open as BASF announces it will temporarily close 80 plants and cut production at 100 more while warning on profits.  One would think this would hurt XOM too but that stock is ridiculously holding on to $75 despite the fact that the main product they sell is now 1/3 of what it was in June, when the stock was at $90.  The collapse of XOM and CVX to realistic levels is my biggest remaining Dow fear as they are 2 of the 3 largest components (IBM is holding $80) and can knock the Dow down 1,000 points if they fall back to the $50s. 

In the US, our CPI showed the biggest drop in 61 years and home construction made record lows.  This is nothing we didn't expect so we'll see how low they can take the markets this morning as it would still be nice to see a spike down with some volume conviction to put in a proper bottom as these sudden runs up don't leave us feeling good at all, especially when they can't even take out our technical levels.  Another build in oil may send XOM reeling so they are my short of the day at $76-$77 range and the Dec $70 puts are just $3.10 and were $4.30 yesterday afternoon so if we get into those looking for $1+ with a stop at $2.50, that's a fun day trade.  This trade can also be watched along the $55 line in oil after today's inventory report

Bad news for the Big Three automakers as Senator Shelby favors bankruptcy over bailout but don't expect Congress to really let it happen.  Paulson still has his magic checkbook and is saving some cash for just such an occasion.  Until this issue is resolved, the markets will remain uncertain and we will remain uncommitted as we watch our levels as we ride the waves up and down, looking for a real trend!

 


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  1. Phil:

    SKF yesterday’s rise to 200, Financials now really at a bottom I expect ??
    but is it really ready for a SHORT ?
    GE: news about GE is really bad, stock at 16, cannot make enough from selling covered calls,
    FSLR: way down, have they bottomed ?


  2. SKF/RMM – Well, if it’s really at a top, then it’s really ready for a short isn’t it?  You can’t wait for a trend to get into something as the trends reverse twice a day.  At some point you need to decide where you will enter something and pick a bottom or a top, trying to play a trend is how you get whipsawed on every entry.   GE – can’t make enough selling covered calls over what period?  I see a $16 stock that pays $1,54 for selling Dec $16s.  Multiply that by $12 and it’s a better than 100% return in a year.  If you think that kind of monthly return is not good then you will never be satisfied in the markets.  FSLR – no bottom with oil under $60 – solar is just not worthwile with oil under $60 without MASSIVE subsidies.  It’s worthwhile for other reasons but not from a cost/benefit standpoint.

    Much better open than indicated by the futures – let’s see if we can get everyone over our levels.  Right now, RUT is being the dog, still down 1% vs 1/2 point gain for the others. 

    DRYS making new lows at $7.40, perfect entry for selling Dec $7.50 puts and calls at $4.20 (I kid you not!).


  3. RIMM backing off it’s run even though they were added to GS conviction buy list today.  Maybe GS was just giving their buddies an exit off that 25% rally or maybe it’s the perfectly expected 5% pullback that will confirm the uptrend so let’s watch them at $46, which should hold if they are serious about making a run at $50.

    Damn, still bouncing off our upper index levels! (and those are pretty pathetic upper levels).


  4. Phil,
    Is XOM/CVX a good short?? Do you think it is held up because big money is worried that once they let it go, dow index is going to crash badly??
    thanks


  5. HMM Mkt due for a bounce?


  6. DRYS now down 10% for today. Math quiz: How many -10% days you can have before you get to 1 dollar starting at 10?


  7. G’Day to all
    RMM – If you do not trade Covered Calls then typically CC can improve stock performance by 4-6% percent/ year. This is not a major panacea on a bad stock. So if stock decline, you have slightly lower loss.


  8. DanW – 21.9 days


  9. Bronek:
    I sell a lot of CC, including GE, my comment about GE had in mind the news that they might go under,
    even with CC, it takes a year to make up for the stock losses.


  10. XOM/HP – Yes, that’s a likely explanation.  They are caught up in index bottom fishing and also the general disbelief by oil bulls that the party is over so they are a "flight to quality" for the sector but XOM is making those air pocket gains just like the Dow is and they are easily undone and sub-$55 oil is a stake through the heart if that trend holds for a couple of weeks.  They just tapped $77 on the button and were soundly rejected, we’ll have to see what happens after inventory, which may be yet another BTE build.

    $1/Dan – The answer is – A lot.  Do you have a quick way to calculate that?   Kind of reverse compounding…  The real question is how far down to $5, where it would be put to you and that would be 7 10% down moves from $10 but just 4 bad days from here.  How many down 10% days until GM gets to zero?  

    The NYSE sent a delisting warning to FNM today, GM is below the S&P level of $5 but so are 60 other S&P 500 stocks in this freaky market…

    Yuck, TGT making new lows – not what we want to see.  SPG also.  YHOO back to $11, maybe they hold it.  ANF still going down, now $15. 

    ISRG holding $125 and a great long-term play here.  V holding $55 and MA doing well but AXP is a disaster under $20. 

    RUT blew 445 aleady!


  11. Phil – Ref ANF. I have Jan’10 $22.5C. Yestrday you suggested to roll 2x to May17.5 for ~$3, or to close this 76% loser. My estimate of rents is: at ~ $2.61/mth for 2x to May $17.5 roll and $1.99/mth for 1x roll to Jan’10$17.5 for additional $1.4Db/contract. My question is what the benefit of 2x roll?. I am planning to hold this company as I believe that ANF is making a bottom.


  12. Phil:
    if I assume further market decline, then I should roll and get DEC CC already,
    if I assume no further market decline, then I should not cover,
    so far I am undecided.


  13. Why do you like Dry Ships?  The Baltic Index is hitting new lows.


  14. RMM  If you’re like me, your current callers are going to expire worthless or almost…if you think there might be a bounce, there is no rush to sell December, or you can sell partial


  15. Phil,
    Any oil plays ahead of the inventories? Expectations are for ‘huge’ builds (as per CNBC) and I guess they could be setting up for less than expectations!


  16. ephmen85: exactly, I am collecting the last 50 cents from nove callers as they are out-of-the-money, I often rather pay 10 cents to get rid of the burden to pay attention at the last day,
    this bailout discussion for the car companies is depressing the market, so I tend to believe that the market will continue to decline,


  17. Phil,
    could you do a quick review on our levels as of now and what we need to maintain to stay above watewr?


  18. Did the DOW fall 999 points anytime?


  19. It would actually be easier if the rally waits until Monday, that way all our callers have expired and we can fully participate with the upside…..so here’s to a flat rest of week!


  20. Bought UYG and UYM and shorted XOM (again) yesterday.  All going against me right now.  Will scale in for all 3 positions.  USO dipping now…


  21. Phil
     
    Any plays around short commercial real estate?
     
    Srs, iyr ?

  22. Even JPM approach new lows!


  23. If 10% down day then the price at end of day = 90% price at beginning of day
    1=10*0.9^n
    ln(0.1)/ln(0.9) = n = 21.85 10% down days for a US$10 stock to be worth US$1


  24. Ahhh, and the misery continues…


  25. SKF SRS through the roof!


  26. ANF/Bro – Yes, it’s a bottom call and, more importantly, it stops you from getting whacked if the stock does turn around on you (hard to imagine in this market but it might happen).

    Declines/RMM – With VIX so high you have a lot of good rolls so no emergency as long as we don’t shoot up and drop the VIX so the real rolling decision (assuming your Nov callers are not hopelessly out of the money) needs to be made if we do cross our levels.  Oh yeah – what Eph said!  8-)

    DRYS/Gapando – See above article, I think the index is bottoming and actually overshot the bottom by quite a bit.

    Oil plays/M2 – I liked the XOM puts (also above article – does anyone ever read these?) - sorry but I got tied up on a CC and missed the inventory but I guess it went as expected as oil shot down and took the market with it.

    Levels/Emo – Also in the above post!  Gee, I’m starting to get a complex…  On the downside, we have the 8,200 Dow and 830 S&P that need to hold or we are heading to a low, low retest.

    Short commercial/QCM – Well BXP and VNO are the kings of commercial but they are arleady way beaten down.  I’m really looking/hoping for a bottom on them around here.

    Good one Mike!

    SKF – still not a real break over $200 but, at this point, we need to pray they don’t break out up here.  I think the auto talks are bumming people out, maybe relief when it ends..


  27. Phil – Ref ANF. Sorry for previous confusing question. Let me paraphrase it. Is it better to roll Jan’10 $22.5 C to Jan’10 $17.5C, or to roll Jan’10 22.5C to 2xMay17.5C? Thanks


  28. Did anyone hear the energy numbers?  I can’t find them…

    ANF/Bro – Ah, well that would be under the category of not throwing good money after bad.  You seek to make money back by selling lower calls than would be prudent against the 2010 $22.50s at $3.  As the May $17.50s are the same $3 (about) then that roll allows you to get your montly goal in sales betwen now and April without having to commit additional funds to the roll to the 2010 $17.50s.  You can always roll back in time later and the May $17.50s have a better upside delta anyway and you will be pretty well covered to the downside by selling Dec calls anyway.


  29. These auto execs are unbelievable…they can’t answer the question: "how much do you need?"


  30. ephmen85,
    Auto – maybe they are shy


  31. From CNN
    The Energy Department said crude supplies rose by 1.6 million barrels in the week ended Nov. 14.

    Meanwhile, the government said that supplies of gasoline had risen by 500,000 barrels, and stockpiles of distillates, which are used to make diesel fuel and home heating oil, fell by 1.5 million barrels.

    Analysts had expected to see a rise of 1.2 million barrels of crude oil, according to energy research firm Platts. They had also expected to see a 700,000 barrel rise in gas supplies, and a 900,000 barrel rise in distillates.

    Meanwhile, the rate at which refineries were operating last week rose 0.3 percentage point to 84.9%, the opposite of the 0.3 percentage point decline that had been expected by analysts polled by Platts.


  32. Y the selloff?


  33. Y not a selloff?


  34. Coz
    1. Everyone are expecting it
    2. Bailout
    3. Financials have turned for the better (As per Paul yesterday)

    4. Am short & generallymkt goes against me (went short yesterday so I am still in the Red)


  35. UK completely collapsed going into the close. Down 2% in the last 30 mins of trading. Closed down 5% altogether. Huge losses in mining banks and commodities. Barclays down 13%


  36. So Dow would sink under 8000


  37. Mike
    Better change that to 15% days down for DRYS to get to a dollar.


  38. Auto/Eph – I know, that one shocked me.  They are asking for $25Bn for:  You know… stuff…  What bank would give them a thing and how can these idiots even have jobs?  A person needs to be appointed to come in, take the business over, audit the books and give a real report to Congress in January.  In the meantime they can draw on a line of credit as needed – end of hearing, let’s go home!

    Thanks Herb!  They expected a net build of 3M and got 600K?  Gee, there was a time when that would have sent oil up $5 at least…  What a joke!

    Sell-off – This is good, we needed a better sell-off than what we had yesterday. 

    This woman trying to wring some specific earmark for dealers ($1Bn) out of this bill is really pissing me off.  Why can’t Congress every see the big picture?

    S&P right back to 830, tied with Dow 8,200 but NYSE blew 5,200 so not looking promising. 

    How many 5% down days before SOX hit zero?  Who will win the race between semis and financials?


  39. Fire Congress already.

    C pushing 7.60… holy comoly.
    UYG 5.18

    What a goddarn mess.


  40. "Looks like I picked the wrong day to stop sniffing glue"  --
    http://www.youtube.com/watch?v=CwyrGwM4a7M


  41. Hawaiian Holdings just flashed new lows 3 times in a row on my screen as the Dow tested 8,200 and my screen said: "HA HA HA" – I wonder if that’s trying to tell me something?

    New idea for Congress.  Give Donald Trump the $25Bn to give to the auto companies and he makes them perform different tasks every week to get a check.  One week they could try to sell cars people want, the next week they can pollute less, the next week they can fix the pension plan, the next week they can improve MPG.  In the very least, at least the taxpayers would get some ad revenues back for our $25Bn investment…


  42. loan rate starting from 5% going upto 9%
    Might as well they go bankrupt – we can save 25 billion


  43. SKF has always fooled me.: now 208.


  44. now its might be time to short SKF: or will it even go higher ??


  45. I prefer a "Auto executive Survivor Show"  where they put on a island/ auto junkyard where they have to repair, build and race cars with only McGiver-esque tools.


  46. LOL Occam!  I don’t know what everybody is upset about – we’re only back to where we were yesterday…

    SKF – Still a great short here, we already are bailing out the banks and there are no new issues here that should cause SKF to go up 20% since Friday.


  47. Hi Phil-
    i’m a new member…like your insights ans posts.
    Question re initiating a new position in auto: How would you play the auto sector if one assumes they either get a temporary line of credit or the full $25bn? Buying F or GM could be bad if the equity gets severely diluted like FNM/FRE…perhaps going after some of the auto suppliers (LEA, JCI, DANA, etc) might be better? Would you look to other sectors/stocks as a play on the auto bailout?
    Question re SKF: Why does $200-ish level seem to be a ceiling? If it’s because the SKF gets rebalanced with futures, then if S&P, DOW etc break to massive new lows what near term SKF levels would you expect to hit?
    Txs


  48. So if the buyers come back after lunch this market could turn back up.


  49. Phil – Ref ANF. I understand that you recommend to 1x roll Jan’10 $22.5 to May17.5. Thanks. This advice confuses me. My BE “rent” after roll would be ~$5, the “rent” for Jan’10 $17.5 is ~$2. I understand prudence of money conservation, but if stocks will linger at this level then with May17.5 roll I am locking in the loss. Am I missing something?
    BTW. IMO congress woman Boxer is to the left of the communist party. GM needs, but cannot, to reduce dealers number by at least 60%. B/c of the states laws they cannot do it, so Boxer wants to eliminate GM’s intent to starve dealers until they quit.


  50. I really can’t see the whole financial sector.. or the market for that matter.. beginning to improve until we’ve got a prearranged BK package.. or in the least an outright loan to them.  Until then.. the sky is the limit for SKF.  Wish I had some.  But then again.. I like sleeping at night!


  51. Wow, look at the 10 day on DRYS.  It’s pretty clear where that beatch is heading.  It’s down 11% from my entry….. TODAY!


  52. GM-
    Ray Zalinsky once said: (and I think it applies here)

     “America’s in a state of renewal. We’ve gotta have the strength to tie a few companies to a tree and bash ‘em with a shovel.
     
    Meanwhile, if I can grab your share of the market, put a little coin in the pocket, by being the asshole?
     
    What the American public doesn’t know is what makes them the American public….”

  53. DRYS down 20%  to 6.44!


  54. DRYS must make cars!


  55. It is happening 1 day late

    breaking 8000 & going to almost 7000 (Wont happen immediately)

    Logic – first time we broke 8000 on DOW we went right back to 9200, next time to 8500, third time gullible fools like me would buy calls & it will get wiped out as we go lower


  56. Over 90% down volume so far.


  57. Man: those hearings with the car company boys: depressing. They have little vision, poor answers but fly executive jets. Any humility ? No, by defin ition, if you are a CEO, humility does not apply.


  58. GLD negative…


  59. How can SKF go even higher ? Yes, as I have shoprts now.


  60. Survivor/Occam – Yeah but in the Apprentice format he gets to grill them for being idiots every week and, best part, "somebody will be fired."   Amazingly, with all this testimony, no one is even discussing why we are even thinking about giving the same management more money when every other available avenue of credit has been denied to them by people who evaluate them as too big a risk to lend to.

    Welcome SNS1! – We discussed JCI yesterday, I do like them long-term as people are likely to go from place to place in some sort of vehicle in the future (although you can’t tell from the way things are trading).  In any entry we are taking, we are looking to both scale in and hedge our entries per this article I wrote last week.  On SKF, they simply move 2x% inverse to the XLF so it’s more about calling a bottom on XLF at $11 than a top to SKF.  What’s odd about these ultra ETFs is they tend to go crazy when the base ETF gets too low and they can be totally crushed by a very small reversal.  At this level – I expect the Fed to step in before the ratings agencies hop on the banks again and that can lead to a very small move in XLF back to $13 but that would be a 40% drop in the SKF.

    Volume is very good today, we are already near yesterday’s levels so we could get some real fireworks late but which way – I do not know…

    ANF/Bro – Well, of course we’re assuming they come back but the bottom line is you are spending nothing to enable you to collect $5, the value of your call is irrelevant (although it would be nice to get it back) because if the stock does flatiline through May, then your Jans will be worth about 1/2 of what they are now anyway so you need to take that into account as well.  You can always spend $1.50 then to roll back to the 2010 $22.50s or whatever for the $22.50s but there is no real benefit to spending it now when all you want to do is try to get even.  If you lost $3 and you want to get even and you can sell $5 in premium over 5 months – are you more likely to get even spending nothing and rolling or spending $3 on your leap to collect the same $5 over 5 months?

    DRYS – LOL, it’s a long-term play, meaning several years, not several bathroom breaks…   In that same article, it’s based on the premise that they will continue to exist and you can collect at least .10 a month in premiums for a better than 20% annual return no matter what the sticker price says.  DRYS was $10 before the madness set in and maybe $5 is the right price in a recession but their current p/e is 0.31 – that means if they earn 1/10th of what they projected their p/e is 3.1 – I can live with that…

    Oh no!  MSFT tells YHOO to stuff it!   That’s gonna test the Qs.

    Speaking of insanely low.  AA at $8.50, BTU at $21.50, TXN $15, X $26.  If you do not believe these companies will be bankrupt and/or you think America will exist in 2010 – these are good deals!   When they get near a strike you can do the put and call sale for best entry.  TXN, for example, at $15 and the Dec $15 puts and calls net $2.45 so in for $12.55/13.77 if put to you.  If you scale in there and we assume the next round is bought at $12.50 and you get $2 for the puts and calls then that’s $11.50 if put to you again and you are in 2 rounds at $12.59 – just about the best level you can get on this round and 16% down from here.  TXN is a stock that moves with the market so you can downside protect that by looking for the Dow to fall 15% to 7,000 – which would put the DIA Jan $81 puts, now $7.33, $11 in the money so figure a 50% gain there to offset your loss.   

    That’s the trick to balance your risk/reward so you know what your downside is going to be and you know what upside you need to offset – not all of it – but enough of it to prevent a catastroph.  If you are covered in TXN for a drop to $12.50 and that will give you a 50% gain on the DIA puts, then you don’t need to many of them to cover right now.  What you want to cover for is a drop to $10, but that would drive your puts up 100% so a 20% loss on TXN would be offset by making an 80/20 investment in TXN as above balance with the DIA puts.  Now the trick is, do you make enough on the upside to balance the loss on the puts.  From a balance persective – your anticipated 20% gain if called away in Dec does not have to correlate to a 20% move up in the Dow so you can quickly hedge the DIA puts as soon as we clear levels.  Even if you do nothing though – making 20% on 80% returns 96% of your total investment so the puts only have to retain 20% of their original value for you to break even and anything else is profit.

    I like this guy grilling the Auto execs and hitting them on the fact that they all flew private jets to get here and ask for $25Bn…

    Cars are dry good that are shipped!

    Oops, RUT broke 5% rule!


  61. IWM very weak down 5%, transports down 5%, Either we bounce here or the Dow Naz and S&P have further to go


  62. Phil/Potty Break:  You raise an excellent point.  But perhaps given today’s trading climate, in addition to the SwingTrader porfolio, you could introduce something along the lines of say the PottyPortfolio?  You know, something that would be appropriate to hold… for as long as you can your urine?  Many thanks!


  63. FOMC in 1:22 minutes


  64. Buyers coming in ahead of the 1PM freight train?


  65. Phil,
    Question regarding my BAC put position and if I should/need to adjust this at this point. I really only have the $3K in margin requirements to work with as this was my original investment in this postion. My original premise was I sold 1 contract of the $30 put with the intention to purchase BAC but I have now rolled out of that into a spread. I have collected $600 in premium against the original $3K position.
    Short 3 Jan 22.5 puts, Basis $6.72
    Long 3 Jan 12.5 puts, Basis $1.27
    If I was assigned for some reason early what are my options for getting back to even ($3K) as the current value of this entire spread  with my premium collection is $1440.
    Thanks


  66. patrickc:
    how do you conclude/see that buyers are coming in ?


  67. I don’t, just being hopeful and reading too much into a 6 Pt SPX move.


  68. Would the consenus of the TA tacticians out there pretty much agree that the DOW 8200 & S&P 830 resistance points have been pretty much made into mush and can be safely ignored?


  69. 2 mins until the begining of the daily pump and dump…


  70. What will happen at the full hour ??


  71. Pigs will fly and the devil will be wearing a J Crew parka… I have no idea


  72. YHOO share price is evidence MSFT has no freaking clue and Ballmer could easily get elected to Congress, Yang will never live this one down.


  73. "Auto Executive Survivor" vs. "The Apprentice" — I can see the need for examination, and proving who’s the biggest loser.  I have a desire for a "Mad Max" aesthetic.  You know like they have bad teeth, they have to rely on their wits, and pretend gas is a scarce commidity.  
    I think there is room for a compromise--a hybrid of both show formats and a Mad Max aesthetic, and maybe something else--maybe throw in a terminator or two.


  74. The good news here is the dow support at 8200 and SPX at 830.  Obviously, these have to hold to avoid another leg down.  Buyers have been coming in at these levels, butsince it is the third time, I am hesitant to give odds.  On the other hand, since it is options expiration week, I still go back to the max pain premise, and believe that the market will have to ralley to save GS and MS (probably among other brokerage houses) from imploding on options losses.  Last time, I think that the market waited until Thursday of options week to rally, though, so it may be nereve rascking until it happens.


  75. Matt – The potty is the right place for most stocks these days! 

    On the whole, we are holding our levels – in the ugliest possible way but we are holding them so far.


  76. They are trying to tease us a bit today…
    I wish X would drop to 25 already…


  77. Texas LOL, i have to remember not to consume liquids while reading posts on this site

    Some buying, lets see where this goes…clearly we broke some key levels but it wasn’t broad enough to say we can get a big bounce


  78. I bought few SPY’s for DT


  79. bought  skf  nov 200 put at 12.70. excuse me, i ‘m going to church now and say a novenna.


  80. DXD  I rolled my callers to Dec 78, but my calls are Apr 60s.   You recommended that I roll them up and take some money off the table.   I have an order in to roll to the Apr 75s for a 6.35 credit, but the order isn’t filling.  I understand the rationale for rolling up is to lower your delta in case the underlying moves against me, but it seems like I’m not getting compensated enough for giving up $15 in strikes.


  81. Phil I’m thinking about adding HPQ for a LTP – HPTQ 35′s for 7.8?  I know they have run up a bit, but i like their guidance and their market action today.  Any little upside in the market should make these guys really take off?


  82. Waiting for a bounce to sell to open AAPL dec 95 and to sell to close SKF 210.
    Shut down the car company hearings.


  83. If we hold RIMM makes for a speculative day trade, depending on price of course


  84. VIX chart showing that vix hit an intraday low, past 5 mins starting vix trend higher-- or seems


  85. NASDAQ  TICK saying below 0.  95% down volume


  86. http://www.boygeniusreport.com/2008/11/18/iphone-3g-coming-to-wal-mart-on-december-28th-select-sams-clubs-as-well/
    We are pleased to announce that Wal-Mart has reached agreement with Apple to offer iPhone 3G in Wal-Mart and Wal-Mart-managed Sam’s Club* Connection Centers nationwide beginning December 28, 2008.  AT&T will support Wal-Mart and Sam’s Club with the activation process for iPhone 3G, and we need all National Retail employees engaged to ensure a successful launch.

    Not sure how true the story is


  87. Phil, do you have any idea why DRYS would drop 25% in a day??  Seems like stocks in those sectors should be a little more stable then that.  Makes XOM look like the Rock of Gibralter.


  88. kustomz, i don’t know if that’s a bid deal.  The iphone is available almost everywhere in the U.S.  I got mine in ashland, ky when i was visting my inlaws.  I wonder if apple downgrades have some merit  i.e.  decrease in number of sold iphones?


  89. I am not sure who gets the biggest "Holy Sh*t" comment today.

    Candidates include DRYS and C.


  90. ISRG still green, once they let go i would say its safe to say traders just want out


  91. as there should be only something like 19 million shares held in public hands (CEO owns the rest); something is very very fishy about the volume we see daily in DRYS.


  92. DRYS  Buy the stock and sell the dec 5 put and call.        57% return     Do I have that right??


  93. C: $7.12 !!!!


  94. UNbelievable yet I see it.
    I wonder how professional managers have been doing the last 3 months ? Have they lost ?


  95. BAC/Calch – Are you in a vertical spread?  Those are not good at all.  The  bottom line is you have a 3x $5.50 put spread and want to improve it and you are currently tying up $3K in margin. So, it it worth fixing?  You can, of course, go 2x the Dec $12.50/$7.50 puts spread, which is the same margin as you have now but could jam you up if things go wrong.  I’d go with a roll to 6 2010 $12.50 puts at $4.50 and sell 6 Dec $15 puts for $2.88 as that’s a $1,500 margin and a $972 spread that has a much better chance of working over time than messing around with changing the vertical.

    Terminator/Occam – Have you seen the new game show Chase (on Sci-Fi).  They actually hunt people down a-la "Running Man" except they only tag them but the hunters do act like terminators and you can see how we are very likely a generation away from a violent version of the same show…

    Support – Guys, we expected to test 8,200 and flatline around there into tomorrow’s data and that’s what’s happening.  Paulson’s boy at treasury (can’t remember his name) says TARP is working so they are already floating baloons to boost the market and we may get a full-blown PPT attack into expirations.  In the very least, it’s in the interest of funds to goose the stocks so they can sell Dec calls at good prices so lots of ways to win and one very big way to lose…

    LOL Drum – let us know if that helps…

    DXD/Eph – The premiums are too ridiculous on the high end but, if DXD does go down 20% as the Dow moves up 10%, that will knock you down to the value of the $70s, which is $28 and perhaps a 25% drop in the VIX will knock out another $4 in premium so down $9 on that move.  If you are in the $75s at $24.50 the $90s are $20.20 and another $5 off that (25% as it’s all premium) would be $9 lost there too but the difference is you’d have $6 in your pocket to roll them back down if you wanted to or leave it alone depending on our outlook so it’s more of a flexibility play.

    Smart guy on CNBC points out that the auto industry shoved cars down people’s throats for the past 5 years and there simply may just be too many cars at the moment and the combination of people cutting down on spending and financing drying up means nothing will save them anyway until demand perks up and that could be another year.  Once upon a time, a family would drive a car until it died and then the kid would drive it until it had to be pushed more often than now – Americans could not buy a single new car for 2 straight years and our fleet’s average age would still be way less than it was 20 years ago.

    HPQ/Jo – Well they ran up 10% and the 2010 $35s are up from $5 to $7.30 so not too bad but I’d rather pay a little more once we confirm that we can hold up here as they may pop back down if the market drops.  Of course the Dec $35s are selling for $2 so it’s a nice offset anyway.

    DRYS/Matt – No idea, I don’t see news and the whole sector is down.  Just a general sense of global malaise I think.  Good point Cap – maybe CEO got a margin call like CHK…

    C at $7 is holy something!

    DRYS/Steve – Yep, it’s amazing if it works and, if not, you can share war stories with CROX shareholders…


  96. Markets are going to play the FOMC minutes, I’m going to position myself for a bounce as the markets only go up on bad news.


  97. Here we go again, congress asking the big 3 to set up a billion dollar fund for the dealers to access when they could do it themselves.  I have consistently seen congress in in these mock trials telling people what to do when they are the ones that should be doing it.


  98. deadly game show mockumentary way ahead of its time
    http://en.wikipedia.org/wiki/Series_7:_The_Contenders
    very funny, in a sick way


  99. Maybe Tiger won’t be driving a Buick soon.


  100. occam
    Maybe the big 3 should have a demolition derby to see who gets the money.


  101. AA -10%, BTU -12%, TXN -4%, X -10%. Do these stocks really deserve to be dwon this much today? Esepcially considering how far they’ve already fallen?


  102. Anyone dare call a bottom on HOV at 2.50? I mean at some point this is just totally ridiculous


  103. QLD $23s at $2.10 are nice mo play, out at $1.50, looking for $4 on a good move.


  104. Cars – can’t disagree more. Make a car that someone actually wants to buy!! (shocking I know) otherwise they’ll just stick with what they have — a slightly older and slightly more used version of what they already have. I have a 1998 Ford Ranger that I bought new. Why would I buy a 2008 Ford Ranger with the exact same gas mileage before my old one dies (which, at 85k, is about when they die, BTW). Give me a Rnager that gets 40 MPG and I’ll buy it tomorrow. Hell, I would buy it today!


  105. I agree biod, it is a broken model, with broken leadership.  They just need to blow it up and start again.  I know some people will suffer, but earning 70$/hr  can not be sustained.


  106. biodieselchris,
    As far as AA, check the news. downgrade of another aluminum company, earnings estimates cut by 70% and falling aluminum prices are possible causes for the drop.


  107. bio
    I still drive my 91 Explorer. It has been real reliable for 17 years.  Only 95K on it.  About time to replace all of the hoses and carry a spare water pump.  Hard to find parts for when something does break.   I keep wanting to treat myself to a new BMW but everytime the market tanks and well thats it.


  108. FOMC bounce – I agree Kustomz, more likely than not.   They don’t need a good reason – just a reason…

    Demolition derby is a good idea – great way to burn off excess inventory.  If it works out for the big 3 we can mount a few thousand unsold houses on wheels and smash those up too.

    Value/BDC – Last month I pointed out that value is very relative in a bad market.  You can’t eat GS share certificates and 71% of the stock is owned by institutions and mutual funds.  There’s a nasty cycle that takes place as a down market persists as people who used to live off 10% annual portfolio returns are now getting 1/2 of what they were and they start selling 5% of the portfolio to make ends meet and then they need 5.1% next year and before you know it (and this happened in Japan) they have whittled away so much of their portfolio that they don’t participate in the recovery.  Just another way that a market collapse is great for the rich (who can afford to buy on the dips) and terrible for the rest…

    HOV – All I have to say about that is that, even in the depression, there were thousands of companies that DID NOT go bankrupt and the survivors come out with much less competition, cheap labor and cheap materials as well as a recovery in the lending market with far fewer people left to lend to so cheap money, regardless of inflation and rates.  I don’t know when the market will turn around but one day it will and there are plenty of companies that you can offset (as above TXN example) losses for a year or two while we wait.

    Cars/BDC – I don’t disagree there but what I’m saying is they already gave financing and incentives that put record numbers of cars on the market in 2005, 6 & 7 – If you give away all you can eat Pizza for 3 straight days that 4th day is going to be a tough sell…


  109. BioD_C HOV is my trap. It is dead money for foreseeable future and they pay no dividend.


  110. Don’t forget that auto loans are also going for 6-8 years now so people are inclined to keep their car longer before turniing it over which also depresses demand.


  111. I drive 18 yrs old GMC w/170K miles. If market improves I may repaint it and fix few dents. Otherwise it takes me where I need to be.


  112. Phil,
    On the BAC suggestion I don’t follow your suggesting in that I originally invested $3K that was tied up in margin by selling (1) Nov 30 put and then I rolled this to Dec 30 and then I rolled this into a vertical January 22.5/12.5 put spread that has a $5.5 difference between the two strikes bought and sold ($6.72 & $1.27). If I roll this to 6-Jan ’10 12.5′s and sell 6-Dec 15′s by closing out the vertical I will end up losing $$ right now as the value of the current Jan 22.5/12.5 put spread is $1400 so I have on paper lost $1600 of the original investment. My original $3K investment has gained $600 by selling Nov/Dec/Jan puts so I have $3600 in cash on the position but the value if closed today is $1400. Please help me on the position as I was trying to roll to something else with a lower put spread to increase my chances of recovering.
    Thanks


  113. GOOG weak i have a buy in at 280 that’s better than 5% down and I’m expecting a flush before the rise, this all relies on past action


  114. Cars – I recall from 2 or 3 months ago that someone here mentioned that a dealer was offering to accept a trade in for 60% of the value of a Cady Escalade. I wonder how much lower this offer going to be now.


  115. Trade in values for cars (even 1 to 3 years old) are pretty low.  i.e. a lot of people are upside down on their car loans as well.  This  seems like a race to zero.


  116. I’m holding on for my dear life with DIA testing 82 three times.  Can someone tell me the next steps with the Big 3 saga, is there a congress vote?  Sorry, I don’t have access to a TV right now.


  117. DRYS down now 33%.


  118. Steve, my fault, I keep rolling down..


  119. Fed minutes interesting

    They are ready to cut rates further of course and they don’t expect a rebound until Q3 and they dropped 2008 GDP outlook from 1.3% to .3%, that’s a pretty rapid decline!  In 2009 they also see 1% growth or less vs. 2.5% previously projected so that’s spooking the markets but – Duh!  Unemployment forecast raised to 6.5% from 5.5% – sounds like they are dreaming there as it’s 6.5% now.


  120. Wait…. I think I have it wrong today… This is "dump and pump" not vise-versa.


  121. I think they are squeezing us for all we’re worth.  I expect a huge turnaround tomorrow based on ‘bargain hunting’.

    Just once I’d like to be on the side of the trade with the relentless momentum.


  122. I’m with you Matt, I shorted SKF at EOD yesterday and forgot to put in a stop, just got out of a meeting and found myself 50% down on that trade. Ouch.


  123. ISRG green


  124. Unemployment 6.5% :D
    It’s more probable that unemployment will be double that a year from now.
    What a bunch of clowns.One of the main things this crisis has taught us is that Central Banks do not control interest rates, that was a fallacy of comfortable times


  125. —> HOV – I agree and hope we are both right because I am long – but being long anything right now takes gallons of Pepto Bismal and an extremely LONG timeline. I think the BDI has bottomed and The Great Credit Tundra has thawed with $10T in excess liquidity coming in (which was probably overkill) and things could whipsaw back the other way in so little time it’ll be physically painful if you miss it.
    —> I hope Caddy Escalades go to low because 40% off I don’t even look but 90% off with gas back at $2 I buy one just for fun – so there is a fair, and very real price, for everything and stocks are way under it (I pray, I hope … I don’t know anymore
    ). I just hope we can look back in 6 months and say "hey remember when C was at 7 and GS was under 60 and we thought the earth was going to crash into the sun. That was funny!"


  126. BAC/Calch – You currently are obligated to pay 3 x $5.50 to your caller = $1,650 and there is a $10 spread between the strikes so it’s tying up $3,000 in margin right?  It doesn’t matter what you bought it for but what you can do with it now to improve your odds because, at the moment, you are very close to paying out $1,650 if BAC heads lower.  6 2010 $12.50 puts cost $2,700 and the 6 Dec $15 puts sold give you back $1,728 so that is now net $972 with a much better spread that you can roll 10 times.  The $2.50 difference between the strikes costs you a margin of $1,500 so the play, overall uses 1/2 as much cash and 1/2 as much margin and you move your putters from Jan $22.50 puts which are $9 in the money to Dec $15 puts that are $1.35 in the money and much more likely to get wiped out (and infinitely more likely to be wiped out by Dec 19th).  In order for your Jan $22.50 putters to be wiped out you MUST lose 100% of your put value but, in order for your Dec $15 putter to get wiped out, you can still retain over 80% of your long puts’ value.

    That was a nice little sell-off on the whole.  Oil closed down at $53.89 in the end with a .50 pump to the close that couldn’t hold $54, let alone $55 – these guys are in such big trouble that Cramer has to come on and pump oil and XOM…

    AAPL is the focus of my rally cap mantra at the moment, they are still close to $90 but GOOG doesn’t look ready to go just yet.

    I can’t believe the prices I’m seeing on some things – just amazing…


  127. Phil/AAPL-  I bought the Nov 90s this morning for $2.12 for a quickl day-trade.  I will dump them if I get a 10-15 return before the bell.  However, is there any reason to hold them over night if we end the day in the $89 range?


  128. bio
    Your forgetting that if you have a business you can get a tax break on a SUV.


  129. Peter D _ref Auto hearing – this is just a public lashing by the Bank/Finance Committee of the HoR. They have no authority to allocate money; but there is an opportunity to show-off demagogical talents.  If there are votes, they may bring a bill to floor tomorrow or late next week. Pure PR.

  130. MA not liking the FOMC minutes


  131. BDC – Did you catch the 30 years of Time magazine crash covers I posted yesterday?  Very interesting perspective as you relize how many times we’ve faced THE END in our own lifetimes…

    Come on – A doom and gloom Fed report and this is the most they can do?  I’m not really impressed with the bears here.  It’s just a lack of buyers and we sure haven’t been given any reason to today….  I was wrong about volume earlier, it’s still low – for some reason ETrade was not clearing yesterday’s numbers and was adding them together or something…

    C $6.7 – that is the scariest thing of them all!


  132. FXP – I have stock with cost aroudn $77.30 (now $83) and sold Nov $65 calls against it for $7.20 (now $18).
    What is a good ‘roll’ for this position? Roll it to Dec 85 for about net debit of $0.25 or wait and let stock go away?


  133. SOX ten year low, someone tell me we aren’t due for a bounce


  134. Phil: I like to cover AAPL with dec 95 but it ain’t going up to about 7.2$.


  135. Time for the 3PM buy programs to kick in!


  136. AAPL/Texas – I wouldn’t hold the Novembers, if the market sneezes down you will be wiped out.  That’s the practical advice.  As a gamble, I think we may pop so it’s a dead gambel of $1 (I assume you’ll keep half the value) against a potential $3 gain.

    FXP/M2 – Hey, a position that went up?  That’s amazing!  Too bad it’s an ultra-short.  I’d wait because if we rally tomorrow then FXP goes down fast and your front month will suffer more than the position you want to roll it to

    AAPL/RMM – Same deal there, I hate covering at what is very likely the bottom. 

    I don’t get all you people seeing us hold a level for 2 days and still acting like we’re going to 7,000.  As I said yesterday, THIS IS OUR BUY POINT.  You can hedge with downside bets like DIA puts but there are very few times you are presented with so much evidence that you can take a stand at a certain level.  It’s the same with the SKFs – if they were wrong at $200 then they are more wrong at $212, not suddenly right – you can’t keep taking plays with plans that last 2 hours.


  137. Phil, I have STP long and the NOV covers are mostly worn down so I’m basically naked going into earnings tomorrow, how heavily should I re-cover?


  138. Thanks Phil for the quick FXP answer. Will hold for now till a bounce…


  139. Phil:
    if SKF would fall back to 170, what would the nov 210 caller be  in $ ?


  140. Selling the Nov $5 puts and calls on DRYS and buying the stock gives you  30% IN TWO DAYS if they hold over 5 bucks!
    Personally, not brave enough :( !


  141. ISRG gave a great buy signal today, GE weakness great sell signal


  142. I can’t believe I bought C at 7.10 and I’ve already lost 6%


  143. Insane and more insane.


  144. How can your traders stand this ?


  145. Anybody else tired of getting ‘punked’ by these computer programs?  In 5 minutes, they wipe out the gains of the previous 35 minutes.  It’s such an f-ing racket.


  146. Time to short the SKF and wait 2 days.


  147. AAPL market cap > BAC… scary


  148. SKF; is on steroids.


  149. I expected to close out SKF shorts with a gain, I guess I keep them and make the money tomorrow.


  150. STP/Mr. M – It’s not earnings, it’s guidance and oil is too low not to cover up.  I’d go conservative with Dec $10s as you already won one set and getting $1.85 now and being called away up another $1 isn’t such a bad outcome if it goes well.

    Meanwhile, we’re really pushing to yesterday’s lows led down by financials (-8%).  8,120 was the low of yesterday and we are hitting it here with volume picking up but the S&P already broke lower so let’s see what happens…

    SKF/RMM – It would be $40 or close enough not to sweat the small stuff.

    GE $14.50 – Damn!

    C/BDC – Be careful, that’s what LEH buyers said!


  151. S&P hit 819 last Thursday, just a bit below.  Then it shop up to 915 2 hours later so anything can happen in the next 2 days….

    VNO making new lose is not encouraging, nor is MAT ahead of XMas…


  152. what actually drives SKF higher and higher ?are they dumping all financials ?


  153. I had no problem selling KBH Jan09 5 puts at full ask price of 0.55. This is a crazy doom and gloom market.


  154. here is the answer: 125 billion lost in marketvalue the last 2weeks for major banks.


  155. 7773 perhaps…  I know, I kicking a dead horse.  But I fiigured it would happen within a week or two.. that was last Thursday.
    Phil/ Do you believe yet?  :P


  156. Phil,
    My brother says that a marginal new low below 818 on the SPX should complete the pattern.
    We’ll see!


  157. The markets dumping and look at Goog just sitting there.  They are such bastards.  They only do things when they want to do them.  It’s as if they are completely immune to external forces.


  158. SKF up 36 $ today right now.


  159. Phil is very quiet. Is it the market ?


  160. Jesus H. good call phil I added C Dec09-2.50 puts at 0.27 for disaster insurance on the long play.


  161. I took my beating with SPY DT like a real man.  BTW. I got C at >$20, so now $1 drops represents a small percentage change.

  162. I had the Nov SKF 140 calls at something ridiculous like 6 a couple weeks ago. Took them out at 15 and now it’s 85+   :(


  163. (I meant Dec08 on the C puts, sorry for the typo)


  164. Go for rebound or 7000?


  165. SKF/RMM – Yes, the XLF is now down 10% and it does look like we’re going to test 8,000, kind of hard to follow through and flip more bullish here though as it’s too late in the day for a comeback. so 50/50 at most.

    Well I’m beginning to wonder if 8,000 will hold at this rate, that’s for sure.


  166. man, sure glad I put $90 covers back on aapl when they hit $3.15


  167. I really think we’ve been here before.   When all seems lost…. the market manages to just turn around and rally.  The despair is so pervasive.. I just got to believe we’ll rally tomorrow.  Otherwise, there REALLY won’t be any buyers left.


  168. Picked up AAPL on a down 400 point day!!


  169. thanks to my covers i’m actually up for the day if you can believe it!!


  170. Well: just settle at 400, you guys always like clean figures.


  171. boy, if aapl can’t turn the corner what can?


  172. Rolled AAPL Jan ’10 100s to 90s for 3.80!


  173. Phil:;;

    Is this panic selling of Financials ?????????


  174. Where’s the bazooka?


  175. aapl is turning!


  176. TRIN really high, VIX high, SKF in space,  We rally within next 2 days.  maybe tomorrow.


  177. too late !


  178. I don’t know guys. I think we’re in really deep **** here.

    C are in a coma and it’s very difficult to figure any way out of it for them….. That will destroy the markets. We’re getting back to the armageddon fears I had about two months ago. Glad I have only one long position, WFR.


  179. 7,882 was the Dow low but the S&P just blew through everything so it’s just strange today – still makes DIA puts best protection as the Dow has the farthest to fall.

    So what we need now is a big down open tomorow and then a recovery to 8,400+ but, for now, it will be nice to just hold 8,000 as the selling is again relentless.

    Rilling is good 3Way – we have now given up all of last Thur/Friday’s gains and then some and we are in that unbroken downtrend on the S&P.

    C down 24% now – WOW!   That is just so scary – if they go under, the only thing we’ll be remembering about today is that the Dow was way UP at 8,000 as we could be on the way to 4,000 if C fails.

    Saved by the bell… sort of…  Dow down 5.08%, SOX down 7.5%, RUT down 8.5%, XLF down 10% but GM went shooting up into the close – wacky!

    OK, I need a drink after that one! 

    WFR is a good one Anton, only down 10% today!  That’s a win in this market.


  180. Another day like today and I’ll be done.  I’m gonna hold out till COB Friday.  If I’m not in MUCH better shape by then I’m going to pull the plug.  But again… I think this is just all part of the grand scheme of things.  Mua Ahh Ahhhhhhhh!


  181. WOO HOO PHIL ;)

    TBH I went through their financials this morning, presuming severely pessimistic figures for the next two years, and came away still very happy with them.


  182. Bot more GE and X common before the close.
    My damn AAPL 90 call gamble is hurting volume was 39,570.  I should have bought more into the close.
    224 pts from a restest.  VIX up 10% today… X,GE, GOOG WFR, JPM 52-wk lows (those are ones I happen to track daily).  QID-52wk high.

    TECHIES/DOW- Technically, we should get a bounce tomorrow, right?  5% rule.  (????)


  183. Hee hee Matt you sound like me, I’ve been threatening to go to cash and just take a break from the markets for the last ten weeks now; at this point what’s the use, the damage is so done…


  184. Tomorrow, I think I will start drinking before the bell so it is not so painful.


  185. got out of skf-novenna did’t work today-getting clobbered


  186. Damn!  Look at the DOW, S&P and NAZ charts.  They are so in synch with one another I can hardly believe they represent more then 500 different stocks.  Who is in control of these things??????????????????????


  187. LOL Steve!!!

    I might join you for a pre-market drink.  Hell, if we get a phat rally… the drunk people will have the most fun imo.  That said, I’ve got a bottle of Maker’s Mark (Mint Julep Special Edition) in my office that is itching to be cracked and consumed vigorously!!!  I think the market needs to get drunk… rather than acting like a crackhead.
     

    Well, I’m going to Coldplay tonight at the AA Center… So, I got that going for me…. Which is nice J


  188. texas
    My Maker’s went dry a few days ago.


  189. 5% Rule/Texas – Yes we should get a 20% retrace so 80 points up form here, not too exciting but we’re down 10% from Last Friday so possibly back to 8,150 ish but the bad side is that a 150-point gain tomorrow is meaningless and notice that 8,150 was our breakdown point at the end and was the point we held yesterday so it’s not looking too promising for the week.

    Last X-week Wednesday, we dropped 733 points so it might do us well to reread that day and the next tow to see what worked.  At the time, we were testing the 40% levels and we bounced back about halfway the next day but finishid down on expiration day.  That day also we had a big drop in the last 15 mins. 

    Have fun Texas – I think it’s time for the 151 at this point…


  190. Before you buy your next bottle of Makers.. I would suggest trying Bulleit Bourbon.  It’s goes with anything.  Had some in my hot chocolate last night. 

    It’s YUMMMMMMY!


  191. Shit Steve… thats no jokes…. We need to get some alchol to you STAT!!!!
    I’ve got some Evan Williams Single Barrell Vintage Bourbon… Its the "super-secret "emergency stash.  I send it to you, but I’m a little short on cash due today’s "market action"….. 
    Do yourself a favor and get A BOTTLE of something.


  192. What a disaster.


  193. Matt,  Like a true Texan, I drink my Bourbon and Tequilia on the rocks with a splash of water…. so the "goes with anything" rule will have to apply to lesser men and females (no offense ladies, not many of ya’ll drink hard liqour mixed with water only). 
    Actually, I’ll try your brand… and add a little in the Mocha-chino in the AM sure sounds fantastic!  (wait, did I just say that out loud?)…. Not that there is anything wrong with that..


  194. texas
    If I don’t use rocks, then I just drink it neat, bourbon, tequilia, whiskey.  I want the true taste.


  195. Phil:
    was it a mistake to stay in the SKF nov 210 shorts for tomorrow ??


  196. DRYS
    Phil -
    Bought some last week, sold calls and puts.
    What are your suggestions with the puts?  I think a little neglect is probably the best thing right now.
    Buy 1000 DRYS @  15.10 now 5.31
    STO 5 Dec12.50P @ 3.90 now 7.40
    STO 5 Dec10P @ 2.92 now 5.4
    Obviously the losses far outweigh the income from the short calls
    I actually made it worse by DD today, I added
    Buy 1000 DRYS @ 6.85 now 5.31
    STO Dec7.5C @ 1.70 now 1.15
    STO Dec 7.5P @ 2.50 now 3.30
    I guess I should consider this my bullish position, LOL.
    Thanks


  197. TX:  I drink mine on the rocks.  4 per 2 oz. of the good stuff.  I just dropped it in the coco cause I wanted something sweet after my pan fried pork chops last night.  Damn, I just made myself hungry again!

    Sounds like we’ve got alot of bourbon drinkers on this board.  That’s good company!


  198. matt, have you tried pappy van winkle – aged kentucky bourbon…..yummy on the rocks.


  199. jo, I haven’t even heard of that one.  I’ll keep an eye for it.


  200. The UK drops 5%, The Dow and Nas 5% and 6% and in  just 10 hours time the UK can do it all again. Dismal


  201. edro, I was thinking of doing exactly same! (paper trades) so
    Phil, your advice to edro will be eagerly awaited!


  202. Alright, the bears won against and the humanoids on this board are having drinks, even before the market open tomorrow.  Technically speaking, we are dead in the water.  Automaker bail out plan may get approval, but remember the last time the $700 Bn package was passed, the market drop a zillion points.  So we need to be playing for the downside.  Psychologically, we are just worry about a big up day that can kill us after we just switch sides.  That’s the common storry now, we are not doing good with the longs, and when we side with the shorts, we are killed by possible rallies!  Cash is king, but kings could suck too.  No man’s land is how we feel.


  203. Anybody want a "do-over" on the election yet ?

    S&P down 26% since Election Day.

    Tis a fact ….

    Time for a drink.


  204. Here is a position for possible Risk Analysis:

    GM. Short 100 Jan 10 2.50P with Average Fill: 1.78
    F. Short 100 Jan 10 5P with Average Fill: 3.90

    The rationale for the F 5 Puts is that if GM collapses, Ford may still be able to remain liquid due to the keen foresight of Alan Mullally, Ford’s CEO, securing Billions in Lines of Credit 2 years ago. This in turn will create an over demand for the F series Utility Trucks. Hence the greater balance of Risk vs. Reward on the 5 Strike.

    Short Vega will be more advantageous than Delta and that is the main objective of such positions at 99 percentile IV levels.

    So where’s the STOP? Conditional Buy Order:
    Buy 20 DIA Dec 76 Puts @ MKT GTC Contingent upon GM Mark at or Below 1.10.

    Further, Consider Long Term Bull Verticals on TM, if a Bankruptcy were to occur from any of the Big 3.
    Bankruptcy? Unlikely: http://leeiacocca.blogspot.com/
    Can it happen? A N Y T H I N G can happen. The Risk is Real and the Market is pricing it.

    I think your reasons and approach are very sound. The F and GM naked puts are not like the traditional naked puts unless the stock goes less than Zero. So, it is like a short vertical and even better because you don’t have to pay for the Zero strike puts.

    Your hedges are king of cool and creative, as well. Please keep us posted.

    Hi OptionMechanic,

    It’s a good trade. The one thing I would consider is that it’s possible that the DIA put hedge may not work, if DIA and GM lose their correlation – i.e., GM falls below your 1.10 level, while DIA does not fall that much.

    Here are a couple of alternatives that can also be considered:

    (1) An alternative might be to just buy the underlying stock, and treat it as if you bought a speculative call that does not expire, unless stock goes to zero. Then don’t use a stop, so position sizing must be done accordingly, so stock going to zero will keep the loss managable. I known this does not take advantage of the very large volatility that exists but if (and that’s a BIG if), these stocks recover, you’ll be in a very nice position. 

    (2) Another choice would be to do the short puts synthetically – ie. covered calls. Right now 2.5 GM calls are 0.94. If done with no stop and if the short calls expire, you can hold on to the long stock with cost basis of about 1.00 less that what you bought it. Again I would not over leverage these and would assume that they can go to zero.


  205. Cap,
    Bush still gets credit til January.


  206. Good Morning everyone. (!!!)

    More relentless selling in the UK. Now down 2.27% two hours into the trading day. US pre-market is also pretty grim.


  207. Good Morning DB and all…:-(


  208. Asia Markets :    Thursday, November 20, 2008
    (The following is from WSJ; please cross check with other sources to confirm.)   

    Nikkei Average*                   7703.04    -570.18    -6.89%
    Hang Seng*                       12298.56    -517.24    -4.04%
    China: DJ Shanghai*            207.45         -2.31    -1.10%
    Seoul Composite*                 948.69      -68.13    -6.70%
    Bombay Sensex*                 8451.01    -322.77    -3.68%
    Baltic Dry Index                       859.00    -6.00    -0.70%

    *at Close


  209. Japan Loses Nearly 7% as Asia Gets Routed

    Asian markets fell like dominoes Thursday after U.S. stocks hit their lowest in more than five years. The rout was especially pronounced in Japan, where the Nikkei lost almost 7 percent, falling below the key 8,000 technical level for the first time in three weeks.

    Japan’s Nikkei plunged 6.9 percent in its biggest one-day loss in a month, as exporters were nailed by a stronger yen and fears that a worsening economy will batter earnings .Large banks fell after shares in Citigroup plunged 23 percent to a 13-year low as investors questioned the survival prospects of the U.S. banking giant.

    South Korea’s KOSPI ended 6.7 percent lower as banks and Hynix Semiconductor tumbled on deepening sectoral worries, with some banks falling by nearly the daily limit of 15 percent. The index has fallen for an 8th straight losing session and has lost more than 18 percent since Monday last week. The KOSPI is just 6.3 percent away from the Oct 27 low of 892.16 points, which itself was the lowest January 2005.

    Australian shares closed 4.19 percent lower as concerns about a prolonged global recession triggered sharp losses in leading miners.

    Hong Kong shares dropped 5.5 percent to a three-week low, after dismal U.S. economic data prompted a global flight to cash, but the main index held above the 12,000-point level. Unwinding carry trades amid a global equities sell-off pushed the Hong Kong dollar to the upper limit of its pegged trading band against the greenback. The territory’s central bank has injected more than $2 billion into the banking system this week in a bid to curb the appreciation in the local currency.  ocal property counters plunged, beaten down by a slew of warnings from investment banks on further corrections in home prices as banks tighten lending.

    Singapore’s Straits Times Index extended losses, down 4 percent, led by falls in financials and commodities after U.S. stocks slid over five percent on a weakening corporate outlook.

    China’s Shanghai Composite Index was down, taking its cues from a tumble in Wall Street stocks as it bumped up against strong resistance after the previous day’s strong gains. Banks led the decline.

    Bombay Stock Exchange’s Sensex closed at 8531.05, down 242.73 points or 2.77 per cent. The 30-share index touched an intra-day low of 8316.39 and a high of 8531.05. Markets ended volatile session in the negative terrain but off lows on Thursday. Realty, metals and oil&gas stocks were the worst hit.


  210. Banks, Commodities Drag Euro Shares Lower

    European stocks fell to the their lowest level since March 2003 early on Thursday, adding to the previous session’s selloff, as banks and commodities continued their slide on worries of a deep global slowdown.

    The FTSEurofirst 300 index of top European shares was down 3.4 percent at 784.21 points, having fallen as low as 782.67. The benchmark index has fallen more than 48 percent this year.

    Dexia, Fortis, Barclays, Credit Suisse, Banco Santander and UBS fell between 5.9 and 9 percent.

    But BNP Paribas was outperforming, down 0.3 percent, after announcing late on Wednesday that it is not considering any capital increase other than that already scheduled to finance the acquisition of Fortis Bank, which will be subscribed by the Belgian and Luxembourg states Insurers continued to fall, with their equities portfolios hurt by the slide in the stockmarket.

    Axa, Aviva, Prudential, Swiss Life and Zurich Financial fell between 5.1 and 8.9 percent. All 38 industry groups in the FTSEurofirst 300 index were lower. But Royal Bank of Scotland was the second-biggest gainer on the FTSEurofirst 300 with a 5.7-percent rise ahead of a shareholder meeting to approve a fundraising plan.

    Oil prices, which saw their lowest close in 22 months on Wednesday, fell further, down nearly 2 percent to less than $53 a barrel. Total, ENI, BP and Royal Dutch Shell fell between 1.5 and 2.6 percent.

    Likewise, base metal prices fell, though gold was higher. Antofagasta, BHP Billiton, Eurasian Natural Resources, Kazakhmys, Rio Tinto, Vedanta Resources , Xstrata fell between 2.2 and 8.7 percent.

    UK retail sales data provided further evidence of economic slowdown. Sales fell 0.1 percent in October, said the Office for National Statistics.

    But this was less of a fall than analysts had forecast. The ONS added that the September figure was revised to show a fall of 0.5 percent, compared with the previously stated 0.4 percent.


  211. Oil Falls Below $53 on Demand Drop, Economy

    Oil fell for a fifth straight session to approach $50 a barrel on Thursday as the fallout from the credit crisis hits the global economy, hitting demand for fuel. Japan’s exports to Asia fell in October for the first time since 2002, showing that the turmoil has spread to neighbours such as China and adding momentum to investors’ flight to the safety of cash.

    U.S. light, sweet crude [ 52.07    -1.55  (-2.89%)] futures for December delivery, due to expire later on Thursday, fell, trimming back from an earlier dollar drop.

    London Brent crude [ 50.94    -0.78  (-1.51%)] also fell.

    U.S. crude oil inventories rose 1.6 million barrels last week, twice analysts’ expectations, according to data from the Energy Information Administration.

    OPEC ministers gather for talks in Cairo on Nov. 29, having already decided last month to reduce output by 1.5 million barrels per day. They are scheduled to meet again on Dec. 17 in Algeria.

    Euro Hits 1-Week Low vs Yen, Stocks Struggle

    The euro hit a one-week low against the yen and the dollar on Thursday after a dim economic outlook from the Federal Reserve underlined dire global conditions, sparking fresh demand for lower-yielding currencies.

    The yen rallied across the board, as a near 3 percent drop in European shares kept demand high to drop carry trades where the low-yielding Japanese currency was used to buy assets in higher-yielding ones, such as the euro and the Australian and New Zealand dollars.

    Some analysts said moves in the yen have been tracking the stock index very closely, and that a further S&P fall towards a six-year low would push the Japanese currency higher.

    "People are starting to give up on the hope that the economy is going to recover," said David Woo, head of currency research at Barclays Capital in London. "Further losses in the S&P will lead to more yen gains."

    The euro [119.48    -0.05  (-0.04%)   ] had fallen against the yen, hovering near a one-week low of 118.59 yen hit according to Reuters data earlier in the day.

    The dollar [ 95.42    -0.29  (-0.3%)    ] was also lower versus the yen.

    The euro [ 1.2519    0.0033  (+0.26%)   ] traded higher versus the dollar, after having fallen as low as $1.2472 earlier in the day to hit its weakest in a week.

    High-yielding currencies like the Australian and New Zealand dollars in particular took a beating, with the Aussie falling roughly 2 percent against the dollar and the yen.

    The New Zealand [ 0.5376    -0.0036  (-0.67%)   ] currency slipped more than 1 percent against the greenback, its lowest level since early 2003, and tumbled 1.3 percent against the yen.

    The single European currency was pressured by a 2.55 percent fall in regional shares, which approached a 5-1/2 year low due to falls in commodity shares as U.S. crude oil prices hit their lowest level in nearly two years.

    Major central banks have been slashing rates aggressively in an attempt to boost their economies during an extreme slowdown. Figures this month show that Japan, and the euro zone fell into a recession in the third quarter.


  212. Gold steady near 1-week high, weak stocks weigh

    Gold was steady near its strongest level in more than a week on Thursday, as bargain hunting from investors and jewellers in Asia helped the metal defy selling pressure from weak oil prices and slumping equities.

    Gold was trading at $737.80 an ounce, up $5.40 from late New York levels on Wednesday, when it hit an intraday high of $762.30 an ounce due to early gains in oil.

    "I think people in Asia are happy to buy at below $750. People are happy to buy at these levels because they still think the banking sector is not safe," said Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong."Even though governments say they will guarantee savings, people are shifting some money from banks to buy physical (gold)," he said.

    The World Gold Council said global demand for gold jumped 18 percent year-over-year to 1,133.4 tonnes in the third quarter, reversing a weaker trend earlier this year, because of strong buying by investors and a lower gold price.

    "I guess gold and platinum are relatively cheap for people in Japan because of recent gains in the yen against the dollar," said a dealer in Tokyo. "Some people have also sold their gold bars to buy platinum because the price has dropped so much."

    Premiums for gold bars were steady at $2.5 to $3 an ounce to the spot London prices in Tokyo, and dealers said demand in main consumer India was steady during the marriage season, when parents give gold to their daughters for financial security.

    Platinum  was trading at $790.00 an ounce, down $18.50 from New York’s notional close. The price has dropped more than 60 percent since spiking to a record of $2,290 in March to track lower gold, and lately due to tumbling car sales.

    Gold           737.60    4.75   +0.65%
    Silver             9.25    0.04   +0.43%
    Platinum     790.00  -18.50   -2.29%
    Palladium    183.00    2.50   +1.39%


  213. Good morning!  Oil is at $52 and Alwaleed is upping his stake in C, which is kind of like Buffett doing the same to global investors so hopefully we can make something out of that but it’s all about whether we can shake off the jobs report this morning…

    SKF/RMM – At this point, we need to roll them while they still have premium to Dec and sell Nov, just looking to get even but we’ll have to see how it goes.

    DRYS/Edro – There is a lot of chatter that this is still forced hedge fund liquidations as they did not put aside enough to cover the massive withdrawl reqests that came in this Q.  Like all of us, they held on to stocks hoping for a bounce that did not come.  I don’t think you made it worse with DD as the net entry was $2.65/5.08.  On a spread like this you have to ignore daily changes – all that matters is are you on track to your goal.  The first trade is net $8.28/9.14 so let’s assume they are both put to you – You end up with 4,000 at an average of $7.11.  Even with the stock at $5.34 now, you could sell (if this were now Dec 19th and you were selling Jans at the same price as Dec) $7.50 puts and calls for $4.45, which would reduce your net to $2.66/5.08.  Of course the problem is you may not want 8,000 shares of DRYS, even at $5 but, if that’s the case, just selling the $7.50 calls for $1.15 reduces your basis to $5.96.  So you played this just right so far and this is a great examle of why I love this system as the stock has dropped 65% since you bought it and it’s still not so bad! 

    The real key is to size your position for scaling in at the outset so if 2,000 shares at $8 (might have been our guess if we had to DD) was your target (and your target should be 5% of your portfolio max and willing to DD to less than 10% in an emergency), then the first entry should have been 500.  That would allow for a put, and another put in 2 consecutive months that didn’t work out after which we’d have to look at an adjustment.  I talk about DRYS a lot because they have $100M in cash, $400M in investments, $1.7Bn worth of propery (mainly ships) and about $1.2Bn in debt, mainly paying off more ships.  Effectively, the price to book value of DRYS at $5.35 is 0.11 vs FDX at 1.24 or BNI at 2.17. 

    I’ve said before, this is JUST a recession/depression, we did not have a nuclear war and an asteroid did now hit the earth – there are still 6.4Bn people on the planet and they still need to eat and buy some clothes and 4Bn of those people make less than $10 per day so this downturn isn’t going to change their lives much and they are the people for whom most bulk goods are shipped.  This isn’t about your BMW coming in from Germany, this is about 5M tons of rice that goes from China to Nigeria every week.  The shipping industry has existed for 1,000 years, I doubt this is the week it all comes to an end…

    Bourbon – I like Wild Turkey, pretty much the only hard liquor I drink regularly.  With all these rational drinkers on the board, I say we should line up shots for the day and every time the Dow punches through a 100-point level we down one – probably we wouldn’t last a day in this market!

    Long/Short Peter – This is why I’m trying to talk more about balance the last two weeks.  Our plan was to be 60/40 negative and then to flip down between 8,200 and 8,000.  Note my comment on hedging at 12:28 – that’s key to entering any position in this market but, as you can see with the Edro DRYS play, it’s OK to dip our toes into long plays that are well hedged.  Since Edros DRYS play was "safe" for a 10% drop in the Dow (assuming the stock didn’t drop independently and, with the stocks we pick, we do not expect them to be weaker than the market) then a simple hedge of the DIA Jan $90 puts (as the Dow was just under 9,000 when DRYS was $15) would have gone from $5 to $13 in the same time.  Since he was pretty well covered for a 10% drop and the fear was of a 20% drop and we know a 20% drop in the Dow from 9,000 to 7,200 would put the $90 puts $18 in the money and that Edro would expect to lose about 50% on his long position – then the entry could be calculated at 70% DRYS spread covered with 30% DIA puts. 

    The DIA puts would have already gone up from 30% to 60% while the 70% DRYS would have (after Edros DD) dropped by 1/3 to  49% so he would, at the moment have 109% of his original combo.  This was considered a bullish bet and, had we gone the other way, his 70% position would have made 50% so 105% there and anythiing left on the put side would be a bonus.  In the broader portfolio, since we were 60/40 bearish up there, that bet should be in the minority anyway while other downside plays should be working.  The big adjustment down here, as we flip to 50/50 and then 60/40 bullish, is to start cashing in those puts that have doubled up and use that money (assuming we still like the stock) to improve the long plays that have gotten cheaper.  As I’ve said, it’s like surfing, you have to keep finding your balance until we get a market wave we can ride at which point we’ll get more agressive (but no more than 70/30 for a long time).

    Yes Cap, it’s the election – not the idiots we’re getting rid of after 8 years of destroying the country.

    Alf – Very interesting.  I don’t think that GM will go below $1 at the same time as the Dow flies – GM going BK is one of the three ways we can get to 6,000 so I think the DIA puts are a fine idea but I’d go to Jan so you can hedge by selling Decembers in a run-up.  There is some logic to just buying F at this price.  Let’s not forget Chrysler was going under one (and taking the makets with it) and that stock recovered all the way back to about $70 – though I doubt GM will be so lucky but Ford might if GM goes under and they live.


  214. some retail beats yesterday after the close

  215. Dress Barn (DBRN): FQ1 EPS of $0.32 beats by $0.05. Revenue of $376M vs. $370M. Sees 2009 EPS of $0.90-1.00 vs. $1.15. (PR)
  216. Gymboree (GYMB): Q3 EPS of $1.06 beats by $0.03. Revenue of $261M (+5.5%) vs. $270M. (PR)
  217. Hot Topic (HOTT): Q3 EPS of $0.17 beats by $0.01. Sales of $197M (+4.7%) in line. (PR)
  218. Limited Brands (LTD): Q3 EPS of $0.01 beats by $0.01. Revenue of $1.84B (-4.2%) in-line. (PR)
  219. Men’s Wearhouse (MW): Q3 EPS of $0.30 beats by $0.06. Revenue of $460M vs. $475M. (PR)
  220. PetSmart (PETM): Q3 EPS of $0.28 beats by $0.02. Revenue of $1.3B in-line. (PR)
  221. and at least in-line this morning

  222. Buckle (BKE): Q3 EPS of $0.64 beats by $0.01. Revenue of $211M (+25.7%) vs. $209M. (PR)
  223. The Children’s Place Retail Stores (PLCE): Q3 EPS of $0.84 in-line. Revenue of $450.6M (+4.6%) in-line. (PR)
  224. Wet Seal (WTSLA): Q3 EPS of $0.07 in-line. Revenue of $147M (-2.5%) vs. $146M. (PR)
  225. perhaps all is not lost…although I’d guess most have lowered forecasts


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