Archive for 2008

Weekend Reading – Always in Progress!

Well that was a fun week and I'm off today, but as things catch my eye I'll throw them up and it's nice to have a fresh place for discussions anyway.

I'm trying to get a handle on the overall market conditions as I'm trying to figure out how to get our two new virtual portfolios off on the right foot.  So far, it seems like no one has any idea what to think and there are very compelling bull and bear arguements.  None of this changes my overall thoughts that we would bottom out in Q1 and make new highs in Q3, except that I originally thought we would consolidate between 13,000 and 13,000 with perhaps a spike as low as 11,500 but 12,500 forming a very solid floor.  You may think I'm not far off but I'm off on the very dangerous side and what I thought would be a floor is acting like a ceiling so my confidence is getting shaken as well.

If we can't get over 12,700 and restablish 12,500 as a firm floor (preferably 12,700 though), then we are going to have a really rough spring and we'll have to be thrilled to get to 13,500 in the summer.  It all comes down to oil, do we spend, globally $30 x 100M gallons a day on something we burn or do we spend it on consumer goods?  That's the Trillion dollar question on the difference between $60 a gallon and $90 a gallon, which brings me to my first weekend article.

Floyd Norris, in the Times, follows up on what Barry and I have been saying this week about retail sales and has this neat, but scary chart that clearly shows how food and energy are sucking the life out of the economy:

Retail Sales Stabilize . . . but More Goes to Necessities as Optional Areas Weaken

The worst thing about this chart is that the last time Bush gave money away (his election rebates) was followed THE WORST dip in retail spending, and food and energy were considerably cheaper then!  Remember these are year/year changes, not just the fixed price, so when energy starts at 100 in 1997 and stays flat through '99 that's still $100, but then it's $108 in 2000 after an 8% change and $112…
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Stop the Week, We Want to Get Off!

Man, this week was going so well for a while

Oh well, we've done our virtual portfolio reviews and, on the whole, things could be much worse so let's just lick our wounds and get back into bargain hunting mode over the weekend.  There was nothing we heard yesterday that made things worse than they were last week and, as I said yesterday morning, this is what the market needs to make sure that buyers coming in now are real buyers, not delusional optimists that get chased out of their positions every time Bernanke's voice cracks.

Today we have some VERY inflationary import pricing, up 1.7% from last month.  Adding insult to injury our export prices are only up 1.2% – mainly a reflection of the declining dollar but a net 0.5% disadvantage in our trade in just one month.  Additionally, the Empire State Manufacturing Index was down a "shocking" 11.7, a very recessionary sign heading into a 3-day weekend.  BBY cut guidance this morning and Citigroup has barred withdrawals from a $500M hedge fund as manager John Pickett walked off the job "following a bitter dispute with Citigroup executives and complaints from investors that he put too much money into a single investment that went bad."  All I can say about the Citifund investors is they are lucky compared to their Falcon Plus Strategies, which plunged 52% last quarter and a letter sent to investors told them to expect additional losses ahead as the fund "tries to dump some of it's battered holdings."

Asia was generally flat this morning and China's export growth continued to accellerate (that's where our 1.7% monthly inflation is coming from) so we can expect Beijing to continue to tighten monetary policy, which is what sensible governents do when they want to support measured growth rather than put up some pretty numbers in order to win an election and dooming the economy for years to come.  China is famous for its 5-year plans and it would be nice if we adopted A plan of any kind in this country!

Europe is well off, about 2%, ahead of our open after hearing all the bad news and our pre-markets are in shambles.  There are signs of slowing in the EU economy and the heat is on Trichet to cut…
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Bargain Basement Virtual Portfolio Review

Well I’m low on time so I’m going to be quick with these moves.

I’m not very happy with the progress here but this is a longer-term virtual portfolio and I guess most people don’t cry about an 8% monthly return but I had hoped to do better.  We got blown out by SU, SPWR and XLE on the u-turn in the energy sector and yesterday’s circus on Capitol Hill didn’t really give me a reason to think this will improve very soon but we’ll follow through on our plan and hope for the best.

AAPL – We’ll hold these naked, have to have some fun!

AIG – Rolling to 6 March $45s at $3.45

BA – Rolling our 5 Aug $75s up to 10 Aug $85s and selling 5 Mar $85s at $3.25

BUD – Holding naked

MCD – Rolling 10 Feb $52.50 callers at $3.20 to 15 Mar $55s at $2.05

MRVL – Holding naked

MSFT – How great that we got that caller!  Today will be painful but I’m going to risk it over the weekend.  If things get worse we’ll sell the Mar $27.50s and roll ourselves down.

SPWR – Rolling our 5 June $65s to 10 June $80s at a cost of $1,000 and rolling 4 Feb $65 callers to 6 Mar $75 calls aprroximately even.  If it goes lower, we’ll cover more and roll down but our goal is to roll them up to 10 Apr $85s even or better next month.

XLE – If we weren’t short on cash I’d DD at $5.50 on the June $74 puts so naked on the weekend.

ABX - We’re going to take out our $45 caller and hold naked into the weekend.

APOL – Way oversold yesterday on no news, lets just stay naked as we can always sell $70s and roll.

BAC – Our poor callers!  Poor us if they go lower, let’s get out.

CY – We already rolled to March, no need to shift yet.

SU – Already rolled, no change.

WFMI – Right on target, let’s assume they are being pinned and wait for next week, there are tons of strikes to sell so no worries as we are $1 ahead so far.

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$25KP Review

Yesterday’s dip left us just shy of our $50,000 goal but, on the whole, not a bad gain for 30 days!

Like the $10KP, we will be wiping the slate clean on Monday and starting with a fresh $25,000 but that is no reason to liquidate these positions, so I’m going to continue this folder with no new addiitions as we let these spreads play out so we can keep following their progress. 

AIG – Ouch!  Adding insult to injury our callers are not even going to do us the favor of expiring worthless.  Still, look at the JUICY $3.45 we are being offered for selling the Mar $45s against our August $45 calls at $6.90 and I will have to XXX this as a new play for anyone and probably will make it a new play next week so feel free to jump the gun if you aren’t already in it.  We are currently covering 3 of 5 and that’s a good continued mix for the March roll.

AXP – We’re not going to be greedy here and we can roll our 5 Feb $45 callers up to 7 Mar $47.50 callers at $1.75.  That’s effectively taking 1/3 of our cash off the table and leaving ourselve with a little upside should AXP go wild next month.

EK – Remember the days when we couldn’t fill the damn thing for .80?  Now it won’t come off that price.  We’re risking this one as I think it’s being pinned at $20 for expiration but it will suck if I’m wrong.

NDAQ – We were very lucky to have more cover here than the $10KP did, that’s the advantage to being able to spend your way out of a jam.  I also believe these are being held down but let’s be mindful of our total cost of $2.38, which means we are dead even but hopefully with $1,350 worth of premium collected.  In a small virtual portfolio, there is no reason to keep 20 of these so cutting back to 10 naked calls into the weekend is daring enough for me.

ABX – We already did our roll but let’s take our our caller for $2.10 and keep naked gold as weekend insurance.

AMGN – (almost same as $10KP) Was kind enough to wipe out our caller and he will either expire worthless or be taken out today so we can afford…
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$10KP Review

So here we are at the end of the month and forced to deal with our losing positions as we prepare to shut down our virtual portfolio as we reset with a clean $10,000 on Monday.

BUD is a very dead looking play and there’s not much to do but hold it and pray for a miracle.  The time for micacles is past for DELL and those calls expire worthless today.  Our NDAQ play is right on track and the caller will either expire worthless or we will buy him out and we will transfer the naked $42.50 puts to the STP but, as a $10KP player, we cannot tolerate a loss here so we need to set a stop at $2.10 and look to take at least 1/2 off the table should we get lucky enough to get to $3.

SNDK was a spread and took a big hit yesterday so we’re going to try to be brave while we wait for the Mar $27.50s to get back to at least $1.50, where we will sell 8 of 12 contracts to cover.  Should the position turn down on us, we only need to sell 8 March $25s to pay for a roll to the April $25s on our longer legs so that’s our backup plan. 

AMGN was kind enough to wipe out our caller and he will either expire worthless or be taken out today so we can afford to wait and see next week before deciding what to do next.  We can get $3.10 for the March $45s and just 5 of those would pay for our roll down to the April $45s so there’s no reason for us to worry on this already beaten-down position.

ERTS looks just fine and we’ll take advantage of the very nice premium being offered on the Mar $50s to roll our 5 Feb $45 callers up to 10 Mar $50 callers for a net cost of .30 for each of the 5 (.40 is the most you should pay).  We will roll our 5 June $45 calls at $6.60 to 10 June $50 calls at $3.90, which will cost us $1.20 per original contract.  The net effect of this is that we are spending $800 for the roll rather than paying our caller the $1,210 we owe him but we are spending the bulk of that money on increasing the value of our…
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Thursday Thump

Well that thump we heard today wasn't the sound of a heart beating with love, it was the sound of the US markets hitting a gigantic air pocket, specifically the hot air that was coming out of the Capitol today.

We were treated to a less than stellar performance by Fed Chairman Bernanke as he looked and sounded like he would rather be somewhere else (perhaps screwing up the economy of a smaller country) as he answered some particularly uncomfortable questions from the Senate Banking Committee.  It was, as I predicted this morning, a massacre as Al Capone's gang at least had the decency to put their victims out of their misery back in Chicago.

Mr. Bernanke said he expects "sluggish growth" in the economy and a "somewhat stronger pace" later in the year, thanks to rate cuts and fiscal stimulus. But he cautioned that housing and labor markets could deteriorate more than anticipated, emphasizing that "downside risks to growth remain."  Paulson was no help as he admitted about Project Hope and the Stimulus Package that: "those programs alone will not be sufficient….It's going to take time and some pain before we work through this."  TIME and PAIN?!?  Hey man, this is America – we don't have time and we can't stand pain – SELLSELLSELL!!!

And sell, sell, sell they did with the markets taking a nasty hit, finishing below technical levels I had warned about at 11:46 in yesterday's comments.  12,400 didn't hold on the Dow, we lost 9,000 on the NYSE and 1,350 did not hold up on the S&P.  We need to retake those levels at the open tomorrow or there is little hope for recovery while, to the downside, we need to hold Nasdaq 2,325 (now 2,332), SOX 350 (now 353) and Russell 700 (now 705) or we may as well throw in the towel and run some mattress plays

Kudos to Sen Bob Corker of TN (R), who said: "Sprinkling $160 billion around the country and asking people to spend it quickly to me was not a solution worth debating or passing."  When we had our economic crisis in the '80s, Ronald Reagan (who is rumored to have been a Republican) and Paul Volcker fixed the economy by RAISING interest rates to STRENGTHEN the dollar, which lowered those pesky food and energy…
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Valentines Day (Hopefully No Massacre)

Happy Valentine's Day everybody!

This is the 79th anniversary of the St. Valentine's Day Massacre when Al Capone's "South Side" gang, dressed as cops, rousted a garage run by Bugs Moran's "North Side" gang and had them stand against the wall and then executed all 7 men.  They shot them 70 times with machine guns and made their escape by using the Capone men dressed as cops to "arrest" the other Capone men and drive them away from the scene in broad daylight.

Today, the Bush gang (known as "The Gang That Couldn't Talk Straight") faces off against the Senate Banking Committee (known as "The Gang That Allowed This Whole Mess To Happen And Are Looking To Blame Someone Else") this morning on Capitol Hill.  If we get a gunfight at high noon, we can expect blood on the Street but if we get an uncharacteristic love-fest, with everyone congratulating everyone else on what fine Americans they are and how hard they are all working to steer this country through this difficult period (which they caused), then I imagine we could get a strong relief rally into the weekend.

RetailsalesgasolineIt will be much better for us if the Senate does ask the tough questions and airs out the issues as the market needs to make a "trial by fire" so we can make sure we have real buyers out there who are aware of the issues but remain bullish, rather than our typical bunch of manic-depressive trend jumpers.  Barry Ritholtz made the depressing point this morning that, if you strip out inflation, retail sales are clearly down and, even with inflation boost, the majority of our gains are coming from the sale of gasoline.  Spending more money on the same gas you used to make the same trip you made for 70% less money 3 years ago is NOT a sign of a healthy economy.  This isn't the case of the devil being in the details, the devil is right there in the big picture!

Energy costs are my big picture concern for the global economy but the rest of the world seems to be taking it in stride and a slowdown in the US that cuts our piggish demand (we are 5% of the world's population using 25% of the world's fuel) and
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Long Term Virtual Portfolio Review

We’re up 40% for the year so I’m not going to be too shy about taking a few chances in March as this is, to some extent, a no guts, no glory type of game.

When in doubt, cover, is the usual watchword but I’m going to be rolling to a lot of 1/2 covers and light covers for the weekend as I’m willing to use 10% of my gains as a cover, rather than capping my upside should we break up next week.  Those of you who covered tightly know how annoying it is when your callers get away from you and, if you are behind, then taking additional risks is foolish – this is the kind of thing we can afford to do because we are well ahead and still a lot of cash after rolling down and taking a risk on a bounce last week.

It’s easy, and not too damaging, for me to change my mind and cover – my real risk is on a big Monday drop catching me with my pants down and I will not sleep well over the weekend with this plan so I reserve the right to change my mind if we fall back below 12,450 betwen now and tomorrow’s close:

Description Type Cost Basis Opened Sale Price Closed Days Gain/Loss $ %
AAPL
40 JAN 09 120.00 AAPL CALL (VAAAD) LO $ 131,210.00 1/18/2008 $ 119,600.00   27
$ -11,610.00 -8.8 %
We got soooo lucky on these I’m not going to push it too hard.  Selling 1/2 the March $130s, now $7.25
$ -11,610.00 -8.8 %
AIG
25 JAN 09 45.00 AIG CALL (VAFAI) LO $ 18,835.00 11/2/2007 $ 21,000.00   104


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Wild Wednesday Wrap-Up

Hey, I'm getting pretty good at this predicting thing!

We are getting, of all things, a tech-led rally and the Nasdaq is resting just under the 2,380 mark and the Russell is making rapid improvements, crashing through my 712 target from Monday, putting us in our "Feeling Better" zone everywhere but the SOX – who are valiantly attempting to catch up with a 5% move on the week but are still miles away from anything that's really going to make us feel better.

"I've got to admit it's getting better, better
A little better all the time (
it can't get no worse)" – Beatles

It can't get no worse has been my premise for this rally and my bottom call at 12,000 but the question now is: "How much better is it really getting?"  In just 3 days this market has shifted back from depressive to manic with traders picking up everything that wasn't nailed down today with every major index gaining at least 1% giving us our first 3-day advance since right before XMas (when the market crashed the next week).  Since our bottom on 1/22, we've had 10 of 16 positive sessions with the great bulk of our losses coming on the 5th (down 366), when we got that terrible ISM report that everyone seems to have forgotten about already.

I would have preferred it if the energy sector hadn't played such a prominent part in the rally.  Despite another large build in crude inventories, oil stayed at a still painful $93.22 while the energy sector jumped 2.4% and oil services gained a whopping 4.2% on the day.  It is XOM's turn to take a production hit (you can't expect Shell to shut down Nigerian production EVERY time a teenager with a gun in a motorboat gets rowdy) as they play out their grand theater with Chavez.

My own prejudices about the ridiculous scam of oil aside, the OIH group looks poised for a very nice run if the market keeps heading higher.  The service sector has long been the part of the energy sector I won't short so I don't mind going long here with the Jan $170s at $22.65, which I really like as we can sell March $175s for $4.50 but we can afford to hope for more and backstop
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Wild Wednesday Morning

Can we be disappointed by retail sales?

Hard to imagine them being worse than the market is already anticipating but we'll find out at 8:30 so I'll be updating then.  The WSJ did a little bit of investigation into what kind of smoke and mirrors the admininstration's homeowner aid has been so far.  To date, despite Paulson's fabulous spin yesterday, they have provided counseling to just 36,000 borrowers and have suggested loan workouts for less than 10,000 of them over two months.

10,000 sounds good until you remember that 7,000 people PER DAY are losing their homes to foreclosure.  Much like looking for Osama Bin Laden by invading Iraq, some jobs are just never going to get done if you don't actually make a real effort to solve the problem! Other callers were looking for money, which the hotline doesn't have available, or had only general questions, executives running the project say. It's not clear how many borrowers were able to stay in their homes because of the hotline's help.

Today Bush will "celebrate" tossing another $168Bn onto the inflationary fire with his pointless rebate package and it kills me that people (Congresspeople) act like it's somehow OK if we just "try" this to see if it works.  $168Bn is A LOT of money folks, it's enough to GIVE all 2M homeowners facing foreclosure $84,000 or, more importantly, it's enough to finance a reduction in mortgage rates all the way to 4% for 14M homes (15% of US homes).  We need to save housing, not Wal-Mart! 

 

Would you like a 4% home loan or $600?  Unfortunately, the average US homeowner is not good enough at math to answer that question, so it's up to government to steer our fiscal policy in the right direction.  Even more unfortunately, Congress apparently really does represent the AVERAGE American and we've chosen a very average American to lead us, so what do you expect to happen?

Most of Asia seemed to enjoy our rally yesterday with the Hang Seng picking up another 247 points, albeit after once again testing 23,000 while the Nikkei seems to be unable to resist the pull of 13,000 for more than a few hours per session.  Shanghai traded off 2.4% as that exchange finally got back to work after a week off.  Speaking…
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Zero Hedge

Enemy Of The People?

Courtesy of ZeroHedge. View original post here.

Via The Zman blog,

There has never been a time when normal people did not know the media was biased and biased in a predictable direction. For every non-liberal in the media, there were at least ten liberals. The ratio was probably higher, but then, as now, some lefties liked to pretend they were independents or some third option.

The media used to invest a lot of time denying they had a bias and an agenda, but the only people who believed them were on the Left, which had the odd effect of confirming they had a bias and an agenda.

...



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Phil's Favorites

A 2019 Earnings Recession?

 

A 2019 Earnings Recession?

Courtesy of 

Shout to Leigh!

On the new Talk Your Book – Josh Brown is joined by Leigh Drogen of Estimize, one of the leading providers of crowdsourced financial and economic data to talk about the trend in corporate profits that could potentially lead to an earnings recession later this year.

What is the thing that Leigh is seeing in the data that Wall Street isn’t yet picking up on? What segment of the stock market is most at risk? Why is the crowd smarter than the narrow consensus of Wall Street analysts?

Check out Estimize ...



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ValueWalk

D.E. Shaw Investment Calls For Leadership Change At EQT

By ActivistInsight. Originally published at ValueWalk.

Elliott Management has offered to acquire QEP Resources for approximately $2.1 billion, contending the oil and gas explorer’s turnaround efforts have done little to lift the company’s share price. The company responded and said that a thorough review of the proposition is imperative in order to properly act in the best interests of shareholders, “taking into account the company’s other alternatives and current market conditions.” The news came only a month after Travelport Worldwide agreed to sell itself to Siris Capital Group and Elliott’s private equity arm Evergreen Coast Capital for $4.4 billion in cash and two months after Athenahealth was bought by Veritas and Evergreen for $5.7 bi...



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Kimble Charting Solutions

Gold & Silver Testing Important Breakout Levels!

Courtesy of Chris Kimble.

Gold and Silver from a long-term perspective have created a series of lower highs over the past 8-years. Will 2019 bring a change to this trend? A big test is in play!

Gold since the lows in 2016 has created a series of higher lows, while Silver may have created a double bottom.

Gold & Silver are currently facing break attempts a (1) and (2). These falling resistance lines have disappointed metals bulls for the past few years.

The direction of Gold and Silver weeks and months from now should be highly influenced by what each does as they are attempting to break above important resistance levels.

To become a member of Kimbl...



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Insider Scoop

UBS Says Disney's Streaming Ambition Gives It A 'New Hope'

Courtesy of Benzinga.

Related DIS Despite Some Risks, Analysts Still Expecting Double Digit Growth From Communications Services In Q4 ...

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Digital Currencies

Russia Prepares To Buy Up To $10 Billion In Bitcoin To Evade US Sanctions

Courtesy of Zero Hedge

While the market has been increasingly focused on the rising headwinds in the global economy in general, and China's economic slowdown in particular, while the media is obsessing over daily revelations that Trump may or may not have colluded with Russia to get elected, a far more critical, if underreported, shift has been taking place over the past year.

As we reported in June, whether due to concerns over draconian western sanctions and asset confiscations following the poisoning of former Russian military officer Sergei Skripal, or simply because it wanted to diversify away from the dollar, Russia liquidated virtually all of its Treasury holdings in the late spri...



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Chart School

Weekly Market Recap Jan 13, 2019

Courtesy of Blain.

In last week’s recap we asked:  “Has the Fed solved all the market’s problems in 1 speech?”

Thus far the market says yes!  As Guns n Roses preached – all we need is a little “patience”.  Four up days followed by a nominal down day Friday had the market following it’s normal pattern the past nearly 30 years – jumping whenever the Federal Reserve hints (or essentially says outright) it is here for the markets.   And in case you missed it the prior Friday, Chairman Powell came back out Thursday to reiterate the news – so…so… so… patient!

Fed Chairman Jerome Powell reinforced that message Thursday during a discussion at the Economic Club of Washington where he said that the central bank will be “fle...



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Members' Corner

Why Trump Can't Learn

 

Bill Eddy (lawyer, therapist, author) predicted Trump's failure based on his personality, which was evident years ago. This article, written in 2017, references a prescient article Bill wrote before Trump became president, in July, 2016, 5 Reasons Trump Can’t Learn. ~ Ilene 

Why Trump Can’t Learn

Donald Trump by Gage Skidmore (...



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Biotech

Opening Pandora's Box: Gene editing and its consequences

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

 

Opening Pandora's Box: Gene editing and its consequences

Bacteriophage viruses infecting bacterial cells , Bacterial viruses. from www.shutterstock.com

Courtesy of John Bergeron, McGill University

Today, the scientific community is aghast at the prospect of gene editing to create “designer” humans. Gene editing may be of greater consequence than climate change, or even the consequences of unleashing the energy of the atom.

...

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Mapping The Market

Trump: "I Won't Be Here" When It Blows Up

By Jean-Luc

Maybe we should simply try him for treason right now:

Trump on Coming Debt Crisis: ‘I Won’t Be Here’ When It Blows Up

The president thinks the balancing of the nation’s books is going to, ultimately, be a future president’s problem.

By Asawin Suebsaeng and Lachlan Markay, Daily Beast

The friction came to a head in early 2017 when senior officials offered Trump charts and graphics laying out the numbers and showing a “hockey stick” spike in the nationa...



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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.

Market Shadows >>