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Which Way Wednesday

Barack Obama - 2 Years OldWell I’m uplifted!

We had a fantastic day in the markets yesterday as we went bottom fishing in earnest early in the morning, picking up entries on JPM, X, IP, VNO, HMY, M and IYR early in the day, ahead of my 12:48 observation to members: "BAC breaking up along with their preferred stock – that’s a good sign.  SKF back at $192 test area, XLF at $7.45 so just a little push and maybe we can get somewhere!Indeed watching our levels paid off and we went flying up after that.  As I often say, you NEED to make these buy decisions at the bottom, it’s too late once the train starts moving.  We did grab a momentum play on BAC as they crossed $4.40 but, other than adjusting our DIA cover play, we had no need to make adjustments during the run-up because it’s what we were playing for.

We went into the close fairly neutral (a very slight bearish bias on our DIA puts), having accomplished our mission and not being sure what kind of speech Obama would be giving.  It turned out to be a great one and the Republican response by Gov. Bobby Jindal was so mind-blowingly awful that Rachel Maddow was stunned to the point where she was unable to speak and I will leave my own commentary at that!  On this same clip, Cris Matthews had the comment of the week, saying that the Republicans were so mired in responsibility for this crisis that they had to outsource the response (Jindal is Indian).  I found that very funny…

As we expected, there is no "quick fix" in Obama’s speech and we’ll see how well the markets hold yesterday’s gains.  We would have been more bullish had we not had so much trouble with our two critical levels I said we should watch in yesterday’s morning post: Russell 411 and NYSE 4,790.  As I said in the morning, these were just the levels we needed to break in order to consider the day’s action anything more than a weak bounce off the horrendous drop of the past two weeks.  That’s why we do not jump on the bandwagon once the rally gets going – we do our bottom fishing at the bottom and we sell or cover into the rallies.  If it’s a real rally, we have a long, long way to go and we will have very strong buy signals – a good start would be holding our watch levels today at: Dow 7,245, S&P 760, NAS1,425 (I raised that one), NYSE 7,490 and Russell 411.  We also want to see the SOX over 200, still pathetic but something and let’s not even consider being bullish with the Transports below 1,600 (7% to go).

Oil is at $40, the DBC needs to retake $20 and the BDI needs to hold 2,000 – None of these are signs of a "healthy" global economy but they are signs of a pulse, and right now we’re not even sure we have that!  Global economies were generally perky this morning, following Obama’s most upbeat speech since the campaign.  Bernanke was also generally upbeat yesterday as he addressed the Senate, hopefully we can get past the House hearnings today without a misstep and have another nice afternoon rally.

China is certainly doing their part, committing Trillions of dollars to their own stimulus program and President Hu Jintao announced this morning (good timing) that even stronger measures may be required to boost domestic consumption.  "China’s advantageous economic conditions have not fundamentally changed, but downward pressure on economic growth has intensified," Hu was cited by state radio as saying during a State Council meeting.  According to JPMorgan chief economist Frank Gong: "Top of the agenda will be to pass the Social Security Law, approve proposals for medical reform and discuss educational reform."   Wow, sounds like Hillary accomplished a lot on her China Trip!  Boosting consumption in China is very difficult as those without a social safety net are not confident enough to go out and make long-term investing decisions – something the communists understand but the Republican party does not…

Meanwhile, Japan’s Aso has come to us and is meeting with our President this week.  Aso pledged $2Bn to support our troops and reconstruction in Afghanistan and, in another indication of the globally coordinated push to improve the markets, his Finance Minister Yosano said: "Stock prices must in principle be determined by market forces, but since excessive falls would affect the health of banks, insurance companies and others, the government must come up with generic steps to support stock prices."  The Nikkei climbed 2.6% in morning trading as the Yen continues to pull back against the dollar while the Hang Seng bounced back 1.6% and the Shangai held flat at 254. 

By the way, on Feb 4th I said: "Dollar dumping helped our market yesterday as the dollar fell 1.25% and we will probably retest the 50 dma at 84 before turning back up.  There are still no viable alternatives for currency investors and the Yen index is back at 112, just about where Japan needs to force it back down, most likely by trading Yen for dollars so let’s keep our eye on that move this week.  A combination of dollar strength over 86 and a big build in crude today could send oil back to its lows and we’ll be looking for short plays on USO and XLE (and, as always, XOM if they dare to test $80) if we get another pointless run-up after a better than 3M build in crude inventories but I think we break +5Mb today and it will be tempting to just go short on oil into this morning’s report..Check out this Yen chart, check out this USO chart, check out this XLE chart, check out this XOM chart – You’ve gotta love getting your information that far in advance!

European markets are up about a point ahead of our open.  A plane crashed in Amsterdam with 9 dead and 125 survivors.  They still don’t know what happened and, like all plane crashes, this one spooked the markets but it doesn’t seem like a terrorist incident.  Google is joining the long-running case against MSFT in the EU courts that was originally pressed by browser rivals Firefox and Opera.  This could explain MSFT’s severe stock drop this week as any thoughts of the smaller companies giving up due to lack of funds is now out the window as Google can fund this case from the ad revenues from the people searching for information about this case…

Oh no - time for Ron Paul's question!Not much to do today but watch our levels.  The next move is Bernanke’s and then we’re back to waiting for Geithner but I do reserve the rights to call an audible during comments today!  GM and F will be guests at the White House today as they meet to discuss a way forward.  Our F shares should get another good pop today and let’s keep in mind that taking half off at 50% allows us to put a stop on the rest at 25% and lock in a 37% profit.  I know it was supposed to be a long-term hold but 50% in a week is a pretty good annualized return!  

FSLR really stunk up the joint with last night’s earnings and get hit with a slew of downgrades.  We’ve been short on them since they were at $300 last May and they are my least favorite solar play for reasons I outlined in this post.  We’re done with them but they are dragging down the entire solar sector so a good second chance to catch SPWRA, my favorite solar play, at $30.  You can sell the $25 puts naked for $1+ on the morning dip, which is a fun way to get in (or not get in and get $1) or you can buy the stock and sell the Apr $25 puts and calls for $11 for a net entry of $19 ($6 profit if called away) or an average entry of $23 if the stock is put to you below $25 in April.   That is a 23% discount off the current price and THAT is the way you enter a stock position! 

We may get a small upside surprise from existing home sales at 10, oil inventories should be net flat at 10:30 and then it’s the Bernanke show – let’s sit back and watch the fun!

 

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maybe a headfake to shake some people out with 20 minutes to go.

Another Hammer on the Indices daily chart to confirm the move off the bottom.  More money could be thrown into the market tomorrow if we stay green today.  Today felt like a shake out of weak hands before a move up.  My trick is only fiddling with one of my accounts and leave the others alone.  You can guess the outcome – the untouched accounts are up big time.

DIA puts — looking for a new position of puts and putters. Why did you recommend Jun 80? That’s more than 0.5 per roll? Should I buy Jun 75 w/ Mar 74 putters?

Phil: wrong, I want little excitement, i prefer gains.
did you buy SKF calls ?
Do yuo see a move up tomorrow as Peter D ??

WTF … Did Obama do that ?
 
They sold off C hard and took everything w/ it.
 
SKF even closed green.  WTF.

Someone sent me this via email today…. hilarious
Phil … if too long, my apologies; best I could do via cut & paste (feel free to delete if its a problem).
 
Read thru to the end. Unbelievable

 

                    
36  have been accused of spousal abuse 

7  have been arrested for fraud 

      19  have been accused of writing bad checks 

        117  have directly or indirectly bankrupted at least 2 businesses 

3  have done time for assault 

71    repeat    71 
cannot get a credit card due to bad credit 

14  have been arrested on drug-related charges 

8  have been arrested for shoplifting 

21  currently are defendants in lawsuits, 

and 
84  
have been arrested for drunk driving 

in the last year 

Can 
you guess which organization this is? 

  

NBA   Or   NFL 

  


  

Give up yet? . 

  

Scroll down, 


 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Neither, 
it’s the 435 members of the 
United States Congress 

The same group of Idiots that crank out 
hundreds of new laws each year 
designed to keep the rest of us in line. 

That seems kind of high, even for Congress.  I do not vouch for the accuracy of this.

That thing has been going around for years… so it’s hard to even know which year they are talking about.  But I would not doubt at some point it was true.

Hey folks, what you think about the patern that RUT formed last 3 days? If you compare it to the movement of RUT on Jan 20-21-22 and before that on Dec 11-12-15, maybe we could get some nice raly next 2-3 days…..

Phil:  As I watch you during the day it appears to me that you are trading a well hedged portfolio.  So, in an effort to get my feet wet, (and mimick your strategy) I’m considering building "Tech" portfolio containing AAPL, AMZN, HPQ, MSFT, GOOG and RIMM…then use QID to hedge my exposure.  What is the approximate ratio of stock to QID?  For example:  If I was long 10 shares of each stock that would be approximately $6,000 total.  Then, if I bot 20 shares of QID that would cost approx $1200.  Since the QID is 3X, that should come close to covering any losses incurred by my stocks.    I am also thinking I can add to my stock postions on pullbacks and adjust my hedge accordingly.  Is this the correct approach or is there a better way?
JW 

Hey guys, Im a newbie here and I have been lurking the past two weeks.   I have really been impressed with the flow even though alot of what Phil writes zooms past me.  
The past few days a few newbies have asked great questions that have really helped me, and Phil references back to some older posts have really helped also.
I have one more question, I saw in one of your areas for newbies that you said you were going to create a glossary of "PSW" terms, that would be most helpful, Any chance of that as we move forward?
I tried to put on the HOV vertical call spread Buy Jan 10 2.5 and Sell Jan 10 5, for an .08 debit per contract in TOS, couldn’t get it to fill?
Also I would like to increase my knowledge of advanced options and would like to hear how other members got their educations?  Thanks
Also, Phil I believe I am a Premium Member albeit so far for just one month and I am not getting your intraday updates…. am I supposed to be,,,,  I certainly hope so. Thanks
Sincerely,
cb

Hey Chuck,  I just got a couple of minutes, but maybe I can answer a couple of your questions. 
First, on not getting the HOV fill.  You don’t always get filled immediately, especially on spreads that are way OOM (out of the money) or have thinly traded underlyings.   If you really want the trade, put in a GTC (good to cancel) order and let it work.  In fact, in this volatile market, it sometimes pays to have "silly" orders out there if you know you want to position.  When the markets routinely move 200+ points in a day, it’s amazing what can get filled when you have a little patience.  Just be sure you really want the trade on the GTC orders.
 
Terminology.  Like a lot of specialized endeavors, there if a fair amout of jargon used here, but after a few weeks you’ll pick it up.   If you get  lost in a complicated trade description, just ask for a Phil –> English translation and someone will help you out.   Two basics:
–  Call vs. Caller / Put vs. Putter.    Calls & Puts are what you buy (long positions), and Callers and Putters are what you sell (short positions).    For example, when using DIA to hedge a position you buy a Put for protection and sell a putter to help pay for it.   In almost all of the calendar plays, we are buying longer-dated Calls/Puts and selling callers and putters against them.
Premium:  The excess cost over intrinsic value.   Generally you want to buy as little as you can and sell as much as you can.   Calendar spreads are basically set up to collect premium over time.
 
Anyway, I gotta run, but sure to keep asking questions, Phil and his merry band are always around to help.

Good Morning Phil, everyone.
 
 
 
UK is up 0.8% @ 3879 well off the highs (+2%) on the euphoria of RBS ONLY loosing $34B (as Phil mentions above RBS now up only 20%) is it any wonder that most people wont go near stock markets. Pre-markets is +60pts but will probably change when the data comes out. (Although only for a while because no one pays attention to the data any more – just nationalisation and stress tests.)

Good Morning Phil, DB & All

Asia Markets :    Thursday, February 26, 2009
(The following is from WSJ; please cross check with other sources to confirm.)   

Nikkei Average*                            7457.93         -3.29    -0.04%
Hang Seng*                                12894.94    -110.14    -0.85%
China: DJ Shanghai*                     241.63      -13.36    -5.24%
Seoul Composite*                       1054.79      -12.29    -1.15%
Bombay Sensex*                          8954.86       52.30     0.59%
Baltic Dry Index                              1960.00      -50.00   -2.62%

*at Close

Asian Markets Turn Lower on Weak Yen, Poor Data

Asian markets turned negative late Thursday with the U.S. dollar extending its rally against the yen as mounting economic damage and prolonged political uncertainty in Japan tarnish the yen’s safe haven reputation. The price action in Asia lacked firm conviction as regional exports continue to slump amid the global slowdown and corporate earnings prospects recede rapidly.

The Nikkei ended nearly flat after briefly turning negative on a spate of profit-taking .

South Korea’s KOSPI closed down 1 percent and comments by the vice finance minister on domestic foreign exchange liquidity supported sentiment.

Australia’s S&P/ASX 200 Index finished half a percent higher.

Hong Kong shares were 0.8 percent lower as blue chips were sold down ahead of the index futures expiry.

Singapore’s Straits Times Index closed flat. The island state issued revised GDP estimates for 2008 which showed the economy contracted by 16.4 percent in the fourth quarter on an annualized, seasonally adjusted quarter-on-quarter basis.

China’s Shanghai Composite Index closed 3.9 percent lower as banks, which had led a market rebound Wednesday, were mixed. Auto shares were weak, slipping back after some rose sharply in speculative trade on Wednesday when the official Shanghai Securities News said China, planning to restructure the sector, had chosen four auto-making groups to lead large-scale mergers and four other groups to pursue regional mergers.

Bombay Stock Exchange’s Sensex ended at 8967.04, up 64.48 points or 0.72 per cent. The index touched an intra-day high of 8960.84 and low of 8788.32. Indian benchmarks pared losses in the last half an hour of volatile trade Thursday to end higher. Auto and oil&gas stocks led the up move while banks and realty stocks ended lower. Positive opening of the European markets and higher US index futures boosted sentiments.

Euro Shares Rise 1%; Banks Lead

European shares rose in early trade on Thursday, snapping a four-day losing streak, as investors assessed a flood of results and welcomed a UK government insurance scheme for banks’ assets.

The FTSEurofirst 300 index of top European shares was up 1.3 percent at 725.52 points, and had been up more than 2 percent. The index has lost 12.8 percent in 2009, after falling 45 percent in 2008. On Wednesday, the index fell 0.5 percent, hitting a new six-year closing low for the fourth straight day.

The STOXX 600, a broader index of European shares, was up 1.2 percent, with banks adding most points.

Royal Bank of Scotland surged 29 percent after the bank said it planned to place 325 billion pounds in assets in a state insurance scheme.
RBS reported a loss of 24.1 billion pounds ($34.3 billion) for 2008, the biggest in British corporate history. Other UK banks to gain included Lloyds and HSBC, up 25.8 percent and 6.9 percent respectively, and due to report results on Friday and Monday respectively.

Barclays rose 10.8 percent. Stricken Swiss bank UBS soared 9.7 percent after appointing Oswald Gruebel, who masterminded a turnaround at arch rival Credit Suisse, as its new chief executive, replacing Marcel Rohner. Allianz rose 10.5 percent as its results showed the extent to which it had been held back by its Dresdner Bank unit, which it has sold to Commerzbank.

BASF rose 6 percent after the chemicals maker reported a decline in fourth-quarter earnings and said it was bracing for a sales decline in 2009.

German unemployment rose less than expected in February. It rose by 40,000 month-on-month in seasonally adjusted terms, the Labour Office confirmed. The mid-range forecast in a Reuters poll of 31 economists was for a rise of 60,000 on the month.

Across Europe, Britain’s FTSE 100, Germany’s DAX and France’s CAC-40 were up between 1.4 and 2.2 percent.

Oil Rises Above $43 after UAE Cuts Asia Supply

Oil rose above $43 a barrel on Thursday after the United Arab Emirates announced deeper cuts in crude supply to Asia for April in a possible signal that OPEC will cut output further at its next meeting in March.

Abu Dhabi National Oil (ADNOC), the main oil supplier in the UAE, said it will sell customers less of its flagship Murban crude oil and three other main grades in April than in March. The move came as a surprise to traders, who had expected the UAE to keep April supply curbs largely unchanged.

U.S. crude [ 43.46    0.96  (+2.26%)] for April delivery was up, after surging $2.54 on Wednesday.
London Brent crude [ 44.73    0.44  (+0.99%)] gained.

U.S. crude futures jumped more than 6 percent on Wednesday after U.S. government data showed a larger-than-expected drop in gasoline stockpiles as demand rose on cheaper prices. The data also showed a 1.7 percent rise in U.S. gasoline demand over the four weeks ending Feb. 20, as low gasoline prices lured U.S. motorists back on the roads.

Reports this week have shown high compliance by OPEC members on production cuts agreed last year to stem the slide in oil. Venezuelan Finance Minister Ali Rodriguez, a former president of OPEC, said his country expected to propose new output cuts.


Dollar Slips as Stocks Gain; Yen Falls

The dollar slipped against a basket of currencies on Thursday as European stock markets extended gains and the British pound got a boost from the launch of a bank insurance scheme. However, the yen tumbled to a three-month low against the dollar as investors sold the currency amid concerns about Japan’s economic outlook.

The euro [ 1.2761    0.0041  (+0.32%)    ] extended gains against the dollar, and sterling [ 0.895    -0.0003  (-0.03%)    ] after data showing German unemployment rose less than expected in February on a seasonally adjusted basis. The single currency remained near recent lows however on ongoing concerns about sovereign credit quality within the euro zone.

Sterling [ 1.4256    0.0054  (+0.38%)   ] was up against a broadly weaker dollar at $1.4213 after Britain launched a scheme which could end up insuring more than 500 billion pounds worth of toxic assets in a bid to get lending in the recession hit economy moving again.
The dollar [  97.94    0.57  (+0.59%)    ] rose as high as 97.97 yen according to Reuters data, its highest since mid-November, and was last up on the day against the Japanese currency.

One-month implied volatility on dollar/yen options has risen to around 18 percent after falling as low as near 16 percent earlier this week.

The euro [  125.01    1.12  (+0.9%)   ] climbed against the yen, after touching a seven-week high of 125.17 yen on Wednesday.The Australian dollar [  63.54    0.57  (+0.91%)   ] struck a seven-week high of 63.69 yen, according to Reuters data, after figures showing Australia’s business spending jumped in the fourth quarter.

Gold eases on strong dollar, SPDR stays at record

Gold eased a touch as the dollar held onto gains against the yen on Thursday and investors took profit from an 11-month high hit last week. Gold was trading at $945.60 an ounce as of 0620 GMT, down 0.7 percent from the notional close of $952.10 on Wednesday. Gold fell 4 percent over the previous three sessions.

What did YRCW do ? -30% pre-market

GMs loss one third an RBS 🙂 Only $9.6B or $5.9B adjusted. market shows no reaction.

Why are the futures up so much?

:O

🙂

;O

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