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Tuesday, November 29, 2022

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Testy Tuesday Morning

I love testy Tuesdays!

They are usually great days for giving us direction for the rest of the week.  Of course this being an option expiration week we can't count on anything but we nailed it yesterday so I'm in a fighting mood.  While we made the levels I cited in the morning post over in Europe, we failed at the 2.5% levels which I mentioned to members in the 9:14 alert needed to be broken to keep us bullish.  They were: Dow 7,404, S&P 775, Nas 1,466, NYSE 4,839 and RUT 402.  As you can see from David Fry's chart, we popped right off that 775 line on the S&P at 1:05 and again at 1:45, that gave us a great signal to get bearish into the close.

Of course, we don't need no stinkin' level test to get bearish.  We practice non-greedy exits at PSW and my 11:58 alert to members said: "Gotta flip bearish here.  That was a good run and needs to be protected so naked DIA puts, June $74s at least, they can always be covered back up if we break the highs but I'm not feeling it here."  Sure, a lot of analysts can tell you we failed a level after the fact, but how many can tell you an hour before it happens?

I updated members at 1:15 saying: "So far so good to the upside.  Dow and S&P pulling back to 2% from 2.5% is bullish if they hold 2%.  NYSE still over the 2.5% line and RUT is dragging at 1.25%.  Nas barely holding positive so that’s our big worry and I still think we get a pullback but my bad for chickening out  too early before."  Right after that, we blew those 2% levels and the bottom fell out and did so hard enough for us to get a little more bullish into the close, selling SPY puts and covering our long DIA puts half back up as it seemed the sell-off was as overdone as the run-up.  Overall, we were simply following our trading plan from the 9:14 alert, where I had said: "Consolidation between these lines are OK but we're really looking for breakouts one way or the other."

Will we get our breakouts today?  In addition to the 2.5% levels we were looking for yesterday, we need to beware of those 10% (from the bottom) levels to the downside of Dow 7,150 (yesterday's close 7,216), S&P 748 (753), Nas 1,430 (1,404), NYSE 4,620 (4,728), RUT 380 (386), SOX 209 (212) and Transports 1,375 (1,426 – yay IYT!).  So the Transports were our stars yesterday but the SOX were a disaster, led down by NSM, who fell 6.3% and general weakness in solar stocks as oil fell below $45 and spooked the industry

We couldn't resist a hedged entry on SNDK and today I'll be looking as SPWRA at $22.50 as you can buy that one and sell the MARCH (expires Friday) $22.50 puts and calls for $2.55 for a net entry of $19.95, after which we can sell the April $22.50 or $20 puts and calls, currently around $6 so entering a $22.50 stock today and collecting $8+ in option sales by Friday is what I call a nice 3 days of trading, especially on a stock I'm happy to own long-term like SPWRA, who are guiding a rough year but will still earn $1.50-$2 according to the most bearish estimates.

Are we in for another day of consolidation?  Will we flatline into Friday's quadruple-witching expiration?  As it's St. Patrick's day, I went with the picture of the one green witch but we have four of them to contend with this week as the quarter comes to a close.  We've already had fun this morning, day trading the futures in pre-market, a fun thing to do when chat is quiet.  The wild market swings don't confine themselves to market hours as we've already had a 40-point drop in the Dow since 6:30 (now 7:20) and we just added longs on the S&P as 754 seemed to be a good spot to make a stand

Europe is holding up well so far, with 1% drops in general.  Asia was up 3% except for India and the Hang Seng, which both dropped about a point even though the Shanghai was also up 3%.  Is there big trouble in little China that is spooking our Western markets?  The Hang Seng was VIOLENTLY rejected from 13,200 – like a witch trying to get ruby slippers – and went from up 224 to down 98 very quickly in the afternoon.  Looking at the chart, however, what do you see?  It's a run from 12,000 last Thursday with a pullback to consolidate at 12,600 on Monday (5%) followed by a run that teminated at 13,200 (10%) after lunch today.  I don't have to connect any more dots than that for my members to know that anything less than a 240-point pullback after a run like that is STILL BULLISH and what is 240 less than 13,200?  12,960.  That become tomorrow's critical number for the Hang Seng (as does 13,200) as our bullish consolidation level (now 12,878). 

[Asia stock markets]If we have a bad day today, FXP (ultra-short China) could be a great play but nothing bad actually happened in Asia and this was simply profit taking after a great run.  "People are just waiting for some excuse to take profit," said Peter Lai, director a DBS Vickers. He added that there was also "too much uncertainty."  "The rally seems to [have been] driven not by good news but by a lack of bad news. The real test — which should help figure out if this is just another false dawn — will be how the market reacts to the next batch of gloomy economic data," said Anthony Grech, IG index market strategist.  

Banks led the rally in Asia with HBC continuing to recover and MTU making strong gains but Europe is being led down by banks, but it also looks like simple profit taking after some very exciting gains last week.  We can't blame them, we took our profits yesterday at lunch, possibly causing the pullback I predicted but better to take profits early than never I always say…   This is something Tim Sykes and I discussed on his TV show last Friday, funds set targets – not at the targets – but slightly below them as it's easier to get out while others are getting excited that new breakouts are coming.  Also hitting Europe this morning is a pullback in miners as today's PPI report sparks renewed fears of deflation and AA's dividend cut freaked out the metals sector.

We had a surprising (not to us, to "experts") jump in Building Permits (583K, 500K expected) and Housing Starts (547K, 445K expected) as investors and economists are once again shocked that builders would begin to build homes after the winter.  I know, it's scary they give these guys degrees but what can you do?  The market got a nice pop and we took the money and ran on the futures at 756 as there's nothing recovery-like about these numbers as you can see from this chart:

So beware celebrations on a "recovery" to 550,000 homes but this is also not a bad thing overall as we still have plenty of inventory to burn off and this indicates builders are not getting irrationally exuberant but have not completely thrown in the towel either.  We also got PPI numbers which came in at 0.1% and 0.2% at the core, indicating that expectations of deflation ("experts" expected a 0% core PPI) are wildly exaggerated.  This makes gold futures a good buy at 914 (9:00) with a stop at 913, looking for 920 at the moment as gold is really down on deflation fears and nothing more

It should be a fun day ahead, hopefully we can test our bottoms and then break through our tops but things rarely work out that perfectly so we'll take a consolidation day if we have to but, if we can't break our Dow 7,450 target we set over the weekend, that will certainly turn us much more bearish.

 

 

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Ok sold out my AAPL mar95 calls. Up over 100% today on them.  Looks like I left some money on the table.  AAPL just seems a bit toppy now.  Maybe I can buy them back at 98 tomorrow.

Steve S Congrats

Talk about a run-up… I’m very suspicious of this “rally” with a small “r”.   

FAZ – Added to my FAZ from last week at $35.40. Hope I don’t regret it. Mental stop is for $33-ish.
Plan (rather hope?) to sell Calls against it if / when it goes above a ‘reasonable’ 40-45! Right now an April 40 call is $8 and an Apr 45 about $7

Wow, Phil, we pretty much made your levels.
Your levels:
Dow 7,404, S&P 775, Nas 1,466, NYSE 4,839 and RUT 402
My sceen is showing:
Dow 7,404, S&P 777, Nas 1,462, NYSE 4,868 and RUT 404

 Phil, 
Are you covering the /ES short or holding as a hedge?

 Hm, does anyone know where Peter D went? (He’s the one with the yellow box that was talking about SPY strangles over the last month.) Does he hang out anywhere else on the web?

I tried as well to roll the DIA puts all day for a buck…no luck 😯 .  I still believe this is a bear  market rally.  Just going with the trends now.  Talking with my uncle the other day…he thinks we are headed to 5K.  I noted last year here (Sept or so) that 6500 was within reach (from him), as well as Citi at $6, BAC 10, etc. FWIW.  He was just a bit off!

Phil,
what would say would be the decision point for rolling my Dia Jun 76 puts to a higher strike.
I asked you earlier about my EWZ that last week I sold April 31 puts and 33 calls against, you recomednded I keep a close eye on the ratios. Do you mean the Delta on the options or what?
Thanks.

AIG – Excellent article by Elliot Spitzer on what we the taxpayers should be shouting about. Hint – it is not the executive compensation & bonuses – that is just subterfuge for the real thing!
 http://www.slate.com/id/2213942/

Phil, Jan 70 covered with Mar 90 callers…should I roll callers to Apr 95 or 100?

Phil, what to do with GE, FAS, and UYG hedged entries? Still have stock  and GE Mar 12 1/ 2 putters, FAS Mar 10 putters, and UYG 3 putters. Thanks!

 pharm, what are your thoughts on arena pharmaceuticals?  Sounds like a lot of downside if trials of anti-fatty rx go the wrong way?

Goldman to loan employees money:
 
Is this a proper use of TARP funds ???
http://www.cnbc.com/id/29734367
 
Will CNBC run wild with this story, like AIG ?

RE: AIG  … more phony outrage from politicians ?
But why is Obama so outraged and surprised? Today we learn that he signed the very bill that quite clearly made those bonuses legal — the $787 billion stimulus package he had traveled around the nation promoting. The bill includes restrictions on executive compensation, but creates an exception for bonuses contractually obligated before February 11 of this year. The provision, and the exception, were inserted into the bill by the chairman of the Senate Banking Committee, Chris Dodd (D, Conn.), who has received more than $100,000 from AIG employees in the last 20 years, had written and inserted the relevant provision, with the relevant loophole.
Here is the loophole, from the section of the stimulus package that deals with compensation rules for TARP recipients:

The prohibition required under clause (i) shall not be construed to prohibit any bonus payment required to be paid pursuant to a written employment contract executed on or before February 11, 2009, as such valid employment contracts are determined by the Secretary or the designee of the Secretary.

more details on my ObamaNation page …

Cap,
Are you "keeping it" to your political blog, or continuing to polute this one?  Or just advertising?

How will the google inquiry turn out tomorrow? Any guesses?

Jo  – like going to Vegas.  I am trying to buy the 7.5 April for 50c.  Volitility is crazy.  If they hit, YEAH, if not then the stock will be a buck.  I tried to get a reduced entry yesterday (50c) by selling March, buying April, but it did not fill.  The drug will work, just how well (their two competitors have failed on endpoints) and even larger is the FDA approval letter.

Good Morning Phil

Asia Markets :    Wednesday, March 18, 2009
(The following is from WSJ; please cross check with other sources to confirm.)   

Nikkei Average*                         7972.17      23.04    0.29%
Hang Seng*                             13091.03    212.94    1.65%
China: DJ Shanghai*                  256.50        1.23     0.48%
Seoul Composite*                     1169.95       6.07      0.52%
Bombay Sensex                         8976.68  113.92      1.29%
Baltic Dry Index                            1974.00   -84.00    -4.44%

*at Close

Asian Markets Drift Higher, BOJ Move Spurs Bonds

Asian stocks drifted higher Wednesday as banks extended gains, while Japanese government bonds rose after the Bank of Japan sharply increased the amount of government debt it would purchase to support the economy. The BOJ raised its buying of government bonds by 29 percent while keeping interest rates unchanged at 0.1 percent, as the global financial crisis puts Japan on course for its longest slump since World War Two. The BOJ said it would buy 21.6 trillion yen ($219.3 billion) of government bonds a year to help smooth its market operations.

Japan’s Nikkei edged up 0.3 percent in see-saw trade, booking its highest close in five weeks as banking shares rose, although investors locked in profits in recent gainers. The Bank of Japan raised its buying of government bonds by 29 percent while keeping interest rates just above zero, as the global financial crisis puts Japan on course for its longest slump since World War Two.

South Korea’s KOSPI finished half a percent higher after dipping in and out of negative territory during the session. Technology and construction issues leading gains, while a weaker won currency sent banks and airlines lower.

Australian stocks closed 0.2 percent lower.

Hong Kong shares rose 1.6 percent with upbeat data on U.S. housing starts supporting broad-based gains.

Singapore’s Straits Times Index was 1.5 percent higher.

China’s Shanghai Composite Index climbed 1 percent led by coal and industrial metals, as expanding turnover indicated a rally in the past two days had drawn speculative funds back into the market.

Bombay Stock Exchange’s Sensex settled at 8,977.74, up 1.29 per cent or 113.02 points. The index ended well off the high of 9,120.46 as profit booking set in.

Euro Stocks Turn Mixed After UK Jobs Data

European shares gave up early gains to turn mixed by mid-morning on Wednesday after the number of UK jobless rose above 2 million, hitting British stocks. The pan-European FTSEurofirst 300 index of top shares was up 0.1 percent at 717.06 points having been up as much as 725.29 points earlier.

Energy stocks were the biggest losers tracking lower crude prices. BG Group, Royal Dutch Shell and Total were down 0.7-2.2 perce

Financials gained, with UniCredit up 7.6 percent, after the company posted a 38 percent fall in 2008 net profit on Wednesday, ahead of analysts’ forecasts. Royal Bank of Scotland, Allianz, Barclays and Societe Generale were all up between 3 and 3.6 percent.

Later in the day, the focus shifts to the results of a two-day U.S. Federal Reserve meeting, and whether economic conditions warrant additional policymaker action to boost lending.

"Equity markets are trying to shrug off the uncertainty of the last months," market strategist Heino Ruland from Ruland Research, adding that the strong boosts on Wall Street and Japan had a positive effect on European stocks.

Across Europe, the FTSE 100 index was down 0.4 percent, Germany’s DAX was up 1 percent and France’s CAC 40 was 0.5 percent higher.

Oil Retreats from $50 After US Supply Increase

Oil fell from a 2-1/2-month high to below $49 a barrel on Wednesday after industry data showed large builds in U.S. crude stockpiles. Analysts said data from the American Petroleum Institute, showing crude stockpiles rose much more than expected last week, reflected poor demand at refineries and could foreshadow an equally poor set of numbers from the U.S. Energy Information Administration due later on Wednesday.

OPEC has targeted output cuts of 4.2 million barrels per day (bpd) since last September and vowed at its Sunday meeting to achieve higher compliance from members to reduce production.

U.S. light crude [1  48.77    -0.39  (-0.79%)] for April delivery fell. On Tuesday, the contract gained $1.81 to $49.16, its highest settlement since Dec. 1, 2008.

London Brent crude [1  47.74    -0.50  (-1.04%)] slipped.

The U.S. Energy Information Administration (EIA) will issue stockpile data later on Wednesday, with crude oil inventories seen up last week as refinery demand remained tepid and imports increased a little, a Reuters poll showed. Data due to be released later on Wednesday included U.S. core consumer price index for February as well as results of an interest rate meeting held by the U.S. Federal Open Market Committee.


Dollar Steadies vs Euro Ahead of US Rate Decision

The dollar steadied against the euro on Wednesday in cautious trade ahead of a U.S. interest rate decision, while sterling hit a 7-week low against the euro ahead of key UK jobs data and Bank of England minutes.

The Federal Open Market Committee is expected to leave interest rates on hold at zero to 0.25 percent, with focus centered on whether it will announce any additional measures to expand its credit easing policies. In particular, investors will be looking for any hints on whether it is moving towards — or away from — buying long-term U.S. government debt, though most analysts believe they will concentrate on the existing measures they have in place.

Investors will be scrutinizing the minutes for further details on the program to implement unconventional measures to boost the UK’s money supply.

The euro [ 1.305    0.0036  (+0.28%)    ] was flat against the dollar.
The euro [ 1.0623    -0.0159  (-1.47%)   ] rose versus the pound, just shy of an earlier seven-week high of 93.44 pence,
while sterling [ 1.3867    -0.0168  (-1.2%)   ] also fell against the dollar.
The dollar [ 98.53    -0.04  (-0.04%)    ] and the
euro [128.62    0.31  (+0.24%)    ] were both steady against the yen.

Meanwhile, analysts say investors are beginning to feel a little more confident that financial market conditions may be starting to stabilize, helped by news of a 22.2 percent surge in U.S. housing starts in February and an improvement in German investor sentiment.


Gold extends losses on firm equities, awaits Fed

Gold fell further on Wednesday as a rally in the stock market prompted shift some money back to shares, shrugging off a firm euro as they awaited more clues on the state of the U.S. economy.

Gold was trading at $908.50 an ounce, down $5.70 from New York’s notional close on Tuesday, when it slipped 0.7 percent after a surprise surge in U.S. housing starts pushed up U.S. stocks, giving investors reason to raise their tolerance of risk.

Holdings on the world’s largest gold-backed exchange-traded fund, SPDR Gold Trust GLD, were unchanged at 1,069.05 tonnes on March 17, a record amount first marked the previous day.

Silver        12.59       -0.11   -0.87%    
Platinum    1049.50   6.00   +0.57%  
Palladium    194.00    2.50   +1.31%    

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