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Monday Morning – Strapping In For A Wild Week!

Welcome back!

It's always hard coming back off a holiday weekend.  Not everyone is in the mood to work and not everyone even shows up.  Europe isn't showing up this morning as their markets are closed today but there's no Easter Bunny in mainland China, where the Shanghai gained 2.8% and Taiwan gained 1.3%.   The Nikkei was down 0.4% on the day but Hong Kong, Thailand (where they are rioting), Australia and New Zealand were all closed for Easter Monday.  So, all in all, a very slow morning in the markets so far yet US futures have still managed to sink about a point as of 7:45.

That's fine with us as we went into the weekend bearish, per the plan we had way back on Thursday morning, when I said: "We’ll be shorting into this morning rally because it’s stupid."   We half-covered our longer puts with May $79 puts, giving us plenty of room to fall and, had I realized Europe was closed today as well, I may have been a little more bearish because my concern Thursday afternoon was that Asia would fly up on us (like China did) and then Europe would follow and give us an extension of the rally.  Having Europe closed is like engaging the parking brake in the morning as any continuation of this "rally" will require a lot of outside capital to start drifting into the US markets.

We presented two sides to the rally this weekend at PSW:  Jeremy Siegel had a very interesting article asking "Is The S&P Valued Too Low?" in which he makes some very excellent points that the S&P follows a flawed model when it comes to computing overall p/es for the index.   John Mauldin, on the other hand, is being sarcastic when he asks "Is That Recovery We See?" and he backs my long-term inflation premise saying: "There is a limit to continued $2-trillion deficits without the appreciable rise in interest rates that will be needed to attract buyers of Treasury bonds."  John gives us a definitive answer to his question and it's – No!  Have I mentioned I like gold lately?

Goldman Sachs hit the "no" button too, serving blogger Mike Morgan of www.goldmansachs666.com with a cease and desist letter to get him to pull down articles like "Did Goldman-Sachs Scam System With AIG?", "Did Lloyd Blankfien of GS Lie to Congress?",  "Does Goldman Sachs Manipulate the Stock Market?", "Did Goldman Sachs Manipulate World Oil Prices?"   and "Does Goldman Sachs Run the World?"  This led Barry Rhithotz to preface an article pointing out that our tax dollars are being funnelled to GS through Paulson's TARP set-up with "this post was written in International Waters a few miles off the coast of Grand Turks and Caicos. If Goldman Sachs wants to sue anyone over this, send your process server to the wreck of the B-29 bomber, off the north coast, approximately 80 feet below sea level."

Barry also had the quote of the week where he said in the NYTimes: "Understand the difference between an economy that is improving versus one that 'getting worse more slowly,' which is what we’re experiencing now." although he was given a run for his money by Carl Bass, the CEO of Autodesk, who responded to an analyst who asked whether there were any regions that had proven immune to the global slump by saying: "Well, I think Antarctica has been relatively immune, maybe Greenland as well, although not Iceland – as we all found out."  There is a disturbing trend of economic gallows humor you see in fed-up blogs and even some of the MSM, something that tends to happen when people feel overwhelmed by a tragedy.

We have overwhelming and possibly tragic data coming this week, so much so that I'll just copy in the economic calandar from Briefing.com as we'll be referring to it often this week:

Date ET Release For Actual Briefing.com Consensus Prior Revised From
Apr 14 08:30 Core PPI Mar   0.0% 0.1% 0.2%  
Apr 14 08:30 PPI Mar   0.0% 0.0% 0.1%  
Apr 14 08:30 Retail Sales Mar   0.5% 0.3% -0.1%  
Apr 14 08:30 Retail Sales ex-auto Mar   0.2% 0.1% 0.7%  
Apr 14 10:00 Business Inventories Feb   -1.2% -1.1% -1.1%  
Apr 15 08:30 Core CPI Mar   0.1% 0.1% 0.2%  
Apr 15 08:30 CPI Mar   0.1% 0.2% 0.4%  
Apr 15 08:30 Empire Manufacturing Apr   -36.0 -35.0 -38.2  
Apr 15 09:00 Net Long-Term TIC Flows Feb   NA NA -$43.0B  
Apr 15 09:15 Capacity Utilization Mar   69.7% 69.7% 70.9%  
Apr 15 09:15 Industrial Production Mar   -0.9% -0.9% -1.4%  
Apr 15 10:30 Crude Inventories 04/10   NA NA +1645K  
Apr 15 14:00 Fed's Beige Book            
Apr 16 08:30 Building Permits Mar   545K 550K 547K  
Apr 16 08:30 Housing Starts Mar   560K 550K 583K  
Apr 16 08:30 Initial Claims 04/11   645K NA 654K  
Apr 16 10:00 Philadelphia Fed Apr   -32.0 -32.0 -35.0  
Apr 17 09:55 Mich Sentiment-Prel Apr   59.0 58.5 57.3

As if all this exciting data isn't going to be enough, we also begin to get some earnings crossing the wire.  CHINA leads off the interesting names for the week this morning with low expectations of a break-even performance.  Tomorrow we will be off to the races right out of the gate with PPI, Retail Sales ahead of the bell along with earnings from CBSH, FAST, GS, JNJ and GWW.  That's has the potential to take us up to 8,200 or back down to 7,600 all by itself.  Tuesday evening we hear from ADTN, CSX and INTC so that may mark the end of the Nas rally or confirm it

Wednesday will be wild with CPI and Industrial Production AND the dreaded Beige Book, which we know will suck because we read the Fed minutes.  That morning we hear from ABT, SCHW, INFY, BTU, PJC and PGR with CCK, KMP, STX and STLY reporting after the bell.  Thursday it's Housing Starts (or lack thereof) and Jobless Claims and the always-depressing Philly Fed along with earnings (or lack thereof) from: BLK, CY, GCS, GCI, GPC, HOG, ITW, RX, JPM, MTG, NOK, NVR, ORB, PH, SHW, SON, LUV, VIP and PPG.  In the evening we'll get BIIB, GOOG, IRSG, PBCT, SNDK and WERN and then it's options expiration day with AOS, BBT, C, FHN, GE, MAT, OSTK and PRSP.

Needless to say, we will continue to play it conservatively unless and until we see our 8,200 line broken and held on the Dow.  That was my target for AFTER earnings and we still think the early exuberance shown by the markets has been irrational, to say the least.  There is a difference between irrational and completely unfounded though – and that is what we hope to discover this week as we begin to get a little clarity (we hope) from the early Q1 reports.

As we expected, the EIA is lowering their long-term oil demand forecast yet again and that should be good for the OIH and oil puts we stuck with into that BS rally last week.  One encouraging item this morning is that there will be probe of "lending practices of institutions that received public funds, following a rash of complaints about increases in interest rates and fees."  This is what I was complaining about last week and it's nice to know the government is actually paying attention this time.   We'll be watching the bank earnings very closely to see what they are doing with our money other than widening the crack spreads they make on loans they already have out, without even writing new ones that are desperately needed.

Tonight we have a Big Chart Review, where we'll see how we've done over the past two weeks and we'll review our levels but, for today, we're simply looking to hold a floor at Dow 7,900, S&P 833, Nasdaq 1,580, NYSE 5,225 and Russell 444 but, below that, there is very little support down to Dow 7,636, S&P 805, Nas 1,525, NYSE 5,075 and Russell 420 so – be careful out there!

 

 


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  1. GoldmanSachs666 … that’s funny.
     
    Whatever happened to free speech ?


  2. CAP – Whatever happened to free markets ?


  3. INTC  Earnings are Tuesday (before or after market, anyone know?).   Any predicitions?  I’ve got ITM Apr callers and think I should close/roll them ahead of time if there’s a chance there will be an upside surprise.


  4. does anybody know anything about MF’s business?
     
    their stock looks good.


  5. In addition, a weak lawsuit will attract attention and readers to this blog.  Suing to shut someone up is almost always counterproductive.


  6. Two awesome, but different weekend happenings:  The Masters and taking down the pirates….yee ha to both!


  7. that guy had the same thing happen to him with Lennar and settled out of court…when you think about it…a great business plan…talk smack about someone until they pay you a few mil to shut up…


  8. Cap, that is funny.  And probably frightenly more true then any of us could imagine.  Did you get long for at least some of the craziness on Thursday?  I’m amazed by it.  I tripled down on SKF at open and as you CAN imagine I’m underwater big time.  This is the second time now I’ve gotten clobbered while on vacation.  The last time being in July.  When will I learn?  Anyway, my premise is we won’t really turn until Friday or next week.  Once GS gets their offering squared away and we’re past oe.  Although with this runup, we could turn earlier then Friday this time.  They must have been selling the hell out of calls during this run… which seems like its been going on forever.  But has been only 5 weeks.  So once they’re loaded up, we’ll revisit sanity.


  9. TXT falling like a rock, going down like a knife through butter, etc. etc. etc.


  10. DIA Mattress.  I missed my rolls last week so 8 Jun 81s are still fully covered with 5 Apr 77 and 3 Apr 78.  I’m thinking of rolling the Apr 77 -> May 79 and leaving the 78s alone.  About right and should I pay up a bit to roll the Jun 81s up a strike or two?


  11. Look at C … LOL … what a joke.


  12. Interesting blog on providers of market liquidity
     
    http://zerohedge.blogspot.com/2009/04/incredibly-shrinking-market-liquidity.html


  13. LOL DB!

    INTC/Eph – After market.  Doesn’t matter what they earn, what matters is outlook.  I’d stay covered after a 33% run. 

    MF/New – Well, they are a better deal (pe-wise) than ICE or CME but I don’t know if they have traction or cash-flow to last it out with those two gobbling up every aspect of the business.

    GS – Be careful bears, GS is not likely to have announced and offering ahead of earnings if earnings were going to be lousy.  Announcing it now means it will be hard to pull so they have to have a lot of confidence that there will be demand a week from now and we hear from them tomorrow morning.

    DIA/Eph – Why not roll the Apr $77 puts and $78 puts into 3 Apr $80 puts (about the same price, all premium) and then wait and see about covering with 3 more May puts, depending on how things look?  That way, you will get more bang for your buck againts the putters if the Dow goes up and you’ve got room to quickly slap a cover.  On the downside, you have 3 puts with a .51 delta vs 8 with a .35 delta.

    TXT – As I said last week, good to sell into those rumors…

    C/Cap – They are just playing catch-up.  Didn’t have the massive gains BAC did last week.


  14. Phil / GS, So what has GS announced?  What are the specifics?  Is it a public offering our to preferred investors?  The blurb in CNBC said it would be that largest secondary ever.  I agree with you, I would not get short, if you aren’t already, until that puppy is out the door.  Have they mentioned when it will be completed?


  15. Phil:
    Leaking oil with my DIA June $74 puts.  Best suggestion for rolling this position?


  16. Liquidity/HP – That’s why Tyler’s in "Phil’s Favorites" – he is great at digging up that stuff.  This morning he posted some indexes you can keep track of (if you have a strong stomach).

    CC providers still holding up (V, MA, COF, AXP).  MA is scary to short but are running into the 200 dma at $178 and were $10 rejected off $177.29 last week so I like them as a speculative put, perhaps the $170 puts at $3.45 with a stop at $2.50 and, failing that, moving over to the May $165 puts, now $9.45, hopefully for $7ish.


  17. Matt; I don’t know what to say; just trying to stay balanced and pull in some coin where I can.  Still have SKF and SRS positions, w/ lots of calls sold against.  Wouldn’t mind seeing SKF back to 80-90 this week and SRS to 40-50; but can go the other way also given the shenanigans.


  18. Honestly , who would want to buy GS in a secondary at 127; they could have bought it for 73 3 weeks ago in open market. ?


  19. Phil,
    Need some guidance- I sold 2 covered AXP calls last week just prior to the run-up- April $17.50′s @ $.90.
    Now @ $2.30 . What is the stategy here – roll these forward to May @ $3.50? July @ $4.30? What’s the best strategy here? Thanks.


  20. YOu knew they would take BAC to touch and jump over 10 … probably a good short now.


  21. DIA/Matresses: Reading through Friday posts, last post indicates half covers at around May 79s? Correct?
    General questions on mattresses: no stops unless explicitly indicated by Phil?


  22. Phil:
    Issues on long Leaps with front-month call covers. If prices move up, your long is more in the money (good) and your caller may have moved ITM (not a bad thing, nothing to panic over, you want the price to rise after all.) When it’s time to roll your callers, should you generally roll to a little OTM, or ATM to maximize premium? I would think a little OTM.


  23. Everything turned up – yet on so little volume again.


  24. This is just sickening.  It’s a stampede to get into financials now.  Could be attracting money from all over the world with this kind of action.  It’s truly a ponzi scheme at the moment.  Can’t wait for the flush…


  25. Look at the TRIN   0.25
     
    And this is the best they can do ?  Pump financials ?


  26. Morning Phil.
    so should we buy FAS again ? if banks report half decent tommorow and the rest of the week things should be ok. like you said a few weeks ago if people realize that banks are not dead by end of quarter then they will jump like you can not believe. so what todo ?


  27. Phil
    Back to BAC (groan)
    I still have my 1000 BAC @ $3.60. I took some off the table with your earlier suggestion to sell the May $6, then @ $2.
    I also have 10 long puts – May $7.50; bought @ $.90.
    Looking to take more off the table here – buy up the May $6′s and sell the Aug? Roll up the put also?
    What say you.
    Thanks,


  28. This just in!  GS chief reasuring mother says it APPEARS the market has bottomed and that the economy MIGHT be up the later part of this year.  WOWWWWWW!!!!


  29. phil,
    have aapl apr 105 callers @ $5.29 against my aapl oct $105’s @ $15.34.  looks like its time to roll callers to may ? if so what strike price ? $110′s or $115’s ?


  30. Phil, I bought WFC at 15 and sold an April 15 call for 1.7. Now that WFC is sitting near 20 there is no premium left in the calls. How would you recommend adjusting this position ? Thanks  Niten


  31. have BAC May 9 callers for .80 – now 2.50. should i roll?


  32. Chaps, If I understand your question correctly, you just want to know which strike price is paying the most premium.  Its actually a really simple calculation to figure out.  If the option is OTM then the premium is just the price.  If the Option is ITM then the premium is the price minus how much the option is ITM.  If you have a specific stock, I can give you an example of how to calculate the premium.  However, on most trading platforms they let you put in a column on the options spread page called extrinsic value.  In our case extrinsic value is the same as premium.


  33. GS/Matt – Something about $10Bn in the WSJ.  Don’t know how solid it is but I’m sure they didn’t print it without some real info, probably a trial balloon by GS.  They just raised $5Bn for a new fund, which is kind of obnoxious when they owe us $10Bn from their last round of poor decisions.

    DIA/Bvar – Yes, the same suggestion as always.  You need to ALWAYS look to roll up those puts to the next $1 any time you can do it for .50 or less and you should always have at least $1-$1.50 of coverage to support your rolls up unless, for some reason, we are very, very bearish.  The June $74 puts are now $2.65 and you can roll all the way to the $82 puts at $6 for $3.35, way less than .50 per $1 and pay for most of it by selling May $79 puts for $3 but you’ll need to use that money to roll up higher or to Sept if things go against you.  Right now the Sept $82 puts are $8.60 so that would be our goal down the road.

    GS/Cap – Like I said, they have to be expecting to report some pretty good earnings.

    AXP/Pstas – No hurry as they are giving you good insurance at the moment.  You can roll them even to the May $19s or pick up another $1 for the May $17.50s depending on how safe you feel or you can just take the $17.50 and keep the .90 you already got and be done with it.

    Some big buy program coming in, scooping  up a lot of financials.  GS could be reporting something huge tomorrow!

    DIA/Chaps – Yes to the 1/2 covers.  With 1/2s we don’t worry about stops much, full covers we often go in and out of.

    Rolls/Chaps – It depends on your goals and targets.  I may have bought IBM at $85 in March and expected it to get back to $100 by June.  Here we are in April and my $85 caller is $15 in the money.  What matters now is – do I think the move is justified?  Has my outlook for IBM changed.  Since I bought the stock and may now get called away with a 10% premium after 30 days, I may say "so what" and go back to cash.  The $85 calls are $15 and I may want to stay in and spend $3 to roll them up to May $90s at $12 if I feel safe there or even save the money and go to July $90s at $14.25 and look to spend $3.50 to roll those up to the July $95s if I like earnings.   Or I may decide I’m tying up a lot of money ($100) on a stock that’s only netting me $5 more over 3 months and I have better things to do with my cash.  Everyone asks for "an answer" but it always depends on the situation…

    Flush/Matt – It’s possible there will be no flush in financials.  It’s possible that 90% off was overshooting the mark by 20% and that they will hold 30% of their prior values.  It’s possible that 50% is the right number and they have another 50% to gain off 30% just to get there.  When I buy GS or even AIG, I’m buying them based on what they will earn for me next year and in the next 5 years.  I don’t really give a damn how much they lost in 2008 or even last Q if I am fairly certain they won’t do it again.  I find it interesting that the same bears who are so quick to tell the bulls that the glory days are in the past and it’s a new market are the same ones that cling to the losses of last year and refuse to believe any evidence that perhaps it was a one-time "black swan" event  that will not repeat.  I’m not saying that’s what’s going to happen but I certainly would caution against knee-jerk shorting of financials on every run as if nothing could possibly justify a recovery.

    FAS/Micro – Not at $9.22 thanks.  If we get past GS and C without crashing, I’ll be loving FAS, even if they are at $20 but we are still in a pretty low volume rally and a single bank miss can reverse half the gains.  As I just said to Matt – we could be miles below a real bank recovery still or Matt could be right and WFC is off in left field with nothing but tears to come from the other financials.

    BAC/Pstas – What is your actual current positions?

    GS/Matt – interestingly they downgraded X this morning.

    AAPL/High – I would just spend the little bit of money to go to the May $110s at $13.80.  It gives you a tiny bit more leverage and keep well protected into earnings.  If AAPL keeps going up, you’ll be looking at rolling to 2x the Oct $110s and selling 2x the May $115s.

    WFC/Niten – Well they had earnings so hopefully they hold steady.  If you want to stay in them you can roll the caller to the May $17s for .70, if you progress $2 for .70 each month you are gaining $1.70 per month, not a bad ROI on $15.  I would be a little more aggressive and sell the May $14 puts for .70 so I put nothing out on the roll.  In order for the May $14 putter to go in the moneyh the May $16 caller would, of course be wiped out of the $4 you owe him anyway so WFC would have to fall to $10 before you owe more to putters and callers than you do now.  If you can stay in the stock and use putters like this to roll him up $2 per month, you can gain an additional $24 per year before being called away.

    BAC/Drum – If you have the stock, why would you roll?  The May $9 callers have $1.05 in premium, that’s more than 10% of your total position.  If you pay that out every month you will lose over 100% in 10 months – not a good plan…  The worst thing that can happen to you is you get called away at a nice profit and, meanwhile, you are well protected with earnings coming up fast.  The intrinsic value protection of the May $9s is only $1.43, just over 10% of your position – is that really "too much" coverage for you?


  34. Phil: what is situation with DIA puts and covers ?


  35. DNDN – $0.96 to $7.26 
    I dont ask why. Why bother ? :-)


  36. phil,
    my underlying BAC position is the 2011 5 calls. Does that chenge the equation?


  37. Phil – If you were a bear how would you protect against good earnings from GS ?


  38. Phil,
    BAC- current postion:
    1000 BAC – cost $3.60
    Short 10 covered calls May $6′s- sold @ $2.00
    Long 10 May Puts- $7′s- cost $.90


  39. craigzooka:
    Thanks. Actually, my question wasn’t which is paying the most premium. I understand extrinsic versus intrinsic value for any option. I was more asking about the tradeoff of giving up premium from your caller to sell calls more into the money, when your caller is a hedge against a long LEAP you’re holding.
    The underlying’s gone up, so both you and your caller are now ITM and it’s time to roll your caller. Do you roll the caller to ATM (max premium) or OTM (less premium but harder for your caller to go ITM on the roll.)


  40. Phil,
    ….currently naked some May BA 40 putters.  Any thoughts or advice as I am thinkin of rolling out to later in the year.  Thanks.


  41. Point taken on FAS,
     
    But why do you think the fed is having the banks be quit about the results of the stress test. if the results were bad then the banks would not talk about it willingly any way. what do you think ? GS also should do well with all the ,money being funneled from AIG and so forth. your take ?
     
    Thanks
    David


  42. Phil:
    re Rolls: My question pertained to long LEAPS on which I’m generally quite bullish. So my inclination is that I’m happy to pay the caller for being ITM in the expiring month, and even roll him to somewhat OTM next month – thereby getting less from him than if I rolled him to ATM. I don’t want to cash out my longs.


  43. Phil — I’m short July 14 FAZ puts.  I can roll to October 12.50s for .30.  Should I do it now?


  44. Phil,
    I bought STX and sold calls against it last week and waited to sell the putters for a pullback after earnings, Is today the day to sell putters or should I still wait?


  45. chaps…it’s a combination of your outlook for the underlying, your willingness to spend cash, and a personal risk/reward preference.   Are you more worried about missing the upside, or do you think the underlying is looking like it might pull back?  Do you want some protection?  An ITM caller actually protects you to the downside because you can often bring in cash when you make your roll.  It also depends on how much premium is available in the underlying.  For a stock like RIMM, even ITM callers have a lot of premium in them.   Bottom line, there is no "right" answer as long as you keep the relationship between you call and callers:  always have your calls farther out and at a lower strike to your callers.


  46. craigzooka:
    I said: "giving up premium from your caller to sell calls more into the money", I meant "sell calls out of the money."
    Sorry.


  47. SKF down 1.5%, UYG up 3.5%.  Some serious imbalance going on.  A tremendous amount of SKF has been traded at today’s bottom.  I would love to think this is the turning point.. but it’s really too early to tell.  But if I didn’t have a position already.. I’d scale into SKF between now and Friday.


  48. Eph:
    Thanks. Yes. It’s clearer there’s no one answer. Must understand the tradeoffs and your opinion on the underlying long term. Also clear that you want time and position relative to your callers, no matter what.


  49. Phil:
    what SRS apr short is the one to sell ? and if it goes bad what roll is the one to make ?/


  50. chaps, one thing to be careful about is to cover too closely when the market is going down.  I got hurt on RIMM because I had only a one strike advantage over my caller and got buried when the stock gapped up.  I had to put a bunch of money into the trade in order to get the relationship back into order and I still don’t have an ideal position, but I’m going to wait another month for the second fix


  51. Eph:
    To be clear: you mean you sold your caller one strike above your long, because the market was down at that moment, and then the stock gapped up, right? By covering too closely, you mean the one strike difference wasn’t enough, correct?


  52. Hi Phil,
    Gotta ask, who is Ilene? and why can’t I get a capital "i" for Ilene?


  53. phil,
    what are those odd aapl ‘up wicks’ on the last few minutes of trading (day graph per min)


  54. I’d like to see a 400pt drop on high volume just so I can believe that its not just GS holding up the market :-)


  55. phil,
    is someone trying to trigger aapl loss/gain stops?


  56. chaps
    Some good guidelines for calendar calls are to maintain 2 strike differences over your caller and to only be 80% covered.  This will give you all the delta advantage you need in a up market.  The stock can gaop an you still come out ok.  If you own the stock then go 100% covers.    Same strike caledars are just suicide.  If you have any covers that are going into the money then best to roll those into May right now before the delta gets too high.  Especially important during OE week. 


  57. chaps, that’s right.   When the market was going down, I was still selling callers, but the only way to earn decent premium was to sell close covers.   Over the last few weeks as the market has moved strongly higher, these close callers have hurt me.   I’ve still made money, but much less that I would have if my hedges were looser.   Several cliches can apply: there’s no free lunch, pick your poison, whatever….I was hedging myself and bringing in cash which helped when the market was going down, but I’m trailing now that the market is going up.  That’s the nature of hedging.  In the case of RIMM, I had Apr 45 callers vs Jan 40 calls.   I actually lost money when the stock gapped because the callers moved faster than the calls, I didn’t have enough of a delta advantage.


  58. This was in Bloomberg:
    "The stress tests, designed by President Barack Obama’s administration to show how much extra capital the 19 largest U.S. banks may need to survive a deeper economic downturn, are controversial. Wells Fargo Chairman Richard Kovacevich called them “asinine” in a speech at Stanford University in California on March 13, saying the results would provide opportunities for short sellers to drive down bank stocks. "
     
    so this could take the wind out of the financials by the end of April unless the fed figures out how to find a nice spin for it, which they probibly will.
    ideas ?
    thanks
    david


  59. Singapore Steve:
    as usual, your cover advice is good, where are you ? in Co or OR ?


  60. chaps, along the lines of what  Steve said, it is easier if you have at least two long calls on any positions.  That way you can go 1/2 covers and then do a 2X roll to a higher strike if the callers move to fast on you.   If you only have a one lot position (like I do in some cases because I’m trading a relatively small amount of money), you need to be more cognizant of your call/caller relationship and watch it closely.


  61. DIA/RMM – June $82 puts, 1/2 covered with May $79 puts.

    BAC/Drum – Well it just means you will be damaged more in a big run-up as you can’t just let yourself get called but it’s the same otherwise. 

    GS/DB – I suppose I’d go for long FAS calls.  You can buy the 2011 $5s for $6.20.  If things go your way then you can always sell a cover for $1.50+ and get a nice long-term spread (right now you can get $2 for the May $9s).  On the opposite side, you can always sell FAZ calls like the May $12.50s for $2.02 and just make a stop to cover at $13, which would put you in for net $11 in a position you believe in anyway (financial bear) if GS has poor earnings and XLF tanks but, if GS has bad earnings and XLF takes off, then the FAZ calls will expire worthless and you keep the premiums.

    BAC/Pstas – As you are in for so little it is worth it for you to roll to Aug $9 puts and calls at $5.60, which is better than even for you.  There is no hurry to do this as you will only collect the .65 from your putter and your caller is keeping you well covered.  There is also no real reason not to take +.90 for rolling the putter to the May $10 puts at $1.61 since you owe $5.20 in puts and calls now and BAC would have to fall to $5 before you owe $5 to that combo so it’s just putting $1 in your pocket against the risk of buying more BAC for net $5 (from where you are now). 

    Whenever there is a solution that gives up little or no proteciton AND puts money in your pocket – that’s usually a good one!

    BA/Onc – It’s risky with earnings coming up and they are down to about 25% premium so I can see spending .50 to roll them to the Aug $36 puts, which can be rolled better than even to Jan $35 puts where (I assume) you’d be a happy long-term owner of BA.

    Stress test/Micro – Because you have to think of it like the roll-out of a marketing campaign.  The government’s mission is to give us better, stronger, safer financials who are "stress-test" approved and you can bet they have a dozen top-notch marketing guys putting together a massive PR campaign to get the financials moving again.  There’s nothing wrong with that – it would be irresponsible to spend Trillions of dollars to pacakge a program and then neglect to spend millions of dollars advertising it.  This administration is very marketing savvy and we’ve already seen how well the can coordinate a bull run when they want to.  As with any good marketing campaign, you don’t want any leaks ahead of the big announcement or you lose impact and that’s why they are keeping a muzzle on the banks for now.

    Rolls/Chaps – You still don’t want to only roll callers OTM as you are giving up your own protection, especially if you are PAYING to roll them OTM as you are INCREASING your leap basis at the same time you are DECREASING your coverage.  You can create a synthetic strike between any two by selling 1/2 at one strike and 1/2 at another – that’s a good way to compromise premium and safety if you are conflicted.

    FAZ/Clue – I sure wouldn’t.  It’s a little early to give up and sit on your hands for 6 months I think.  First of all, you can sell 2x the Apr $10 puts for $1 right now if you can afford to and put a stop on the July $14 puts at $7.25 so if FAZ drops to $9 you only give the 2 new putters their money back and save a bit on the long puts (then you can roll them over to the July or Oct whatevers anyway) but, if FAZ goes up, you’ll cut down the roll on the $14 putters by an extra $2.  Without doing that, I’d still rather roll the July $14 puts at $6.85 to 2x the May $11 puts at $3.20 rather than roll them back to October first.  If you have no confidence in that working, then what’s the point of staying with this trade anyway?

    STX/Maxt – They have earnings Wed night and they should be a loss, way below last year’s .70 earnings.  INTC reports ahead of them and they won’t make any money either (.02 expected) so I would chance it to Wednesday morning when, even if it’s going the wrong way on you, you’ll still get a good premium due to earnings to sell into.

    SRS/RMM – I’m not short on real estate at these levels so it’s kind of a trick question for me.  I suppose, if you want to be short real estate, that selling may $26 puts for $2.50 puts you in at $23.50, which is about 33% lower than here and not bad for just $10.50 in net margin.  I wouldn’t touch Apr but they don’t move as fast as the options give them credit for and we don’t have builder or RE earnings this week (but GE could say something about commercial) so selling the $30 puts for $1 isn’t too bad of a gamble.

    Ilene/1020 – Ilene our editor at large and she is in charge of all the writers in the "Phil’s Favorites" section.  She also recently launched our Insider Zone, which is very cool but we’re in a quiet period so it will take a while for things to start coming in.  Also, capital "I" is "I" but it does look strange on Ilene as it’s next to the small "L" which looks like a capital I.  Blame Gutenberg I say…

    AAPL/High – Usually, when you see that, someone is preparing to make a big buy and is flushing to find sellers at various strikes so they can pick a target to accumulate at. 


  62. Phil: I have the may 4o calls and my question was to sell some premium which is kind of safe to expire zero ?


  63. RMM
    Back in Colorado. Was in Oregon last week. 


  64. Singapore Steve: had Easter lunch at Half Moon Bay at Mezza Luna.
    Now am tired from playing with the granskids.


  65. Phil: what is your definition of protection ? please give an example.


  66.  GS sounds like the bush aministratrion – free speech is great as long as you agree with them.


  67. SRS/RMM – No such thing as "safe" when you are giving a caller position advantage like that.  It’s the same logic as aelling the puts, the $38 calls are not that likely to get hit by Friday for $1 and if you sold the $30 puts and those calls, you’d win on one side or the other or maybe both.

    Oil below $50 yet a lot of oil stocks moving up – strange.  None of those guys have earnings this week.  Whole market moving up with energy sector.  Gold tipped over $900 but pulled back to $898. 

    So far today does not look very different than last Monday, where we gapped lower and then drifted into a stick save (would be about 8,050 today) before falling off a cliff on Tuesday morning with a 200-point drop so I’m less than enthusiastic about today’s action. 

    Last week we had stimulus announcements all over the world and the "great" news from WFC to boost us up.  Last week we also had no data, so no bad news – this week that’s not so sure. 

    Extrapolating last Monday’s close and Tuesday’s open gives us:

    • Dow 8,050 – 7,850.
    • S&P 855 – 835
    • Nas 1,650 – 1,615
    • NYSE 5.350 – 5,225
    • Russell 463 – 450

    So, to the extent that we are able to ourperform or underperform those targets at today’s close and tomorrow’s open – it will be a bit bullish as we’re holding higher highs and lower lows in an uptrend.  What we need into this close is constant improvement to those targets.  I think anything negative (breaking today’s lows) would be a sign that there’s a lot of negative sentiment building.


  68. Phil,
    a few weeks ago citi announced they were going to do a reverse stock split and I remember you thought that would be posiitive for the Dow, have you heard anything new about that and how much of an impact do you see when it happens?


  69. C/Maxt – It would have been better for the Dow when they were at $2 becuase going from $2 to $20 in a 1:10 reverse would have meant they would have then moved to $34 and that would be about 120 Dow points.  That’s the way it would have been good for the Dow.  Now that they have already goine up 50%, the danger shifts to the downside.

    BIDU May $175 puts at $10.50, looking to roll up for $1.50 per $5.  Dangerous with GOOG earnings but fantastic if GOOG has revenue issues or shows gains in Asia market share or tough Asian environment

    FSRL hitting updside target.  May get to $150, may not…  May $135 puts at $10.55, selling Apr $140 puts for no less than $2.50 (now $3) but hopefully we get a sell-off and we can sell the Apr $135s for $3+ (now $1.60).


  70. Phil, The WFC trade was brilliant ! Thanks


  71. what are your thoughts on googles earnings?


  72. Protection/RMM – ???   Protection is how much coverage you have in a posiiton.

    GOOG/Jo – No idea this time around.  Way too complex with exchange rate and all but I will be surprised if they pull a beat out to the hat.

    Pisani says we’re mainly up on news of Obama Economic speech tomorrow.  Don’t know what time but they just announced it at 1:15 coordinated with a huge buy program but I saw the pattern forming well ahead of that as we started to look like last Monday. 

    Oil jammed up to $51.50 with 30 minutes to close at the NYMEX, early pump job today – they didn’t want to take any chances.  I imagine if oil is below $50 at a certain point, then energy companies need to adjust their forecasts lower based on lower oil prices so we now have a whole other set of people interested in keeping oil up ahead of oil company earnings.


  73. "Run, run, run but you sure can’t hide"


  74. Its a Ball of Confusion !
    That’s what the world is today … hey, hey, hey….


  75. "Politicians say more taxes will solve everything …. And the band played on …."


  76. Phil
    WFR down 15% on lower forecast.  Is that a prelude to the solar sector?  Nothing else is getting trashed that hard in solar or semi’s.


  77. Phil,
    Yours thougths if SRS has further to fall or may be a good candidate to sell puts?


  78. these 3 pm pump jobs are starting to piss me off !


  79. hey phil
    I have had some OIH and have sold calls against it today for april – 1.10..thats the good news
    bad news is I have a good deal of the OIH May 70 puts and they are not looking great – if earnings are good, I may be hurt worse there…what would you do with these at this point…i thought about rolling to the 80, but its over $3 – is that too pricey
    thks in advance


  80. Oh wouldn’t it be wonderful if we just sold off for the rest of the day?  When was the last time we had a sell off into close?  I  can’t even remember.


  81. WFR/Steve – Actually a lot of their lowered guidance is on gross margin, not unit sales so it doesn’t mean solar has gone down – just that there is more competition to supply chips to that sector.  This is going to be a good oppotunity to get back into WFR, who had really gotten away.  Selling March $15 puts for $1.20 is a good way to start but I’d wait until INTC’s earnings/outlook.

    SRS/Savannah – I like selling the May $26 puts IF you want to be short on real estate as I think it’s dangerous to to anything more aggressive.  I wouldn’t do anything bearish with financials until we see what GS, GE, JPM and C have to say this week.

    OIH/BC – I would sell the Apr $85 puts for $2.87 and use that money to roll to the May $80 puts at $4.03, maybe leave 1/3 open.  That way, you will be able to roll them down the the May $75 puts (now $2.40) when the $1.50 in premium is gone and you’ll be in a $5 vertical for no additional cash.

    Speaking of oil – what a joke!  Back to $50 now.


  82. Holy cow green!  So crazy!

    I guess opening up relations with Cuba gives us a whole new economy to exploit…

    Selling FAS May $9 puts for $1.85 AND FAZ May $9 puts for $2.45 is net $4.30 and they both can’t be in the money (or not much in the money allowing for deterioration) as they are opposite funds so you, at worst, get FAS or FAZ put to you for about 1/2 price!


  83. Here’s your sell-off Matt.  A little late to do much damage though…


  84. Phil, if the financials rally, what if FAZ just goes the way of UYG down to 3!


  85. FAZ/Ajay – Then, like UYG, you hold it forever and sell $1.20 a year of calls against it for a very nice ROI.  Meanwhile, if the financials ever have an issue and drop 10%, you gain 30%.  You say like UYG but UYG is now $3 and I bet more of you wish you had listened to me when it was $1.50 and I said that was ridiculous because they couldn’t go bust. 

    In the pair trade above, you can roll the loser down another $2.50 sell another set and collect another $2 off the winning side and if you do that a couple of times you can be in a free trade!

    8,048 - off by 2…  The kid is AMAZNING!


  86. Sell off?  Nope.  That was just a more rational close then we’ve had recently.  It’s somewhat reassuring to see some profit taking going into a close.  Thursday’s exponentially rising finish for FAS was MOST unsettling.


  87. GS is getting back up to the range (135 – 140) where there was alot of chop.  I SERIOUSLY doubt we break through those levels.  I think it will get the ol smackdown.  And if and when it does happen, I’m going to throw the friggin kitchen sink at it.  This bear’s sentiment is GROWING!  C’mon Friday…


  88. goldman just reported … thought it was manana


  89. What did they report?  Initial AH crowd not diggin it.  That must mean it’s going up.  ;)


  90. Well.. WFC, the best in class mortgage provider reported.  GS, the best in class investment bank reported.  I think once JPM, the best in class bank reports it might be time to close up shop on the long side.  I don’t see how the other a$$ clowns out there are going to make much of an impact beyond these best in classes.  They are already riding their coat tails and can’t possibly pop on top of what they’ve already pulled off.  Could they?  I think not imho.


  91. True, true…I’m in on FAS/FAZ and UYG! :) And some more FAS and FAZ positions as well…


  92. $3.39 "earnings"  (BS !)  
    revenue down 40% YOY
    $5 B stock offering
    cut dividend to 35 cents


  93. BAC C like it but GS starting to drop.
     
    All this "income" courtesy of relaxing MTM.
    Wonder if analysts will ask about that.


  94. Looks like a sell the news event if you ask me.


  95. SKF SRS up AH, but that doesn’t mean anything.  DIA also up.


  96. Who is this Bill Rudin ?  He is full of crap.


  97. GS fell back to mid-morning low area. curious


  98. fas ran up and down- FAZ did not move – odd


  99. GS crushes numbers and gets a yawn due to the dillutive offering I suppose.  $40Bn in revenues is 33% more than expected too.  Offering not even 10% dillutive so I guess massive earnings beat was really baked in…

    They did not cut dividends.


  100. Oh no!  Marilyn Chambers is DEAD!!!


  101. That’s my feeling about the rest of the banking sector.  There is alot already baked in.  After this run, how could there not be?  JPM announces at 6:15am Thursday.  Weird time!  But just in time for an about face in the banking sector to trash alot of calls before Friday afternoon.


  102. ivorysnowHere’s a picture of Marilyn Chambers in 1972, she was the Ivory soap girl.

    I guess theres a lot to be said for that 56/100ths that isn’t pure…


  103. Phil
    Have been meaning to ask- what’s your opinion on BRK/A. No options , but still curious on your take.


  104. hey pstas – not to butt in but if you want to see something good, read Doug Kass Blog and see his reversal over th past year or so with regard to BRK – he just got bullish again on April 9 – due in part to WFC news
    http://www.seabreezepartners.net/news.asp


  105. GS Divvy — Headline on DJ sez:  "GS cuts quarterly dividend to 0.35".
     
    If the headline is wrong, so be it….


  106. Yahoo sez:  GS dividend = 1.87.
    0.35 = 1.40/yr


  107. Some confusion over GS results in that they changed reporting period.  Was Dec; now Jan.  Claim is that when including Dec, which the report excludes, they actually lost money.
    In other words, GS supposedly eliminated December from this report (and it was not in last report) and they also said for month of Dec they lost 2.15 per share.
    I have no idea if this is accurate.


  108. bcfla / BRK
    Thanks for the link. I have seen some of Kass’ articles and his move on BRK was timely. I , however, never bet against Warren. I have been a buyer over the years and I am a buyer now. I would not be surprised at all to see BRK double from here in less than 5 yrs.


  109. OMG, so Goldman basically is trumping a report that sez lets just ignore those $2.15 per share in losses in December.
     
    Maybe every bank will do this; have massive losses in a month and simply choose to not report them !
     
    Its an ObamaNation !


  110. The GoldmanSachs 666 guy has sued Goldman — hilarious


  111. Trading activity on DNDN has been halted due to news tomorrow morning..should we take this news as bad, good, indifferent?  The stock was up almost 16% today, and I know you (Phil) had put a play on the board late last week.  What are your feelings going into tomorrow’s announcement?


  112. pstas – big fan of him for years…i found Kass flip-flopping disappointing I guess…he was a bull for many years and then seemd to get very aggressive in his criticism – just around the time he started his new long/short fund… 
    now, he goes other direction and does not address his previous shorts….i guess we all have talk our book sometimes


  113. BRK.A/Pstas – I love them but last I picked them was back in early March when I thought they were way too cheap.  Back at $92,500 a share, you’re better off bying DIA or SPY or QQQQ calls as they’re all going to move pretty much the same as Berkshire.

    GS/Cap – Seems to be a lot of wild rumors out there by hyenas who are short GS and are willing to say anything to stop them from running.   There is no CC (strange) but they are doing something like a press conference at 7am.  They have said nothing about cutting dividends and it would make no sense with these earnings but I do see stuff that does seem to somehow indicate they ignored December as they shifted reporting cycles.  Thas will benefit them twice as it avoids a loss this Q and, in Q4, they will look great against terrible comps that include December.  How can you not love a company like this?  They rig every aspect of the game!

    DNDN/Poof – I dread every announcement they make as it’s like Russian roulette with those guys.  We picked it up cheap enough that it doesn’t seem so bad but you never know with these guys…


  114. I don’t know what to make of GS.  They just seem to make up their own rules.  It also seems like a highly orchestrated ‘glossing over’.  Announcing a day early just doesn’t make sense for it to go ‘down’ this way on supposed good news.  If it smells like fish..


  115. Phil, what do you think of this SKF trade? Am I getting with the program here? :)
    Buy Oct 45 calls for $26, sell May 65 calls for $9. In for 17 and need SKF at or below 65 on May 15 to keep the $9 (9/26=35% not bad). If SKF is above 74, I only make 65-45-17/17=17.6%, still not too shabby for one month, assuming no rolling, which I would do.
    If SKF goes down to 45 by May 15, I keep the 9 and my Oct 45 calls will only go down about 9 and I still have 4 more months to sell calls against my Octs. 


  116.  DNDN to unveil Provenge results on Tuesday! 
    http://www.reuters.com/article/marketsNews/idINN1333940120090413?rpc=44


  117. And what’s up w/ a media call and not an earnings call ????


  118.  matt,  I agree with you but betting against Goldman is always a mistake.  They will usually find a way to win.  IMHO


  119. [...] It’s always hard coming back off a holiday weekend.  Not everyone is in the mood to work and not everyone even shows up.  Europe isn’t showing up this morning as their markets are closed today but there’s no Easter Bunny in mainland China, where the Shanghai gained 2.8% and Taiwan gained 1.3%.   The Nikkei was down 0.4% on the day but Hong Kong, Thailand (where they are rioting), Australia and New Zealand were all closed for Easter Monday. More at  Phil’s Stock World. [...]


  120. Party on Wayne; Party on Garth:
    Wells Fargo May Need $50 Billion in Capital, KBW
    By Ari Levy
    April 13 (Bloomberg) — Wells Fargo & Co., the second- biggest U.S. home lender, may need $50 billion to pay back the federal government and cover loan losses as the economic slump deepens, according to KBW Inc.’s Frederick Cannon.
    KBW expects $120 billion of “stress” losses at Wells Fargo, assuming the recession continues through the first quarter of 2010 and unemployment reaches 12 percent, Cannon wrote today in a report. The San Francisco-based bank may need to raise $25 billion on top of the $25 billion it owes the U.S. Treasury for the industry bailout plan, he wrote.
    First-quarter net income rose 50 percent to about $3 billion, Wells Fargo said last week in announcing preliminary results that topped the most optimistic Wall Street estimates and sparked a 32 percent jump in the stock. The bank attributed the profit to a surge in mortgage originations and revenue from Wachovia Corp., acquired in December. Full results are scheduled for April 22.
    Details were scarce and we believe that much of the positive news in the preliminary results had to do with merger accounting, revised accounting standards and mortgage default moratoriums, rather than underlying trends,” wrote Cannon, who downgraded the shares to “underperform” from “market perform.” “We expect earnings and capital to be under pressure due to continued economic weakness.”
    Wells Fargo raised its provision for loan losses by $4.6 billion in the quarter, below Cannon’s estimate of $5.4 billion. FBR Capital Markets analyst Paul Miller wrote after the announcement last week that he expected a $6.25 billion increase.
    Charge-offs
    Net charge-offs were $3.3 billion in the quarter, compared with $2.8 billion in the previous period at Wells Fargo and $3.3 billion at Wachovia. The current numbers are artificially low because consumers received tax refunds and a there was a moratorium on some mortgage defaults, wrote Cannon, who predicts a “re-acceleration” of charge-offs in the second quarter.
    The ability of Wells Fargo and 18 other U.S. banks to withstand further economic deterioration is being determined by the government’s stress tests, which will be completed by the end of April. Treasury Secretary Timothy Geithner expects that some lenders will require “large” amounts of capital.
    While Wells Fargo is likely to pass the test, regulators may “push for higher capital levels,” wrote Credit Suisse analyst Moshe Orenbuch in New York, who initiated the shares with a “neutral” rating today.
    “Given rising unemployment, continued home price declines and general macroeconomic headwinds, WFC’s consumer and commercial portfolios remain at risk for meaningfully higher credit losses over 2009 and 2010,” Orenbuch wrote.
    Wells Fargo rose 6 cents to $19.67 at 4:11 p.m. on the New York Stock Exchange. It has dropped 33 percent this year. Wells Fargo trails only Bank of America Corp. in U.S. home lending.
    To contact the reporter on this story: Ari Levy in San Francisco at alevy5@bloomberg.net.
    Last Updated: April 13, 2009 16:12 EDT


  121.  Cap, it will be interesting to see the true analysis of Goldman’s numbers.  I believe they put out the early earnings so they could float out the new shares prior to the conference call.  Even if the conference call starts before the bell – the headlines are very bullish or in favor of GS.


  122. GS has suckered Asia in, check out Marketwatch.com’s headline
    Goldman gooses Asia banks
    Financials leap after Goldman Sachs earnings, recent China loan data
    Banking shares bound upward, with Hong Kong-listed lenders, such as Bank of China and Bankcomm, marking major gains, helped by strong Goldman Sachs results, renewed hope for overall corporate earnings, and China loan growth.
     


  123. Good Morning Phil & all


  124. Asia Markets :    Tuesday, April 14, 2009
    (The following is from WSJ; please cross check with other sources to confirm.)   

    Nikkei Average*                                      8842.68     -81.75    -0.92%
    Hang Seng*                                          15580.16    678.75     4.55%
    China: DJ Shanghai*                               293.31        2.50     0.86%
    Seoul Composite*                                 1342.63        4.37      0.33%
    Bombay Sensex*                                 10967.22   163.36      1.51%
    Baltic Dry Index**                                    1478.00     15.00      1.00%

    ** Data from April 09, 2009
    * at close


  125. Asian Markets Are Mixed, But Financials Edge Higher

    ( Indian Markets closed tuesday, will reopen wednesday)

    Asian markets were mixed Tuesday after Goldman Sachs’ stronger-than-expected profit signaled the worst could be behind for U.S. banks, emboldening investors to chase after riskier assets.

    Japan’s Nikkei lipped 0.9 percent as worries over a GM bankruptcy grew. Investors locked in profits on auto shares, while banks rose after better-than-expected results from U.S. peers. Retailer Aeon, which is set to report full-year results after the close, fell 4.8 percent after its unit Talbots posted a deeper-than-expected quarterly loss and offered staid sales projections.

    Seoul shares ended firmer, with STX Group shares up on China funding news and banking issues gaining on solid numbers from Goldman Sachs, while new threats from North Korea had little impact on markets.

    Australian stocks closed up 2.2 percent as optimism for decent quarterly results from U.S. banks lifted financials.

    Hong Kong shares climbed 2.9 percent, staying close to a three-month high after a long Easter holiday, buoyed by hopes for stabilisation in the financial sector and reassuring economic data from China.

    Singapore’s Straits Times Index was down half a percent after data released by the government showed the economy contracted 11.5 percent year-on-year for the first quarter.

    China’s Shanghai Composite Index edged higher in heavy trade, with coal and non-ferrous metal shares hit by profit-taking as the market paused after a three-day rally, although auto shares outperformed.


  126. Good morning early people!


  127. Euro Shares Extend Gains, Hit 2-Month Highs

    European shares extended gains on Tuesday morning, rising 2 percent to a two-month high, led by banks.

    The FTSEurofirst 300 index of top European shares was up 2.1 percent at 794.40 points and had hit a high of 794.61, its highest in two months.

    Banks gained after strong earnings from Goldmam Sachs, which beat earnings forecasts on Monday. BNP Paribas, Banco Santander, Barclays, HSBC, UBS and UniCredit were up between 3.8 and 14.2 percent.

    Miners got strength from higher metals prices, with copper rising 2 percent, nickel up 5 percent and zinc gaining 1.7 percent. BHP Billiton, Anglo American, Antofagasta, Rio Tinto, Xstrata and Eurasian Natural Resources rose 3.2-7.9 percent.

    Energy stocks were under pressure as crude oil prices fell 1 percent. BP, Royal Dutch Shell, BG Group, Tullow Oil, Repsol and Total shed between 0.6 and 2.3 percent. Royal Dutch Shell said it was holding discussions with Chinese state oil firms to jointly bid for oil projects in Iraq. The oil major has said it wants to expand its presence in the vast fuel retail and refining businesses in China. Royal Dutch shares were down 0.9 percent.

    Investors awaited U.S. retail sales and producer price data, due at 1:30 pm London time, that may shed further light on the state of the world’s biggest economy.


  128. Oil Rises Toward $51 as Stocks Rally

    Oil rose above $50 a barrel on Tuesday, recovering after an earlier fall, as a stock market rally countered the impact of weakening global oil demand and forecasts for rising U.S. supplies. European stocks rose and bank shares surged as better-than-expected results from Goldman Sachs added to confidence the sector may be through the worst, analysts said.

    U.S. light, sweet crude was up, after falling as low as $48.96 while ICE Brent crude climbed.

    Oil fell more than 4 percent on Monday after the International Energy Agency, adviser to 28 industrialized countries on energy policy, sharply cut its world oil demand forecast for 2009. Dealers will be seeking any confirmation of the IEA’s demand forecast this week.

    In addition to the forecasts for global supply and demand, traders will also focus on the latest snapshot of supply in top consumer the United States. U.S. crude oil supplies rose for the sixth consecutive time last week as imports rebounded, and that could have lifted inventories to the highest in almost 19 years, a Reuters poll of analysts showed on Monday. The poll of eight analysts showed an average forecast for a 2.2 million-barrel increase in crude inventories.

    OPEC is likely to be concerned by the IEA’s estimate that inventories in developed countries equalled 61.6 days of demand in February, far above the 52 days many in the group consider comfortable. Iran’s OPEC governor Mohammad Ali Khatibi said if oil demand continued to drop the group might decide to further reduce its oil output, the Iranian newspaper Hamshahri on Monday quoted him as saying.


    Euro Falls vs Dollar, Yen; US Retail Sales Data Eyed

    The euro fell against the dollar and the yen on Tuesday as investors shrugged off rises in European equity markets and stayed cautious ahead of U.S. retail sales data and a string of upcoming U.S. corporate earnings. Investor wariness stoked demand for the perceived safety of the U.S. dollar as well as the yen, while it pressured the euro and other currencies seen as higher risk — such as the Australian dollar.

    Although this leaves currencies out of step with current trends in equities — where gains usually lift higher-risk FX — analysts expect stock market trends to provide direction in the coming days, in the absence of any other major drivers.

    The euro fell against the dollar [ 1.3282    -0.0083  (-0.62%)    ] and the yen [ 132.59    -1.21  (-0.9%)    ] .
    The dollar [ 99.79    -0.28  (-0.28%)   ] also fell against the yen, though its broad gains against other currencies pushed it higher on a trade-weighted basis to 84.801

    Goldman earnings news initially boosted higher risk currencies against the dollar and the yen, taking the Australian dollar to 73.49 yen, its highest since mid-October. The boost faded on Tuesday, however, with the Aussie dollar [ 72.78    -0.43  (-0.59%)   ] last down versus the yen, as investors looked ahead to results later this week from other banks and companies.

    Sterling bucked the trend among higher-risk currencies, however, with gains in UK shares — and particularly significant gains in financial stocks — helping the pound to a five-week high of 89.28 pence per euro.

    Global economic worries also weighed as Singapore announced it was effectively devaluing its currency after posting its worst quarterly economic contraction ever on Tuesday.

    Gold edges up on caution before U.S. earnings

    Gold edged higher in Europe on Tuesday, as caution ahead of a spate of U.S. corporate results supported safe-haven buying, but gains were capped by a rise in equity markets after strong earnings from Goldman Sachs. Gold  rose to $894.50/896.50 an ounce at 0913 GMT (5:13 a.m. EDT) from $892.05 late in New York on Monday.

    A stronger dollar typically pressures gold, which is often bought as an alternative to the currency, but both assets have recently been reacting chiefly to risk aversion.

    Meanwhile holdings of the world’s largest gold-backed exchange-traded fund, the SPDR Gold Trust, were unchanged on Monday from the level reached last Thursday. Although the fund’s holdings are at a record, it has seen inflows of only 70.86 tons in the last month, against 185.7 tons in the month of February, according to the SPDR website.

    While jewelry demand has suffered from high and volatile prices, traders hope buying will pick up ahead of India’s Akshaya Tritya festival on April 27, an auspicious time to buy gold, and as the wedding season gets underway in Turkey.

    Platinum was at $1,222/1,232 an ounce from $1,236.50 in New York late on Monday, while palladium was at $237/240 an ounce from $237. Among other precious metals, silver eased a touch to $12.62/12.69 an ounce from $12.71.


  129. phil what happened pre market--did you see that burst?


  130. [...] I predicted a wild week on Monday morning and we have been having a fabulous time as it only took me until 12:51 on Monday afternoon to point out to members that we were following a virtually identical pattern to the previous week. That enabled us to anticipate the gap down on Tuesday morning, as well as yesterday’s stick save. In fact, I predicted the Dow would close at 8,050 and missed it by 7 points. Our short plays that day were MA (which we cashed in yesterday with a huge gain), BIDU and FSLR. The last two are still trading up and I really like BIDU as a proxy for a possible disappointment from GOOG this evening. Also, we got a downward revision to China’s GDP today to "just" 6.1% growth. [...]


  131. [...] net $4.70, not a bad entry and you’re automatically playing for the bounce! I’ll repeat my Monday comment on the financials to bearish members here as it’s an important thing to consider: It’s possible there will be no flush in [...]