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Thrilling Thursday Morning

8,200!

Finally we make the target we discussed since the beginning of the month but, sadly, it took another shot of Federal stimulus to get us there.  Now what?  I did say at the time that I thought it would be a short-term top as 8,200 is the 5% rule bottom of the 8,650 mid-range (8,217 to be exact) that we expected to get back to in May but we didn't expect to get there without a pullback test of 7,632.  Heck, we haven't even tested 7,900 properly since our very brief visit to 7,699 on the 21st.   I didn't count that as a test as it was brief and 1% off our mark but, since then, the market sure has acted like it aced the test and is ready to move up to the next set of levels.

As we can see from David Fry's chart of the S&P, the S&P is hitting very serious resistance at about the 885 mark and that ties right in with Dow 8,250 and Nas 1,717, which is our first US index to hit the 40% mark.  Our other 40% levels will take some work as we're looking for Dow 8,413, S&P 946, NYSE 6,232 and Russell 514.  The Dow and the Russell have the best chance of getting there but we'll have to see as, at the moment, the Nasdaq is more of an outlier at the moment.  We need to keep an eye on the Nasdaq leadership:  GOOG, AAPL, RIMM, AMZN, EBAY, ORCL, INTC…  for signs of weakness.  If they can't keep it going, the entire market rally may falter here.

XOM missed by .03 this morning but still earned .92 per share and seem to be forgiven for it.  While profits are down 58% from last year, last year was $10.9Bn so $4.6Bn may be disappointing but oil back over $50 does allow the company to project better times ahead (gee, maybe that's WHY oil is at $51.50 this morning).  I wouldn't touch them with a 10-foot pole as they did beat revenue forecasts by 20% ($64Bn vs $54Bn) which indicates the company is doing a lousy job of controlling costs and may face disaster if the economy doesn't improve or if oil collapses. 

While earnings have been pretty good, expectations have been really low.  This is like getting all excited about a limbo contest at the beginning, when all the kids are walking under the bar that's being held high by the adults – THERE'S NO CHALLENGE!  Oh boy, my little XOM only missed by 3%.  That's nice mom, but they missed by 3% the level that was set 55% lower than last year and the stock is still trading at better than 70% of last year's level.  There are plenty of bargains out there, XOM just isn't one of them…  As it's a major Dow component, I'm expecting us to take a hit at some point as someone wakes up and sells XOM.

Jobless claims just came out and we "only" lost 630,000 last month.  Continuing claims rose to a record 6.27M indicating that, when we lose a job, they tend to stay lost but I'm already hearing "green shoot" nonsense on CNBC so enjoy your morning spin!  Personal income was down 0.3% and personal spending was down 0.2% and Real Consumer Spending fell 0.2% – all worse than expected by "experts" and I'm amazed that, as of 8:35, we're holding a 1.5% gain in pre-markets on this data.

None of this end-of-month movement makes much sense:  The BOJ cut their economic outlook to a 3.1% contraction from -2%, saying:  "Economic conditions in Japan have deteriorated significantly," in its semiannual economic outlook report, noting that in the corporate sector exports have also decreased significantly because of the "sharp downturn in overseas economies."  What sent the Nikkei up 4% this morning though, was a surprising 1.6% increase in industrial production as well as relief from a rumor that the BOJ would be forecasting a 4% contraction.  The BOJ also voted to keep rates at 0.1% while forecasting continuing deflation of 1.5%, indicating that carry traders will be able to party on for quite some time as 0.1% Yen flow out to the world markets in search of net returns.

Free money from the BOJ, a rate cut from New Zealand and a tripling of funding from the Asian Development Bank sent the Hang Seng up 564 points (3.8%) but the Shanghai barely budged, up just 0.4% after yesterday's 2.5% move.  Auto makers and related suppliers led the march in Asia as Chrysler spins into bankruptcy, raising the possibility that 2 of Asia's top 3 competitors may be on life-support for the balance of 2009.  Auto demand may be down, but that's still great news for HMC and TM.  Airline stocks followed our bounce and the overall mood in Asia was good following what they interpreted as a positive Fed decision to match the BOJ's loose money policy as well as Obama's press conference last night.  "Markets may need much more concrete signs of bad news in the near-term to outweigh the quiet confidence the Fed has expressed," said analysts at Standard Chartered.

Europe is off it's highs but still up over 1.5% just ahead of the US open.  Inflation in the Euro-zone is seen as stabilizing at 0.6%, opening the door for additional ECB stimulus.  Both business and consumer sentiment bounced back in April and that, coupled with what is being spun as a very positive Fed statement is boosting the European markets and that has been boosting our pre-markets as Asian and European investors grab thinly traded shares ahead of our open.  The real question is – are the US buyers going to be as confident as their global counterparts or will they take the money and run on this last day of the month?

While I think we may get held up today in order to make the tape look pretty for the month, I am very concerned about tomorrow and especially Monday so we'll be playing it cautious.  My play of the day is SKF, which I called on the nose when it topped out at $270 on March 6th (see me doing this live on TV) and I will now say it is getting too low at $54.  Thanks to the huge volatility of the ultra-ETF, we can create execute a buy by taking the $45 calls for $12.55, selling the $54 calls for $7 and selling the $50 puts for $3.  That is in on for net $2.55 so our effective buy of SKF is $47.55 if it closes over $50 and $48.77 if it closes below $50 as we will be forced to buy another round.  That's still 13% below today's price so it makes a nice way to make an initial entry to guard against a downturn in the financials.

We'll see what the day brings, if we hold 8,200 we need to stop worrying and love the rally but I'll be very surprised

 


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  1. Good morning ….
    First the bad news … Life on Mars radio is no more.   :cry:
     
    Now the good news …. CNBC and guests giddy all morning that the recession is over.
     
    And the ugly…. Chrysler looks like heading for BK.  The Obasher regime out right away blaming the hedge funds (not the company, government, recession, management, or unions) for not rolling over and therefore not acting in "the nation’s" interest, or their "own self interest" (read this last one as a threat to hedge funds re: legislation).
    Personally, I don’t care which piggy group gets the shaft on Chrysler, they all deserve to get smashed, but it does seem that the gov’t is trampling on debt holder rights to politcally favor unions, and this is just wrong, so it would be good to see the bond guys slap back strongly at the gov’t.  These gov’t actions are a slippery slope that we should not want to go down, so best to try to fight back now.
     
    Meanwhile, party on Wayne, party on Garth.
     
    Also, some new posts up at ObamaNation (click on my name above).


  2. Phil & Matt compliment each other perfectly…Phil’s turning increasingly bearish & Matt went long FAS yesterday!!! Watch out…something’s happening out there  ;-)


  3. Hey, what is the most enchanting thing a reporter can ask Obama at a press conference ?  Good to know that the NY Times is on the case.  All the news that’s fit to print and all that.


  4.  That SPY chart looks morbid… it’s like a cliff that retail investors got pushed over. As they bounce off the ledges, breaking bones along the way, eventually hitting the bottom of the ravine, their dead bodies rebound off the hard surface high into the air.
     
    The question is… will the dead bodies fall back down into the ravine and stay there, or will they sprout angel’s wings and fly away?  Hmmmmmm……


  5. GM Bondholders have a proposal too … FU to Gov’t Motors:   This should be getting more play on CNBC … total push back against gov’t nationalization.
     
    The proposal involves allocating new GM equity equally across the board to union VEBA and GM bondholders, pro rata to the level of financial obligation owed to each by GM. There would be no cash component in this proposed restructuring and the US Government would not own any equity. The union VEBA, based on the current $20 billion in health benefits obligations it owes to retirees, would own 41% of the new GM. Bondholders, as a result of their $27 billion of notes outstanding, would own 58% of the new GM. Current shareholders would retain 1% of the equity of the new GM.

    “Freed of its obligation to make cash payments to the VEBA or bondholders, the US Government would not have to convert any of its $20 billion in loans to equity and dramatically reduce the need to make additional loans,” said Siegert.

    “Our proposed restructuring is quite simple. We will save the American taxpayer $10 billion in cash that would have been spent under the Government’s proposed plan. We think that this is an extremely attractive proposition given our current fiscal crisis,” said Mr. Siegert.

    Siegert continued, “Unlike the current proposal, our plan does not grant a controlling interest in GM to the federal Government. We do not believe that nationalizing one of America’s largest and most important companies is the right policy decision for our country. And finally, any reasonable person reviewing our plan would come to the conclusion that a completely fair and even allocation of new GM equity pro rata to the obligation that GM owes each stakeholder is the best way to resolve competing claims in an out-of-court process.”

    Siegert said that the GM bondholders understand that sacrifice and pain is necessary to get to a fair solution of the current financial situation facing GM. That is why the bondholders have proposed to convert their entire claim to equity so long as others are willing to do so as well.

    “We want to see GM emerge as a stronger and viable manufacturer, providing thousands of jobs and products that appeal to consumers around the world. While we have not seen the revised business plan being developed by the Company and the Auto Task Force (ATF), we commit to working constructively with all parties on a plan that sets GM on the right path forward towards a financially healthy, operationally sound competitor. We will present our ideas to the ATF this afternoon and look forward to an ongoing dialogue and an agreement that is fair and equitable to all parties. Time is of the essence, and we stand ready to engage with all the parties to get to a solution that works,” Siegert said.
     


  6. This pre market futures farce is slowly eroding …. nobody is buying it !


  7. Good morning,
    DRYS reports after close today. Phil / anyone have a handle on what to expect.
    Thanks,


  8.  It looks official now… Mexico is shutting down for 5 days. President of Mexico is asking everyone to stay in their homes.
     
    http://www.msnbc.msn.com/id/30487509


  9.  "Swine" flu outbreak may have origins at a huge 950,000 hog farm operation called Granjas Carrol , a sibsidiary of Smithfield Farms. It is located in the state of Vera Cruz.
     
    Timeline of the outbreak is chronicled here:
     
    http://biosurveillance.typepad.com/biosurveillance/2009/04/swine-flu-in-mexico-timeline-of-events.html
     
    website of Granjas Carrol de Mexico:
    http://www.smithfieldfoods.com/our_company/our_family/GranjasCarroll.aspx


  10. Phil, Good call on GMCR. Up 15ish at the open. I scalped it yesterday for a quick 10% on the pre-earnings sell-off. Glad I got out!


  11. At least TRLG short is paying off. (And UA to some extent)


  12.  phil- any mo’ plays ahead of program buying rounds (eg 10am, 11am (europe close)), etc?


  13. Phil

    Many of the  May puts that I sold are showing 60 – 70% gains – should I close them out or let them expire?

    Thanks


  14. ssdirk, just to clarify, I covered my SKF yesterday with FAS.  I didn’t dump my SKF.  Looks like it paid off, a penny saved.., pretty well.  I just want to stay covered until at least late this afternoon. 
     
    What???  6 banks need more capital???  Don’t worry though, they’re just going to convert the govt’s preferred shares into common.  Not a problem!  Unless you’re worried about dilution..
     
    http://www.bloomberg.com/apps/news?pid=20601087&sid=aiz06xRmmeOQ&refer=worldwide


  15. Wow, what craziness – Worth going all naked here on DIA puts.  Adding $80 puts (buying) for $1.15 is a fun trade too.


  16. Interesting…on SPWRA, you can drive a truck through the spreads, e.g., May 25s are 3.3bid  vs 4.7ask.  Seems to me that they do not believe the current share price is worth the premium.  FSLR earnings having this effect??


  17. SPWRA – the spreads are just wider because the stock is moving quickly?


  18. Red -  when in doubt, take off 1/2.  I cash out on 50% gains.


  19. time to short SPG again; thisgets sillier and sillier


  20. Phil: with SPWRA up, my buy/write of caller jun25 and putter jun22.5, I have choice for caller and I am just evaluating choices,
    1) stay put, it has splenty of premium
    2) roll to sep 28, even
    please enlighten me.


  21.  almost there… huff puff huff puff…. I think I can, I think I can, I think I can
     
    Just a lil bit more to hit the DJIA trigger…. wooo woooo… chugguhchugguh chugguh  woo wooooooooo


  22. Funds/Cap – They really gave them the shaft in Europe with regs, US will not be far behind. 

    Me and Matt/SS – Well Matt was right about us breaking below 8,000 so I’m going to be careful about being too bearish but I just feel like we’re overextending on this run.  I’m still targeting 8,650 for May but I won’t feel good about it without a pullback.

    Amazing push to keep us up today, going to be hard to break.

    GM/Cap – the concept of a quick bankruptcy is not going to play out.  The bondholders were protesting yesterday and there’s no way a BK judge is going to force them to group without a hearing and that could take months.

    DRYS/Joe – I’m rooting for them but I wouldn’t touch them.  They were easy money at $3 so I was loving them there but this is 150% later so, on the whole, I’d rather see them fall again and get a cheap entry. 

    Mexico/Merk – Interesting as this could affect 15Mb of oil next week that usually comes in from Mexico.

    GMCR/Ac – Congrats, I’m glad I was right, I like that company a lot.  What a move this morning!

    TRLG – Good call DB.  I like them down here ($16) off that report though.

    Gains/Red – Absolutely on 70% and on 60% you should put a stop at 50% to lock that in. 

    Hmm, sounds like Obama is putting the big squeeze on Chrysler bondholders and he may announce a deal at noon and that could send us much higher so watch those bearish bets.   We held 8,250 so far and if we get over 8,300 we need to cover long DIA puts with full cover on $83 puts, now $2.20, taking 1/2 off if we break below 8,300 again so it will be an annoying cover to manage.


  23. Last day of the month so a pump to keep the portfolios looking good for April.  Expect a dip tomorrow.


  24. SPWRA/Pharm – Yes, they are up with FSLR but nothing in the move to make a lot of option players shift positions.  If I were short (I’m not, I love these guys), I wouldn’t let this move change my mind, up 30% in 2 days makes me almost want to short them myself!   So between the speed of the move and the fact that there are not that many option sellers or buyers, the bid/ask starts to expand.  I’d say this should be a top here unless FSLR can break $180 and make a move to $200. 

    For SPWRA I propose a buy/write , Selling the June $27 calls naked for $4 and buying the stock at no more than $29, at which point you can sell June $26 puts for $2 (now $2.38) for net $23/24.50 but our hope is the stock falls back to about $26, where we can buy the stock and THEN sell June $25 puts for $3 (now $1.75) for a net $19/22.


  25. Rotterdam/Fab – Hey great catch!  Another nail in the coffin for oil.

    BXP broke $50, if VNO does too we should break 8,300 but I think BXP got ahead of itself and I love selling the $50s naked for $3.20 with a stop at $3.50.

    Don’t forget to sell the FAZ $7.50 puts for $1 if you were looking for that play!


  26. Phil
    A trading strategy/tactic question:
    I have AKAM shares (1800) – have 7 callers – May 20′s @ $1.75- anticipating earnings- not confident on which way they would go- tried to buy back this AM but gapped up. (BTW- I plan on converting these to long calls as soon as these shares transfer to my new account where I can do spreads- which raises another question as why this transfer is taking so long- its been over a week)
    In any event- looking for some advice--
    My play- sell 7 or 8 June 21′s for $2.25; wait/watch for a pull back to sell the May 20′s; then , perhaps roll these to June also.
    Your thoughts? 


  27. FAZ May $7.50 Puts maybe too risky. S&P already above big resistance levels and though it does not appear any good news is imminent in the near term, this market can keep going higher on fumes for longer. Who thought it would crack 880 on such bad news of GDP & Swine flue threat level raise etc!


  28. SPWRA/RMM – Too much premium to buy back (if you buy back the caller, then you are the sucker paying the premium) and, as above, the run-up is not for a good reason and can quickly reverse.

    LOL Merk!

    Got my FAZ sale, now we’ll see if I’m sorry as they’re at $7.73 already. 

    Gold and Ag stocks not doing so well, Nat gas numbers in a few minutes (if CNBC even bothers to report it).  XOM down 2.5% but OIH up 1.21% and XLE up just a bit so no big effect on that sector yet.  Oil flew down to $50.50 so ka-ching on those futures but now they are racing back to $51.  Gold is laying around $880 and the dollar is a bit stronger today as the BOJ money dump chased people out of the Yen for a day. 

    By the way, on SPWRA, those numbers are not written in stone, they are goals and, just like any momentum play – when you get 50% of the way to target you need to start setting stops for entering the next leg of the trade.  There will, of course, be a bounce off $27.25 but if we’re close enough on the put goal, that may be a good time to sell it and then lower the buy stop on the stock to maybe $28.

    Boy they are really pushing on 8,300.  VNO broke $50 so it may be happening.


  29. AKAM/Pstas – They had earning you know…  They were fine so if you intend to stick with the stock, why not roll into the excitement and send the 7 May $20 callers at $2.35 with almost no premium, to 14 June $22 callers at $1.70, that throws them from $98 in premium to $2,226 in premium and you still have 400 open shares that you will be able to convert to 10 Jan $15s ($8.50) if the stock keeps going up.  If not, you can add 10 $21 calls at $2.25 and roll the 400 shares to 10 Jan $17.50s at $6.75.

    FAZ/M2 – Of course it’s risky but we can roll them down and we really don’t mind being assigned at $6 or less.  Also, you shouldn’t look at these in a vaccum, they are meant to either hedge the financials or as a pair trade to FAS puts we sell.

    FSLR is getting so juicy!

    Downward momentum picking up a bit, watch that 8,250 line.


  30. Phil:
    DIA 83 puts.  Good for short play with today’s jump?


  31. just filled a June/May FSLR 175 put spread for 6.90…but it filled instantly, so you can probably get cheaper


  32. Just sitting here watching the slow climb, oh by the Chrysler is bankrupt, Moodys has lowered their ratings on Auto Part suppliers. Who knows how many dealers will go bust, still watching the slow climb.


  33. MGM had a huge pop this morning, they seem to have that CityCenter deal back on track.

    DIA/Bvar – Sure, I like playing them at 8,290 and just get out if we break 8,320

    Still watching VNO (now under $50) and BXP (still over but down) buit now Ags are moving up and so are staples with SOX at 4.5% and transports up almost 4%.  If SOX cross 5% then we could be good for a big move up, probably a test of 2.5% (+1%) to the upside for the indexes.  Europe up around 2%, near the highs for the day.

    ISRG did not like their gap up this morning – gave it all back.

    Sounds like Chrysler creditors are not at all happy with this deal – I don’t see how they are going to put this together by noon.  I think Obama may have thought he had a deal and the administration may have leaked that they had a deal but there is no deal.  If there is a deal, we bang higher.  If there is no deal, I don’t know what happens but logically we should go down (LOL to logic though).

    Very interesting the FXP has barely budged from yesterday after 500-point move in China.  They should be down 8%.


  34.  
    Phil: I have the following short puts:  Fas May6,7; BHP May 40,42.5; Cat May 27;EWZ May 37;FXI May 29,30;Mos May 35; UNP May 40; WMT 47.5.  Most have strikes far below the current prices on these stocks, would you let them expire or close them out now?  Thanks.


  35. really putting the squueze on !


  36. The way I see the charts…
    Naz broke over resistance at 1727
    RUT broke over resistance at 479 – did that yesterday
    NYSE broke over resistance at 5503
    Only S&P500 and DJIA are lagging behind…. they need to get over and close above 898 and 8320 respectively to have a 5 index breakout indication.
     
    Still, my intuition is screaming its all fake end of month shenanigans!!  I’m still stubbornly, paitiently waiting for my DJIA 8320 trigger to buy the last 1/3 of my May 81 puts. 
     
    I think I can, I think I can, I think I can… woooo wooooooo


  37. What a joke CNBC is, everytime a bear comes on with a good arguement he gets quashed or they jump to the bull and change the subject !


  38.  GLD has been quietly sneeking up off its lows… back over 87 now


  39. Suppliers/DB – I know, that’s one I find funny.  How can people not realize that a Chrysler BK means parts companies get screwed out of Billions?  They in turn can’t pay others and dominos start to fall.  That’s why I keep thinking this rally is unhealthy – it indicates really mindless buying and that’s the kind that can reverse hard and fast.

    Puts/John – set stops at 20% of your profit, then let the market decide.  I’m torn between not wanting to pay the premium and thinking we’ll get a big sell-off, which I guess means take 1/2 off now and put stops on the rest so you can’t lose much (10% of gains so far) and still make 50% of your max possible gains from here if they stay up.

    GOOG $400 and climbing!  BIDU up 2.5%.  Is GOOG being used to goose the indexes?  Are they pulling out all the stops now to break 8,300?  Is this a free market or some kind of joke being played by our government and GS, who were closing in on $130 but got harshly rejected?

    FSLR $190!!!  OK, that’s it, first round of Naked $200 calls selling for $5.50.


  40. Phil   if we think tomorrow will be a turn down day in the market. Would it be better on stocks that we owe and want to
    keep that we have sold calls on  1.  roll up in same month, or 2. roll to a up and out to a different month, or 3. just wait to
    see what happens  I hope I made myself clear  thanks


  41. This is such a prop job going on …. seller’s absent.
     
    FSLR  up $38 !
     
    Trying to kill SRS and SKF with these financial and real estate pops.  And doing a good job at it.
     
    Joe Biden … he may not have Swine Flu, but he definitely has a major case of Foot in Mouth disease !


  42. AKAM- from earlier post- not sure if I missed something or your arithmetic needs some work—
    AKAM/Pstas – They had earning you know…  They were fine so if you intend to stick with the stock, why not roll into the excitement and send the 7 May $20 callers at $2.35 with almost no premium, to 14 June $22 callers at $1.70, that throws them from $98 in premium to $2,226 in premium and you still have 400 open shares that you will be able to convert to 10 Jan $15s ($8.50) if the stock keeps going up.  If not, you can add 10 $21 calls at $2.25 and roll the 400 shares to 10 Jan $17.50s at $6.75.
    1800 shares- now short 7 callers; convert the 7 to 14 June 22′s; Leaves 400 shares to possibly convert. OK
    If not- add 10 21s’ (I assume you mean June?) Buy back the 7 May 20′s? Roll the 400 to Jan 17.50′s? That’s 1400 shares? Did you mean to say 14 – 21′s?
    Another practical question – yes, I was aware of last nights earnings announcement. Is there anything one can do in that type of situation? Earnings are announced after the close; the stock is up after hours; gaps up in the AM; I placed a buy/back order last night- did not get filled- didn’t think it would. Any practical measure that could be taken in this circumstance or just go with one’s gut/analysis re: which way it may go?
     
    Also- why the June 22′s versus the June 21′s?


  43. At the G20 a couple of weeks ago they played "Catchphrase Bingo" in all the meetings. One of the phrases all the leaders and financial ministers came away with was "Greenshoots"


  44.  Reuters is officially poopooing the Mexican "evil factory farm" owned Smithfield Farm as whacko conspiracy theory… 
     
     

    And in Mexico reports in at least two newspapers focused on a factory farm run by a subsidiary of global food giant Smithfield Foods. Some of the rumors mentioned noxious fumes from pig manure and flies — neither a known vector for flu viruses.  (he say whaaaaat?)
     
    Those reports brought a swift reply from the biggest U.S. hog producer.
     
    "Based on available recent information, Smithfield has no reason to believe that the virus is in any way connected to its operations in Mexico," the company said in a statement.
     
    http://www.reuters.com/article/scienceNews/idUSTRE53T3ZK20090430


  45. Phil: did you cover DIA puts, your signal was DOW >8300 ??


  46.  wow, look at the volume of those dis june 20 puts  over 10k of them…..hmm…..


  47. Man, watching DIA is making me dizzy today, it’s what I call an RCD (Roller Coaster Day).


  48. OK  Rang the cash egister and cashed out.  Nice 20% gain today.  Let the markets crash now.  Bargains tomorrow. 


  49. Phil:
    I know you like selling the naked calls on FSLR, but if you have to recommend a June put play what would it be?


  50. Tomorrow/Bill – This is why I prefer to use the DIA covers as a blanket hedge, saves a lot of fussing about with all the other stuff.  If you have callers you sold that are well in the money, consider them good insurance.  If you are uncovered – cover at least half.  Generally we do our rolls on the Wed before expiration week at the earliest, we still have 2 full weeks after Friday to expirations.  As I keep trying to point out in our Buy List updates, it is better to leave things alone so often that it’s a better overall strategy than making constant adjustments.

    AKAM/Pstas – Yes to June and that was roll 400 shares to 10 Jan $17.50s but don’t get bogged down in the contingencies, as long as you have a general idea that there are outs you are comfortable with.  Why the $22s?  Because that is the contingency in which things keep going up.  If they don’t keep going up, then you shouldn’t move the May callers at all should you?

    Greenshoots/DB – Sad how uncreative the world is when the media latches on to any simple statement and turns it into the word of the quarter.  Maybe it’s a sad statement on their viewers who give them ratings as well.

    Mexico/Merk – I heard a very credible report that the disease came from San Diego via Mexican workers and that the farm in question was tested 100% clean with no infected workers or pigs.

    DIA/RMM – No because we never held it for any length of time.  Also, I believe I was clear in that, if we did cover, we would stop back out 1/2 on the other side of that line so in no possible way should you be more than 1/2 covered with the $83 puts but I prever 100% naked at the moment.  Of course, this all depends on how bullish the positions are that you’re covering.


  51. Phil,
    I’m w/ you on FSLR. Any projected price target for pullback?


  52.  Wow… what a freaky newsday it is today !!
    I’m not making this $hit up…..the war against Islam is over…. and we won !!  
     
    http://finance.yahoo.com/tech-ticker/article/238937/War-with-Radical-Islam:-How-the-West-Has-Already-Won
     
    And scooby doo said "rrrrruh roh"… 


  53. FSLR/Bvar – I wouldn’t pay the premium.

    Chryselr is BK!  Administration tells upset creditors to take a hike.  Administration says Chrysler will emerge from BK in 30-60 days and then we’re all going to Disneyland to celebrate!

    I can’t believe people will be buying this, you can’t bankrupt a company this size and unwind it all unless the court proceeding is a total farce. 

    I’m saying naked on long DIA puts if we break below 8,250 (1/2 cover above untile 8,320) and possible re-cover at 8,100 if we hold it.

    If the market does go up on whatever Obama says then there is just no fighting the tape.


  54. This is going to be such a great experiment in communism with the workers owning 55% of Chrysler…

    War/Merk – Oh I forgot to mention that today.  The UK ended operations in Iraq.  The coalition of the willing is down to just our 200,000 troops and 6 Canadians.

    Can Obama spin the death of a great American company into a little green shoot?


  55. But those 6 Canadians are really tough


  56. when does Obama speak?


  57. Oh no – Did Obama just say "We cannot keep this company, or any company, afloat on an endless supply of tax dollars"?  What about AIG, GM, FRE, FNM, C, BAC, WFC…. 


  58. Bottom dropped out of OIH ?   Is this Chrysler BK news effect? 


  59. The charts seem to love OBAMA…..Green candles everywhere


  60. Obama the demagogue !


  61. It Will be controlled??  IS that true?


  62. In Obama world, if you hold DEBT, and refuse to take a 67% haircut because Obama sez so, and so the unions don’t have to make larger sacrifices themselves, then you are the enemy … you are very, very, bad man !


  63. Phil  you use the dia for cover can the same effect be done with using the QQQQ  thanks


  64. You know those debt holders invest workers money too !   and average American’s money.  They should just flush it b/c the great and magnificent Obama sez so !


  65. Dennis .on CNBC:   Obama is "pouty and petulant" when he doesn’t get what he wants !  so true ……
    Michelle …. he demonizes Wall Street and investors.
     
    What, press criticism ??  Time to poison their gruel.  Get me Jeff Immelt on the phone now, dammit !


  66. Obama says; will make the US car industry the best in world, good luck,
     
    CNBC, Caruso and the big headed guy: harping at Obama because he said something quite reasonable about financial crooks.


  67. Billman, historically around here we have used QID for tech covers, but note that it’s an ultra so it moves fast.


  68. What a flip on OIH at oil got rejected at $51.50 – something went off script.  XLE too, both down about 2% now.  I can’t see us holding 8,250 if those guys pass 2.5%.  CNBC never mentioned it but build was 82Bcf vs average build of 22Bcf – looks like we’re going to break out of the top of the 5-year storage range and notice the huge difference vs. last year at this time.

    Working Gas in Underground Storage Compared with 5-Year Range

     

    UNG did not take it that badly as nat gas is holding $3.34 (down 5%), still much better than $3.20 last week.

    Overall, that did not come off so badly (if you buy the premise that this will be a quick and painless bankruptcy) so we may get another run up but the stench of BS is very strong over 8,250.   Still, looks like they are fighting to the death to hold it. 

    GOOG up 3% now but Qs can’t break 2.5% (35.75) and the Nas is actually up just 1.75% so I think the Qs are overdone.    That makes QID a fun play, $34s at $3, out at $2.50, looking for $4+.


  69. LOL Dalef!

    Obama World/Cap – How about a world where you are a greedy moron and lend money to an almost bankrupt auto company at 20% interest and then the company goes bankrupt and, when you whine about getting 33% back and the President tells you to grow up because you’re lucky you got a penny, which you wouldn’t have gotten if the government hadn’t stepped in to salvage the crap company you invested in!

    QQQQs/Bill – Sure, the principal works with any index, I like using the DIA becasue it’s easy to track and we get a heads up on events (like XOM miss) that will move the index rather than having things sneak up on us.


  70. Time for a PPT injection!


  71. It is interesting that there is a large cluster of cases around San Diego. But does that really make sense that San Diego would be ground zero, yet the vast majority of infections and death are in Mexico? What is there in SD that would be a likely candidate for ground zero?
     
    http://maps.google.com/maps/ms?ie=UTF8&hl=en&t=p&msa=0&msid=106484775090296685271.0004681a37b713f6b5950&ll=32.650649,-116.139221&spn=2.062781,3.99353&z=8
     
    And to add a lil more to the debate….Isn’t it interesting how the largest concentration of cases is in Cuidad de Mexico, not far from the suspected pig farm. And there are three confirmed cases in La Gloria very near the farm. The residents of La Gloria may beg the question, especially the ones there who are sick. Of course it is easy for Smithfield Farms to  say "there is no evidence" when Mexican federal authorities can not to do a thorough inspection because they are being personally intimidated by staff of Granjas Carroll. Well…that is the claim of the locals, who may be suffering delusions with their flu symptoms.  ;)
     
    Here is a translated news article from the La Gloria area:
     
    http://translate.google.com/translate?u=http://www.marcha.com.mx/resumen.php%3Fid%3D2128&sl=es&tl=en&hl=en&ie=UTF-8
     
    OK… now back to day trading as my conscience burns into numbness


  72. See those DIA $80 puts are a good example of when you want to use OTM contracts to manage uncertainty.  They had a low upside delta so we didn’t have to sweat the little moves up but, as we head lower, they gain delta, making a nice risk/reward profile. 

    Now testing 8,217, which is our exact 5% down position from 8,650 so nice to see a little support here.  Nas still holding us up so watch those 4 letter symbols for weakness, especially GOOG if it can’t hold $400.


  73. Geez, there are already talks of Dow 10,000 and S&P 1000! A pull back to 7650 would be great.


  74. Anyone,
    Where can I read about the 2.5% and 5% rule that is often refernced. Thanks.


  75. SKF – die!


  76. Fab…so funny…my same chant for FSLR


  77. VIX is back to where it started and heading higher.  Everyone must be buying puts!


  78. I bailed out an hour ago.   Holding DRYS leaps and will take what it gives me tonight. 


  79. covered my SPG shorts…. damn crooks; I love to beat ‘em at their own game.


  80.  Damn… "they" wouldn’t setoff my trigger for my last round of put buying… 13 friggin more points is all I wanted !!
     
    Oh well… raise yer hands dudes… roller coaster time… weeeeeeeeeeeeee


  81. San Diego/Merk – A virus is a virus, it can mutate anywhere.  A ton of people from the village in Mexico "commute" to San Diego to work.  A person in San Diego who gets the flu generally takes drugs, sees a doctor and it goes away.  A migrant worker in Mexico gets his ass back up and goes to work no matter how crappy he feels so a flu strain that is nasty but not very fatal can go undiagnosed in San Diego for 6 months while festering in a Mexican village until people start dying in large numbers.

    FSLR $175 puts at $5.30.

    5% rule/Aclend – I’ll have to dig it up, remind me after hours.


  82. Phil … Thanks so much for advice on handling Oct FAZ rolls..  I set a sell target for $5  as you suggested and it got taken out in final hour of trading.  I then moved into the lower strikes (Oct $4) during this mornings moves for the same $5, but still managed to cover with May $12.50 for the same 0.35 you called yesterday.  Nice to see I can benefit from your advice without being a day trader… I am pumped to be part of your group!!!


  83. Todays Chrysler announcement would have been a good day for the bears to get a grip – so far they haven’t really passed the test.


  84. DB,
    I was thinking the same thing. If the market can’t even correct/sell-off when a national icon like Chrysler goes under, then when?!


  85. Look at FAZ skyrocketing.  It really seems like cheating to be able hedge using FAZ.  Its like my eyes have been opened to how all the real financial guys make money.  Lastly, Phil your da man!!!


  86. DIA 80 Put just wonder when people would take them off? I am using a 15c trailing stop which has held so far..


  87. DIA  I think my mattress position is good, but I wanted to run it by you as I’m leaving for the day.  I’m + 8 Sep 84 / – 2 May 81, -4 May 82, of 3/4 covered basically ATM.   I’m also heavily covered on my other positions.  (That’s a story for another post how 1/2 covers became 2X rollups to full covers, which then went ITM and I’ve been scrambling with adjustments ever since.  Who knew that a massive up move could be such trouble for a portfolio that is overall positive delta?   I guess you did which is why you advocate using DIAs rather than covers as your normal hedge.)


  88. If I were manipulating the markets and wanted to reverse the drop, I’d do a big sell into 1:59 to print a down candle, then hit a reverse at 2pm so the next stick looks good on all the different time periods and makes people think we have a solid support line.  So it’s not relevant that we blew 8,200 unless we can’t take it back in the next 15 mins.

    SKF/Fab – Hey, that was my pick of the day!

    VIX/Steve – I hope so, we have to sell June premiums next week.

    Faz/Mira – Cool, glad that worked!  You do just have to be patient with the ultras.


  89. Phil:
    Staying naked on DIAs until 8100?


  90. S+P Downgraded American Express – might knockon to V and MA


  91. Phil: it takes your knowledge and nerve to mamage DIA put, well done,


  92. FAZ/Craig – Yes, that’s the kind of leverage hedge funds can manufacture internally and FAZ makes it available to retail traders which is why Cramer is on a crusade to shut it down because it levels the palying field and makes it harder for him and his pals to fleece the sheeple.

    DIA/Steve – that’s a good amount for a trailing stop.  Like I said, if they can’t retake 8,200 by now (1:15) it’s going to be much harder to do at 1:30, 2 and 3 as the trend lines pull down so I think we had a failed attempt at a save just now that didn’t quite make it.  If the NYSE and S&P turns red to join the Dow, then we really have to watch the Nas and RUT as they can get yanked down hard.

    DIA/Eph – I’d take out one of the $82 puts, we’ll probably drop another 100 points and even if we do pop back it’s an even move when you re-cover but a nice bonus if we head lower.

    AXP got put on ratings watch, be careful if you’re in them.  MA $180 puts at $7.50 are a fun way to play that news, looking for $9+ out at $7.


  93.  A virus is a virus… chuckle… I hear ya Phil
     
    Can mutate anywhere and splice DNA fragments from swine flu, avian flu and human flu. Maybe it spontaneously  generated in a hidden laboratory inside a huge evil factory farm complex located deep in the remote jungles of southeast Mexico… but then then again, I really gotta put away these $1.98 super duper conspiracy theorist glasses…. 
     
    On a serious note… I have my doubts it is so benign and natural. When elitists setup huge granite stones in Georgia and say commandment #1 for them is to reduce world population to 500 million, then red flags go off for me when I see crap like this particular event happening… especially when the virus initially sounds from reports to be so genetically engineered.


  94. Hi Merk, the article I posted in the Favorites from New Scientist mentions the origin of the flu, sounds like it’s pretty well-established that it originated in La Gloria’s nearby pig farms.  The workers there are probably largely immune being exposed constantly:  http://www.philstockworld.com/2009/04/30/swine-flu-the-predictable-pandemic/

    So where did the Mexican virus originate? The Veratect Corporation based in Kirkland, Washington, monitors world press and government reports to provide early disease warnings for clients, including the CDC. Their first inkling of the disease was a 2 April report of a surge in respiratory disease in a town called La Gloria, east of Mexico City, which resulted in the deaths of three young children. Only on 16 April – after Easter week, when millions of Mexicans travel to visit relatives – did reports surface elsewhere in the country.

    Local reports in La Gloria blamed pig farms in nearby Perote owned by Granjas Carroll, a subsidiary of US hog giant Smithfield Foods. The farms produce nearly a million pigs a year.

    Smithfield Foods, in a statement, insists there are "no clinical signs or symptoms" of swine flu in its pigs or workers in Mexico. That is unsurprising, as the company says it "routinely administers influenza virus vaccination to swine herds and conducts monthly tests for the presence of swine influenza." The company would not tell New Scientist any more about recent tests. USDA researchers say that while vaccination keeps pigs from getting sick, it does not block infection or shedding of the virus. read more here. – Ilene

     


  95. JPM and GS are leading the financials on the way down.


  96. Looking at SSW and GMR, shipper earnings seem pretty good this week, may portend well for DRYS.


  97. DIA/Chaps – Then it depends how we look there.

    GMTA DB!

    Thanks RMM but I’m just watching levels and keeping in mind what BS motives may be behind the moves.

    Virus/Merk – LOL, you are drifting outside of my area of conspiracy expertise…  The actual problem seems to be that viruses always mutate but the real problem is we have stopped the natural selection of virus-resistant humans by "saving" them every time there’s an outbreak with antibiotics.  Effectively we let the weak survive (and I know this sounds harsh but that’s Darwinism) and pass on their genes while, on the other side of the equation, we subject the virus to very harsh cullings so that only the very strongest make it to the next level.  Ultimately this is an insane game because we end up with nothing but superbugs and billions of people with no natural resistance – it’s a catastrophe waiting to happen.

    F says: "Ha ha ha, we don’t need any money."


  98. Phil, when referencing FAZ you said that that Hedge funds could manufacture that kind of leverage internally.  If you dont have time while the market is open thats cool, but could you explaing how a fund can "manufacture leverage"?


  99. Phil: is there a DIG put to sell, like june 23 ?


  100.  phil, do you think people are positioning for pullback in financials and end of month crap with stress tests coming up.  i bet faz runs up tomorrow afternoon?


  101.  has anyone tied the etrade/iphone app – it is pretty slick.  i know they r a pretty shitty brokerage.


  102. Speaking of Moves and Motives …….  That fun little "Chrysler BK" spike down is starting to look like a big shakeout….. this is the perfect place to run it back up! 


  103. DRYS/Mr. M – It’s more about how they are handling their loans and cash flow and whether they are doing a dillutive raise than it is about what they earn.

    Good example of why we use 20% of profit trailing stops here and why we watch for 20% retraces.  Dow fell from 8,300 to 8,250, had a less than 15-point bounce, then fell 50 more to 8,200 and had a less than 30-point bounce, now falls another 50 to 8,150 and we allow for a 45-point bounce which means if they cross 8,200 we take our profits/cover.  It looks to me though, that it’s more likely they don’t make the 45 points and we leg down to 8,100 where we can get a 60-point bounce and it’s still bearish.

    Because of the huge bounce at that point and since the next level would be 8,050 with a 75 point bounce back to 8,125 – it then makes sense to just cash out/cover at 8,125 because it’s very likely that, even if we drop further, we’ll be seeing that level again and will have a chance to reload but it’s very likely a turnaround spot so taking the money and running there is a good idea.

    So, if we cross 8,200, we should be full covered on DIA Sept $84 puts with the May $82 puts (now $2.20) and we’ll take out 1/2 if they hit $2.50.  If we get to 8,125, we’ll cover 1/2 with the $82 puts at $2.75 and see what happens – covering another 1/2 at $2.50 and stopping out 1/2 if we go back past $2.75.


  104. Phil – MA earnings are due tomorrow before market. Is that something to keep in mind for the MA 180 puts play? Thanks


  105. Chuckle…. I got lots of time on my hands today since the market has been following my script pretty closely and the weather outside is cool and damp, so I can’t do much gardening today.
     
    Sooooo….I’m just following the white rabbit down the rabbit hole to see where it goes into Wonderland.  LOL
     
    I sat down with the Alice and the white rabbit to drink some coffee, then Morphues and Neo showed and asked me if I wanted to swallow the red pill or the blue pill. Boy was I trippin…
     
    Then…. I started having visions of Dr. Lenny Horowitz and this is what I saw:
     
    http://www.youtube.com/watch?v=GBeKB7aKzOs


  106. Merk,
    I think you just put us into slow motion or something!


  107. Lol things which sound so simple just aren’t in Merkhs wonderland! Have we retaken Dow 8200 or not? rofl


  108. Funds/Craig – Well you could do it too as a large investor through Portfolio Margining – it just gives you much more bang for your buck using standard indexes.  If I cover with QQQQ $41 puts to get a 1.00 delta it costs me $6.75.  A hedge fund can buy that contract for much less margin than you can, allowing them very good leverage.  Using QID, which moves at 2x the Qs, I can get a 1.0 delta by buying contacts with a .50 delta like the $37 calls for $2 (close enough as they are close in price).  Already I’m hedging with style.  If you flip over to FAZ and want a 1 delta to the IYF,  you have to take into account that IYF is $40 and FAZ is $8 but it moves 3x to IYF so you need 5 FAZ/3 or 1.67 shares of FAZ with a .33 delta to fully cover 1 IYF and that would be the May $10s at just .70 so $1.16 to hedge the $40 IYF position. 

    DIG/RMM – There are if you are very bullish on oil.  I’m not.  If you are going to play, you can sell DIG AND DUG June $20 puts for $2 total as it puts you in one or the other at a 20% discont.

    Stress/Jo – Well it would be irresponsible to hold one of the banks being tested or even sector bets without hedging on the possibliity that the test tanks your position.  FAZ is a great overall cover.

    Good timing Chuck.  I still think it looks like a bounce but we live in fear of the stick when we’re bearish!

    MA/Ranj -  Oh it wasn’t an earnings play, just a play into the close – not working so far.  No way you want to hold that premium past earnings even though it is tempting with them up so high.

    8,200/Steve – I don’t count it if it can’t put up 2 10-minute candles (good note for new members, I really don’t look at charts under 10 mins very often)


  109.  Phil, do you have any other long term spreads ideas similiar to LVS, HOV, DRYS, DNDN?


  110. shorting SPG again


  111. Well now it’s a breakout!  Well past our tolerance limit for a bounce.

    Spreads/Jo – We need a higher VIX and, of course, it  works better when things are dirt cheap.

    So this is 10 mins over 8,200 and now it’s a judgment call as to whether I cover up or not (if you are not a good day trader, sticking to basic level crosses is much safer).  So my judgement call is to watch this next dip to see if 8,200 holds but, if it does for 10 more minutes, I must give up.  If, 5 mins from now, we test 8,200 and bounce up – then I have no reason to wait for the next 5 mins so pretty much I’m giving the Dow 5 mins to break 8,200 to the downside or I cover.  Since 8,210 just held up I’m pretty sure I’m going to have to cover and I have my finger on the trigger if we cross 8,220 again as you just can’t fight the market if it’s determined to go up.   Breakdown by 2:35 or I cover is the bottom line.


  112. Cap,are shorting the ETF or buying puts or selling calls?


  113. Phil, I would cover.  Just think of the headline at close they can use:
     
    Chrylser goes BK.  Dow gains 80 pts.  The bottom is in.  Great time to buy.  Get in before it’s too late!


  114. Phil,
    I really appreciate the detail you gave in that post with the anticipation of levels in real-time. That is very helpful!


  115. Phil: this DIA is tough today


  116. LOL, CNBC has 10 folllowers on Twitter – shows what reality is when they don’t have an audience monopolized!

    Levels/Ac – Well its good but I still haven’t covered as we didn’t break 8,220 and, if you’ll remember, our 5% rule was 8,217 so I keep giving it just a little more leeway.  Those judgement calls are really tough and can get you into trouble though, it could have just as easily gone up and taken off.    MA was giving me courage as it keeps nudging down.

    Wheeeee!  Here we go again.


  117. I agree aclend!!
    While it is the mechanical bits which Phil probably doesn’t even have to think about, this stuff on managing the position is very important. Thanks Phil!


  118. Dohh!  Dow <8200:  Nice to see it’s at least occasionally hard for Phil to call the market, too.


  119. Wow, several 400,000+ share lots at ask just went by for UYG.  That’s kind of unusual.  Usually , they break them down into smaller chunks.


  120.  there are a lot of twits on cnbc


  121. Phil: what is overnight coverage for DIA ?


  122. Calls/Matt – Actually it will probably be right to obey the levels, there’s a reason we’re able to use number I put on the Big Chart 6 months ago for an exact pivot-point today.  When I make a judgement call I’m just trying to make some extra nickels and there is some satisfaction to getting it just right but, as I keep saying, you are better off switching off your brain and trading levels in this market as the programs are clearly making all the decisions and they don’t care if Chrysler went BK or if AXP was downgraded to a credit risk by Moody’s or what the price of oil is today – all they do is trigger at the pivot points and make you squeal like a stuck pig with a virus when you’re on the wrong side….  8-)

    DIA/RMM – Overnight needs to be a 1/2 cover I think, especially if you are covering gains as we could get a sharp correction tomorrow or Monday.


  123. We are the latest profession to be "deskilled" . Close your eyes , pick a stock, watch it go up :-)


  124. There she goes!  Down doggie down.


  125. why won’t the Nasdaq die?


  126. Phil – VLO question.  Looking at the buy write….Jun20 C @ 1.3 w/ Jun18 P @0.9.  Currently @ 19.7.


  127. Matt, is there a place to see the UYG lots in ToS? I see Market Depth, but that doesn’t show me the 400K lot, unless I happen to catch it going by.


  128. Potter — shorting stock (SLG) covered again; if it dumpts here, could go to 49′s.
    No worries folks; SHLD up 2.50 !   LOL
    SRS and SKF green now.


  129. On the Pharma front, BMY @ 19.  Selling Jun19 P for 1.  Nice dividend, and buyout is still swarming.  Also, worth a gamble is VRTX.  Rumour around San Diego is JNJ is looking at them.  Their Hep drug is all that is left.  June 35s @ 1 are a gamble.


  130. ajay, I just caught it going by.
     
    I think, assuming we close red, that it’s very telling on a day that followed the so called TA breakout day yesterday.  Some breakout.


  131. Per your ealrier post on OIH, Oil and Natgas and your recent comments about possible market correction, is it safe to assume that Oil will drop pretty hard if the market rips down hard bringing OIH with it?   How much lower can Natgas go?


  132. Phil – What is your opinion about selling MA puts just before close as an earnings play? Thanks


  133. here comes the month end painting of the tape !


  134.  I’m still spending my time surfing the net and roaming the Wonderland Matrix reading about flu stuff… while I watch the market go down and make my puts more valuable…. break it dowwwwwwwwnnnnnn.
     
    Here’s something interesting:
     
    Laurie Garrett, associated with the Council on Foreign Relations, gives a TED talk about what was learned from the 1918 pandemic… this is a more conventional and polished presentation that can put some perspective on our current situation with H1N1.
     
    http://www.ted.com/index.php/talks/laurie_garrett_on_lessons_from_the_1918_flu.html


  135. Man, the Fed already spent $77Bn of the $300Bn they allocated to buy Treasuries and keep rates down.  This is a serious disaster waiting to happen.  I thought they were only buying a little but they are now buying half the paper for the month.  No way do we sustain these rates and sell $150Bn a month once the Fed runs out of cash….

    VLO/Pharm – They don’t look too good right now, safer to go for the $19 calls and puts at $3.05 and that gives you net $16.70/17.85, which is only a 10% discount if put to you, about the least we want to accept.

    Wow what a slap shot off the line at 8,150! 

    BMY/Pharm – Great idea on selling the June $19 put for $1.  VRTX us a little high off this week’s run for me.

    Oil/Chuck – There is no proper reason for oil to be $50.  The only argument for oil, which costs about $15 per barrel to produce and $3 to ship, to be expensive is a scarcity issue.   There is a marginal global supply of usually about 2Mbd and if we eat into that then supply has to be juggled and traders can make money moving barrels around.  With OPEC having shut down 3Mb of supply and other global producers cutting back about 3Mbd too, we now have a surplus production capacity of 8Mbd – 10% more than we use.  Not only that but the US is not even using our allocation and 500Kbd (2.5%) is piling up in storage.  From a supply/demand standpoint, they should be throwing 2 for Tuesday sales to try to spur demand.  The only solution is to cut supply and that’s less work for OIH companies long-term (if we don’t recover).  Nat gas is different but similar in that LNG shipping is allowing the nat gas that is usually burned off in the middle east (because nobody local wants it) to be shipped to the US.  As nat gas is a waste product of oil drilling in most of the world, any marginal sales are proftis for OPEC so they are happy to ship it around the world for $3 and a glut could push prices lower.  That’s what’s being priced in now but that won’t really start happening for a year or two and this year, we can still get a spike into the winter, which is what I’m counting on.

    MA/Ranj – No way!  Much too risky- we got a good score on those other puts and it’s time to stop poking the bear with a stick.

    Why don’t we just buy DIA calls every day at 3:30?


  136. Phil, when did the Fed start buying Treasury paper?  Divide 77B by that and you have the burn rate.  Divide 300B by that and we’ll know when the Fed says they have to expand their balance sheet some more!  But seriously, when will that be?


  137. GLD  I’ve got Sep 78 as the long part of my spread.  What price should I be looking for on roll down?  I’d obviously take .50 (like rolling up a DIA), but I think that is unrealistic.   It’s .70 now which seems rich.


  138.  Ha…. so they wanna make today an "unch" day !?!


  139. MA – my bearish play is Back ratio: Buy 5 MA Jun 195, sell 10 MA Jun 200 for $5.25.  Breakeven is $210 on the upside and no loss on the downside. 


  140. Quite the battle into the close between someone who really wants to print green and someone who really wants to print red.

    Treasury/Matt – Two weeks ago!  I find that terrifying.  They said the last couple of auctions went off well and now it turns out the Fed was buying half the paper – that is a total farce!  Could you imagine holding an auction at Christies for your old baseball cards and they found out after that one of the biggest bidders was your brother jacking up the price – You’d both go to jail…  That money was supposed to be for the whole year and they just blew 25% in 2 weeks, very bad.

    Uh oh, Mr. seller is winning…


  141. beep, beep, beep…. lookout, the SKFy truck is backing up!


  142. PLEASE LORD, LET THIS BE THE POINT SANITY RETURNS TO THE MARKET!!!!!!!!


  143.  Phil, then assuming they continue at the same pace they’ll be out of the cash in less then 3 months.  Either the auctions are going alot worse then they thought or they know full and well they’ll be back asking for more $ for QE.  That is scary.  I think the Chinese have moved on…


  144. RUT and SPX OTM CALLS lost 10% of their value in the last 5 minutes of trading.  Thanks goodness, I sold to cover just in time.


  145. Phil,
    …a reminder for the link on 5% rule and something on the pivot points you mentioned would be great as well.  I know what PP are but, if you have something available that explains how you are specifically using them, that would be helpful.  


  146. GLD/Eph – There’s really no reason to move that with just $2.35 in premium.   Just make sure you sell that much to cover the gap and you are effectively 100% in the money.  You can sell 1/2 the $90s at .75 and knock .37 off over 2 weeks if you are very bullish but I’d cover with 1/2 the June $88s at $3.10 because gold could go either way and .37 won’t do squat for you.  The $88s can roll 2x to the $93s or 2x the July $98s so you have to think of it as pretty much covering at $1,000 and it’s both silly and greedy not to take that cover when it pays off more than 50% of your premium in 45 days.

    Wow – after all that "nothing" happened today!

    MA/Peter – Great play but not much time to hit it…

    Good luch with that prayer Matt.

    Well, that’s it for the month.  Will they sell in May and go away now?  Tune in tomorrow….  Europe is closed I think so we’re really on our own.


  147. Thanks Fast? I looked but couldnt see, is there a link anywhere to describe the contents of the snazzy new levels table at the bottom of the daily post?


  148. Aclend – Another 5% rule comment.  Pivot points are just the levels off the Big Chart (40% line) or the 5% rule numbers that I send out in the alerts or morning post.

    Thanks Fast!

    New chart/Steve – They are just bits of the big chart that I think are worth referencing daily and the 2.5% up and downs are off yesterday’s close.  Unfortunately, the YHOO feed we get is delayed and the colors don’t change when we break 2.5% levels but, other than that, I’m pretty happy with it.


  149. I think the UK is open tomorrow but closed Monday – same for Europe I think.


  150. I was wondering where you got the feed for the table.  That’s pretty much what I had in mind as a contribution to the board.  Mine was going to change colors depending on the current index value, too.  It was going to be a java widget though and I’m not sure it would have fit in with your .php architecture.


  151.  Nothing happened?  
     
    My money is bet that today we saw the tippy top of the bear market rally.  
     
    It is Kahhh-put… fat lady sang, Elvis left the buidling,  Homer said "D’oh",  Robin said "Holy rigged markets Batman", Kirk said "Beam me down Scotty", Fonzi said, "Whoah", Tatoo said "Dee pain Dee pain", Siskel and Eibert gave it two thumbs down, The Borg yelled "Resistance is futile", MvGarret said "Book it Danno" while Seinfeld sits in the back sayin "Yadda yadda yadda"
     
    So GM and Chrysler have closed shop. Does that mean the gates of hell for counterparty risk have been reopened and the smell of sulfur permates the financial air?


  152. merkhava, great deja-vu list, I chuckled.  All you forgot was Arnie: "Hasta la Vista, Ba-by!"


  153. Hey, you think Obama will be celebrating May Day ?


  154. Merkahva …. LOL ….here is some more ….
     
    It is not pining for the fjords, it is dead, dead, dead.
    It is no more.
    It has expired.
    It is an ex-rally.
     
    http://www.youtube.com/watch?v=4vuW6tQ0218&feature=related


  155. Cap, too right!  A day without Cleese is a sad and humorless event…


  156. OK Phil – So lets say that I also think we could be at the top of the Bear market rally and that I think we’ll go back and test the lows – how would you play that ? Just sell the indexes ? (Good day on the UA/TRLG shorts. TRLG at $15.76 looking for $13.5 before earnings on the 5th)


  157. Phil,
    I have AAPL stock that I purchased at $105 several months ago along with a Jan ’11 160 put that put me in for $165 total per share. I have been selling puts and call for several months now against it but wanted to see how I can adjust this to keep my position but maybe free up some cash. I currently have sold the June 110′s for $5 and the May 110 puts for $3. I was going to buy back the May 110 puts since these have run their course.
    Thanks


  158. Events that will/could cause us to revisit the lows – GM to follow Chyrsler into Bankruptcy, AutoPart suppliers also go bankrupt laying off thousands. Citi and BAC to fail the stress tests causing a run on financial shares, Treasury/Fed auction fails to find buyers. Goldman Quant programs try one stick save too many and crash the market in the process. Bearish – Moi :-)


  159. Phil,
    So the 2.5%, 5%,etc. are PP from the previous day’s close and you are mainly watching those levels especially as they intersect with the longer-term 40%,50% levels as well as major psych numbers. Is that accurate. Also, are you doing that w/ select individual stocks too…like AAPL?


  160. Phil,
    I have an idea ! What do you think of buying a dividend paying stock and selling a far in the money call ?
    For example: Buy T @ $25.5, sell Jan 2011 $2.5 call for $23
    T pays $ 1.64 dividend ( i think pretty safe) on a net investment of $ 2.5. That’s a 65% return over 20 months (40% annual).
    I was thinking about using this in my IRA account. Would you recommend other stocks instead of T for such a trade ?
    Thanks
    Niten


  161. Niten,

    What if it is called away in a month or so, or worse yet, before ex-dividend when it is trading at 28 (or something like that)?


  162.  LOL Cap
     
    Absolutely hilarious… ROFLMAO… I haven’t seen that dead parrot skit in years


  163. That’s interesting Pharm. However I fail to see why it is a bad trade. As I see it  if  it does not get called off then you make money on the dividend, and if it gets called off then your trade closes at no loss. One thing that you do make me wonder is why would any one buy the 2.5 call instead of stock outright !


  164. I am seeing way too many doji’s and shooting stars in candle formation.  And also some bearish engulfing candles.  Seems like this run up could be heading to a close. 


  165. UK is trading , Europe isn’t.
     
    US futures up a little but have been gettin stronger for most the morning. Some bearish  facts about the UK consumer out today – UK consumer lending growth at record lows in March and UK shopper figures fall 3.7% in April. The consumer obviously isn’t playing in the UK


  166. Looks like that new flu has arrived in Virginia where I live…
     

    The agent’s family members are among the nine probable cases authorities have identified in Maryland, including two announced yesterday. One of those was a Montgomery County man who works at the World Bank and had recently traveled to Mexico.
     
    Last night, Gov. Timothy M. Kaine (D) announced that Virginia had its first two confirmed cases as the virus spread through the Washington region, and Montgomery school officials announced that Rockville High School would be closed today after authorities reported a probable case involving a student.
     
    http://www.washingtonpost.com/wp-dyn/content/article/2009/04/30/AR2009043001836.html?nav=rss_email/components


  167. Good Morning!

    Japan open, China closed, UK only open in Europe so you can’t trust anything that happens pre-markets.  Already oil is down 1% and the Dow is back to 8,200 so one of those indicators is wrong.

    The dollar is diving 1%, back to 99 Yen, which made the Nikkei happy (up 3% in 2 days), that by itself can give us a 1% market push.  Gold not responding though, still $883, also down about 1%.

    Chart/Matt – This one is called Editgrid, Opt uses it for his chart.  It’s quirky but does a good job of putting up a live sheet.

    May Day/Cap – Yes, happy May Day!  All of our glorious Democratic comrades will join in celebrating the triumph of the worker over the capitalists.  In fact, we started our celebrations yesterday by taking over Americanski motor car company Chrysler!  8-)

    Cap & Merk – More relevant to this rally from Python:  "I’m not dead.  I’m getting better…  I think I’ll go for a walk… I feel happy…"

    Bear plays/DB – I think we should be looking for stocks that have come too far too fast.  There are a lot of stocks that have regained more than 66% of their highs from what was clearly an over-extended, unsustainable top.  If you remind me Saturday morning, I would like to make that a project as we could all do with some long-term bearish positions.  Like with XOM yesterday, it’s very simple to see that the earnings didn’t justify the price, there are many stocks in that area and the slightest downturn in the overall market could send them flying down.

    Ah, there goes oil, joining the party, back to $51 now.  Gold is testing $881 so not a bad play for the futures.  Each 0.10 move in gold is $3.32 per contract but I’d risk $100 to the downside ($878) looking for a test of $890 (+$270).

    Buffett saying we have been through the worst but still a long way to go.

    AAPL/Calch – Well, if you want to free up money I guess my main question would be, what do you need the stock for?  AAPL doesn’t pay a dividend and you can take 1/3 off the table by flipping to the 2011 $50 at $78, that ups your basis to $109 a share and puts $45 back in your pocket.  As to your putter and caller, you can stay well covered and wriggle your way up by selling July $105 puts for $2.60 and using that $2.60 to roll the June $110s to the July $115s.  That would be raising your call away by $5 and taking $45 off the table at no cost to you.  If AAPL keeps climbing, you can run the position up $5 per month this way and you’ll be selling Dec 2010 $190s against your 2011 $50s. 

    Events/DB – If no one cares that Chrysler is BK, I doubt GM will have much effect.   We already took a hit on C & BAC rumored to fail the stress test, be worried about what happens if those rumors are unfounded.  Fed auction I agree is a fantasy land and does concern me greatly (not that the others don’t but I’m pointing out the possibility that the market doesn’t care).  As to GS screwing up – I doubt it.  If they crash the market it will be on purpose.

    5% Rule/Ac – By jove I think you’ve got it!  Yes, it does work with any heavily traded stock but best with indexes.

    Dividends/Niten - Very valid, as Ajay’s link shows.  Boring but a nice income producer.  You WILL get called away just ahead of dividends, the person selling the call is using the same logic as you with less greed and is buying the 2011 call for $23 and will exercise on ex-dividend day (probably using a vertical cover) and then will get out and rebuy for the next period.  You can try it but that is my prediction.  You can sell a higher call, with some premium but my issue with that is, of course, that you would do MUCH better just selling simple calls each month rather than one big deep on per year.  

    In T, for example, you are buying a $25.62 stock to get a 6.5% dividend.  If you sell the  Jan $20 for $6.33, you drop your net to $19.29 and the $1.64 dividend becomes 8.5% so very nice.  If, however, you bought the stock for $25.62 and did a buy/write with the July $23 puts and calls at $3.95, your net entry is $21.67/22.34, just $3 more but you have 18 more months to sell.  Even if you can only sell calls, selling just the July $23s for $3.20 pays you .60 in premium vs .70 in premium on the 2011s.  If you collect an average of .30 a month in premium for 18 months that’s $5.40 in premium that dwarfs what you are getting in dividends. 

    Obviously, there’s more risk to doing it that way but you can always roll down callers if you get nervous and, if you stick to "safe" stocks you shouldn’t get too shocked.  Take a look at the drop T did have in October and March and think about what your plan would have been no matter which cover you sold…


  168. That was a quick $2.50 in gold so we set a stop at $883 and trail $1 from here up!


  169.  LOL Phil… hilarious
     
    Was that Goldman Sachs hitting the little "I’m not dead" man on the head?  
     
    I suppose that was Uncle Ben and esquire Geihtner riding by doing their best clippity-clop impersonation of riding a make believe horse… chuckle


  170. [...] Thursday morning the pre-markets were going crazy and I was very much against it, taking time to point out why we SHOULDN’T be over 8,200 at the open. My play of the day in the morning post was an SKF spread that took advantage of the low open and is working very well already. It only took 19 minutes of trading for me to call a top at 8,300 adding DIA $80 puts at $1.15 to our naked long puts, which ran up to $1.50 on Thursday (up 30%) and $1.70 on Friday (up 45%). SPWRA went so high on the spike that we flipped bearish, selling June $27 calls naked for $4 now $2.83 (up 29%) and we’re now ready to enter stage 2 (the bullish side) of that trade right on target. [...]