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Will We Hold It Wednesday? Industrial Production Edition

Whee, this is great!

Any excuse to take the markets higher and INTC was a good one last night.  We're thrilled because my 2:43 Trade Idea for members was "INTC Jan $17.50s for $1.28, speculative naked call with earnings tonight."  We don't do those very often but we looked primed for a pop and not much was expected from Intel, who were still expected to earn just 8 cents this quarter by the 44 analysts who are paid to follow them, despite the fact that they earned .11 last quarter (an 8-cent upside surprise) and had earned .28 last year in Q2.   That made the long call an excellent play since we were also willing to stick with them and add to the position if INTC had missed.   As it is, that should give us a nice 50%+ pop this morning! 

Other trades ideas from yesterday's Member chat were a GS put spread, AIG puts (and we can't wait for "earnings" on them!), DIA puts and calls as momentum plays, a YUM ratio backspread for the $5,000 Virtual Portfolio and a JPM bear put spread.  So we weren't overly enthusiastic in the run-up, mainly because we loaded up the truck in last week's dip with 18 bullish plays that I reviewed in the weekend wrap-up.  So we are looking for short plays to defend ourselves until we are sure what we have here is more than the proverbial "dead cat bounce" off our 33% retrace (which I discussed in Monday's post).  As I mentioned in yesterday's post, our upper targets to break the dreaded head and shoulders pattern are:  Dow 8,500, S&P 930, Nasdaq 1,825, NYSE 6,000 and Russell 510.  We're making good progress but nothing would be worse than failing this breakout and confirming the downward pattern so it will still be a tough week to get through, especially with todays manufacturing data, which we are concerned about.

David Fry INTC ChartI think David Fry summed it up for the skeptic's camp yesterday saying:

The AP headline today read: “Goldman Sachs’ $2.7B profit shows the firm’s prowess.” Good Grief! You have to hand it to Da Boyz, they know how to bedazzle Main Street. Anyone with a HAL 9000, their bad debts taken off their books, billions in public money to trade and most of their competitors (Bear Stearns and Lehman Bros.) eliminated should do just dandy. “Prowess”? My okole!

INTC did indeed have good earnings (if you throw out that pesky $1.8Bn monopoly settlement, of course) but they are a GREAT company and know how to adjust to changing markets.  That's the kind of investments we like to have in rough times and Intel did not disappoint with a 65% sales increase in low-cost, low-power Atom notebook processors.  R&D was down 11.2% from last year – why research very expensive new processors no one is ordering?  Gross margin was up as Intel slashed inventories, spending 4% MORE on SG&A than last quarter.  Again, a smart company clearing the decks by getting inventory out the door

So INTC having good numbers and outlook (they are a convicted monopolist, after all) doesn't make me think all of tech is fine, just as good numbers from GS don't make me think all is fine in the banking sector.  In fact, if my local savings bank were gambling with my money the way GS does, I'd be sticking a little more under the mattress instead!  I know it's ancient history but way back in November, our government had to step in and stop a collapse of the entire investment banking sector, including GS.  Now the idiots on CNBC are calling for Goldman to get back to $250, as if their model is virtually risk-free and deserves a 25x valuation.  Give me a break!  How do we go from irrational fear to irrational exuberance in 6 months?  Of course the media is to blame but have some filters people, this is embarrassing! 

Yes, yes, I'm the guy who called the bottom last week – get over it!  Just because I thought Dow 8,100 was oversold does not mean I think we should fly right back to 9,000.  This up and down nonsense is very dangerous.  I'm pleased that we are on the recovery track but runaway expectations can begin to cause damage as earnings season progresses. 

Speaking of runaway expectations, we got FAZ and FAS to cross at $45 and I will now give you the only sure thing you will ever get in the market – SHORT THEM BOTH!  That's right, the nature of an ultra-ETF is that, over time, they do not keep up with the undelying ETFs they track so shorting FAZ and FAS at the same price is neutral to start (one goes up, the other goes down) but, ultimately, has a great chance of paying on both sides.  I'll write more on this over the weekend but NOW is the time – short them both and there is almost no way you can lose and a good possibility you win on both sides (not a short-term play). 

You would think Asia would have been a sure thing last night but the Nikkei had a bad close, falling 75 points in the afternoon to finish flat on the day.  There was an attempt to bring the Yen back to 94 to the dollar but that failed and the Yen is now trading at 93.5, not at all good for exporters.  The BOJ held rates steady but that was no surprise and they also extended their quantitative easing measures – everything they can do to keep the Yen down and it's not working – perhaps they should try a stimulus program…  Everyone else in Asia had a great morning with the Hang Seng up 2%, Shanghai up 1.4%, India up 3% and the Baltic Dry Index jumping 4% to get back over 3,000 in style at 3,097.  Meanwhile, in the "all talk and no action" camp, China's foreign reserves grew by $177Bn last quarter to a total of $2.13Tn.  Guess who's been buying up all our notes?

Europe is off to the races, up over 1.5% across the board (9am).  Aside from INTC giving the tech sector a huge boost, EU new car registrations rose in June for the first time in 18 months.  Angus Campbell, head of sales at Capital Spreads, said: "The market is still very much in a state of flux at the moment, with both falls and rallies being short lived. The days of massive trading ranges from a year ago are well and truly over as investors attempt to build up some sort of base, which for the time being seems to be holding up well." Additionally, an investment outlook note by Morgan Stanley Smith Barney said expectations are for the financial markets to remain volatile over the course of the summer, as economic and corporate news is digested by market participants.  "It is likely that the equity market index lows reached in March 2009 will not be breached over the remainder of this year, and that the economic recovery which is beginning to take hold should be firming over the course of the third quarter and fourth quarter of this year," it said.

As we expected, the CPI was just as bad as the PPI, up 0.7% in June, also on high energy costs.  Core CPI, for those of you who don't use energy or eat food, was 0.2%, double the expected 0.1% by clueless economists, who have been looking for deflation where none exists.  Gasoline prices were up 17.3% in June and car prices rose 6.8% as discounts dried up.  Housing, which is 40% of the CPI, was flat.  The Labor Department reported that the Average Weekly Earnings of US workers fell 1.2% in June, indicating paychecks lost 3.2% to inflation for the month.  Gee, do you think that has anything to do with the poor Consumer Confidence numbers?

Industrial Production is a better than expected -0.4% vs -0.6% forecast.  Cap Utilization remained at 68% and this is all a nice improvement over May, when IP fell 1.2%.  Output for Q2 is down 11.6% annualized, a big improvement over Q1's -19.1% figure.  This bodes well for productivity figures (paying workers less and getting more production out of them) and we'll have to see whether it is reflected in the earnings along the manufacturing sector, which would be a nice surprise this season.  

Well the market has little excuse NOT to do well on all this sunny news so we'll be very concerned with any weakness.  We'll be testing 5% gains off our lows at around our upper levels and we will not be too impressed unless we see them broken AND held.  If we do get there though, we enter a nice bear squeeze territory that can take us quite a bit higher but, on the whole, I'd rather get there the hard way so we know we have a solid base, something that was sorely lacking the last time we went over the magic 8,650 line.

 


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  1. (posted this msg on yesterday article, and just pop todays one, so I copy here)
     
    Good Morning @ all
     
    All looks greeeeeeen.
     
    My parachute will take another hit. Witch makes me think this question: What ratio you expect on profit / loss ration from a green day on longs/parachute? For example, On monday (big bull day) I got nice profits from my longs positions (ex-chute). Now, the loss in the hedge side was 20% of those profits.  Some like a 4-1 win/loss in 5 trades.  Does this sounds reasonable?  Or was toomuch hit?

    INTC :  There is a nice (or not so nice) review on earning release by Karl Denninger on market ticket blog.  I deserves a reading. 
     
    DIA puts :  (yesterday)  yes you are right. I paid .03 more than my target.  Yesterday DIA puts, up that time, never broke the $.60 and we where reaching 15:30.  So my play was more a time-play, a kind of stick-save  or dive. At that time was ok for me to take the risk.  I was expecting a roll over OR closing close to that level.
     
    But you are dead right on doing a bad trade will reduce you win/loss ratio.  – Spider


  2.  Time to sell some calls against  GLD leaps.  This has been quite profitable  with gold’s volatility.
    Phil, would you cash out on yesterdays intc play or sell calls against it?


  3. GOOD MORNING,
    I would like to ask the same question as yesterday since I didn’t understand the answer. If I buy stocks or options and want to sell them the same day, I would be called a day trader and need a minimum of $25000 in my account. Is that true or false? Also, would rolling the option to a different amount also be considered as if I am a day trader? How would I roll it without selling it?


  4. miracleniss – Look at my response from yesterday.
    What you said is true (it’s an SEC rule, not something that’s imposed by your broker). IMO – Rolling would also be considered as a DT. Phil, et all can confirm.


  5. Miracleniss – If you buy and sell the same option or stock in the same day it is counted as a day trade. If you do not do this more than 3 times in any rolling 5 day period you will not be labled a day trader.


  6. Miracle:  I think that ANY transaction you open and close in same day counts as 1-day trade. And for accounts under $25K you have 5 day trades per week limit.  Check the SEC rule, pointed in a message yesterday.


  7. On the faz and fas, what is your suggestion exactly? buying puts?


  8. Phil – For FAS/FAZ, can you list out an actionable trade? Most brokers will not allow to short FAS/FAZ on margin (atleast ET wont).


  9. Phil
    Need some help here on DIA mattress
    I am long Sept 82′s @ 4.15- down substantially
    I am short- 1/2 cover with Aug 80′s
    what should be my next move? Roll up to Dec 84′s? Buy back the Aug 80′s and go with full cover on Aug 82" to finance the roll?


  10. Looks like GMGMQ will now be trading as MTLQQ. Still only bankrupt GM. No shares of new GM yet.


  11.  Phil, what is the gameplan with the INTC calls.  Up nicely!!!  Do you recommend action at this time??


  12. Day trader/miracleniss: If you just day trade once in a while, that’s okay.  You become a "day trader" and require $25000 (or is it $15000?) if you day trade x number of days in a row.  Sorry, I forgot what x is.  Do a google or contact your broker.  This is a regulation applicable to all brokers.  So, the answer should be the same from any broker.


  13. Miracle, my understanding is you are a "pattern day trader" if you buy a security and sell it on the same day 4 or more times in 5 days.
     
    This includes rolling. You cannot roll something without selling the old one and buying a new one. Rolling is nothing more than both a sale and purchase combined in a single order entry.
     
    If you breach the rule your account is a  "day trading account" forever, although you can apply for a one time only exemption or perhaps open a new account, but doing this frequently is hardly an answer.
     
    If your account is a margin account and becomes labelled as a pattern day trading account, you will not be able to engage in day trading with a balance less than 25K, nor will you be able to buy anything on margin.
     
    I think if you convert the account to a cash account, you will once again be able to day trade but a different rule Reg T will prevent you from making a profit on anything purchased with unsettled balances. This means if you buy and sell a stock on monday for profit, then buy another stock using the profit you will not be able to sell that stock until thursday (the day the first trade settles).
     
     
    Again, all my understanding. A call to your broker should be able to confirm and explain more.


  14. Good morning!  There’s no trade from the oxen group today. 


  15. I am new to navigating this site.  It looks like I’m not getting all the info on trades.  Watched my emails closely yesterday and the Alpha stocktalk and did not get  GS trade or YUM etc….  Can anyone help?
    I’m also not understanding the trade actions stradegy,,,,etc.


  16. GM now MTLQQ, that’s why they halted yesterday. 

    Parachute/Spide – If you are not making about 2x on the longs that you are losing on the short side then you are probably over-covered.  Did you sell front-month puts? 

    GLD/Jomama – Not with those CPI and PPI numbers.  Also, the talk of new stimulus and China’s insane amount of dollars means we could get a dollar flush but next week the covers may be a good idea.  Of course, Rule #2 works in this situation: "When in doubt, sell half."

    INTC – As I said yesterday, up 50% is plenty so a tight stop would be the plan here (maybe $1.75, now $1.85).  Of course, you can turn it into a nice income play by selling the Aug $18s, now .60 as that’s almost 1/2 off the table with 4 more months to sell so it depends on your goals.  It only costs .90 to roll down to the Jan $16s so collecting that .60 puts you in very good shape for a longer-term play.

    Day Trading/Miracl – You need to check with your broker, not us.  I think that is the general rule of thumb.  Any same day sale is generally considered day trading.  Give me a specific and I’ll see if I can find a synthetic roll.  Perhaps, if this is an issue, avoid playing short-term trades.  In the $5KP I am trying not to day-trade but sometimes it’s just stupid not to make a move on the same day. 

    Speaking of the $5KP, YUM getting crushed below $34, Aug $35s at $1 and $37s are .40 so take out all 6 ($240), which we sold for ($690).


  17. S&P at 920       DIA put  time?


  18. FAZ & FAS – I am suggesting real shorts as the most effective way to take advantage.  The premiums on the Leaps are ridiculous and you can’t pay double premiums and expect to do well,  You can short them for $45 and sell the Jan $30 puts against both for $25 so you are in for net $20 on 2 $45 shorts.


  19. Why is DELL being such a dog? Seems overdone?


  20. Quick question guys, if I sold ERX 26 Calls and ERX 27 puts in the same month and the stock landed in between these strikes at expiration, how would this be handled at settlement?  Would you purchase the stock at 27 and sell at 26?  I wasn’t around to manage the naked calls I sold and I was trying to think of ways to play this.  For now, I’ve purchase the stock outright and will take a .20 loss as the stock could still run for a couple days which will put me even more underwater. 


  21. VIX falling off a cliff…..


  22. Phil, on FAZ/FAS play I show 2 different sets of puts for the Jan 30′s.  What’s the difference between the 2 besides price?


  23. Chute/Mattress:  Im making  about 4x  so looks like I’m ok. Today is a 3x.  TY – Spider


  24. Phil, how are you shorting FAS…FAZ…..having problems with availability at 2 different brokers….


  25. ET won’t short the fas/faz. I had them exactly at 45.20 earlier and ET failed to fill the short request.


  26. Phil – What are the upside levels to watch today? Dow already at 8500 now.


  27. DIA spread – The $84 calls hit $1.35 so mission accomplished.  The $83 puts are just .15 and that’s extra profit now so best to cash in the longs and keep the free trade as they should hold .10 very well and, if we drop back down you luck out

    FAZ/FAS/Trad – You can make a synthetic short on each with a put spread but I hate the premiums you pay on the long end.  I guess you can take the 2011 $75 puts at $44 and sell those Jan $30 puts for $25 as it’s the same concept

    GS $150 puts down to $1.54 while Aug $145 puts holding $4.90 so not bad so far on that spread.

    Mattress/Pstas – My bad, I should have reminded everyone that we needed full covers (or at least you should have been playing the front-month upside DIA plays since you were already covered).  Your cover was not aggressive enough so I take it you didn’t collect much but for sure close them out and roll your Sept puts, now $2.30 to Dec $84 puts at $5.50 and sell 1/2 the Aug $84 puts for $2 and keep a tight stop (25%) on the Aug $80 puts.  You are up .50 (per long) on the 1/2 sale and collecting another $1 on this one so that pays for 1/2 your roll to another 3 months and $2 up – not so terrible

    Welcome DrRobin!  Well all trade ideas start here.  Some become alerts and make sure you are signed up for alerts HERE.  The SAlpha Stock Talk is also a copy for the $5KP of what I say here (and there is more detail here) but it’s also a backup for if this site goes down so EVERYONE should click on my photo link to follow me HERE.   Once you do that, you should see me under "Stock Talk" on the main page at Seeking Alpha.  Just to be clear though, there is NOTHING that I say in Alerts or anywhere else that does not originate in Premium Member Chat so these daily posts are the absolute best places to be.  As to orientation, there is a "New Members Guide" at the top of this page, start there. 

    DIA puts/Atlas – You are a braver man than I am if you do that!  Actually, we want to see if we can break 8,500 of course and 930 is the magic number on the S&P.  Nas now going for 1,850 and MUST hold 1,825, SOX are up 4% and need to take out 280 to keep going.  NYSE must hold 5,900 and needs to get over 6,000 and Russell is at 507 but had huge problems at 508 and 510 before so you can speculate short here, the $84 puts are .32 and have a delta of .28, which is huge as you double up with a 100-point dip so good risk/reward but the risk is a lot the way things are going.


  28. FAS/FAZ – Even ToS shows them as HTB


  29. TDA filling FAS/FAZ shorts with no problem.


  30. Phil – on the FAS/FAZ – the premium I see is only around $12 for the two.  Can you doublecheck.  Are you looking at any non-standard contract ?  Thx.


  31. FAZ & FAS -
    Unless I am making a mistake somewhere, you can also short the stocks and buy 1 each of their respective Jan $45 calls at $12-13-ish, for a total of about $62-64 credit per -100 FAS/ -100 FAZ/ +1 Jan 10 FAS $45 / +1 Jan 10 FAZ $45. The calls backstop any upswing and you’re not on the hook to buy anything like the puts do. Not sure the premium to be lost on the long calls would matter much in the overall profile, since were not expecting any sort of flatlining there.
    I was expecting the calls backstop to prevent margin requirements, but apparently it is not so for me with IB (but then I don’t have portfolio margining). Too bad or I’d get a few in.


  32.  Thanks for INTC.   Out at $1.80+ before 10am.   Schweeeet.   Got a GS questio – by sep post.


  33. Looks as though the Dow and SP might be leading us here.. they are significant resistance points.  Can they pop through?  I’m thinking they will and then promptly reverse themselves.. just to f with the technical traders!


  34. My August 125 GS calls are up about 3% since I started this GS foolishness day before yesterday (I think.)  Was just planning on letting my July 155s expire worth and pocket all the premium.  But I traded these in an account where my options level tops out below naked shorts.   Its still a winning play if I sell and buy back – since I can’t leave the shorties open after I sell the 125s.  Any thoughts?  Just pocket the net profit and go?


  35. As part of a two-leg hedge (last week I think,) I’m still sitting on DIA September 82 puts.   I think I legged out the gainer.   Should I sit tight?


  36. VIX is now moving in the other direction (was down > $1).  Flush coming???


  37. Phil – I only subscribed to the Premium service yesterday and missed the Intel call (great call btw) but with my luck, I managed to buy the Yum $35 calls at $2.20 and was waiting too long for a good price ($1.15 I think) to sell the $37 calls at when the market closed.  So I’m down big on the Yum calls.  Would you suggest getting rid of the Yum calls at the current price ($1.05) and taking the loss or waiting?
     
    Also, I made the mistake of holding the DIA puts from yesterday.  I had both the $84 ($1.14) and $83 (.65) and didn’t want to burn two day-trades on something that would net me only a couple of hundred $.  Now that I’m down a couple of thousand, I feel differently LOL.  What would you suggest doing with those DIA puts?

    Lastly, in case you’re wondering, yes, I did go big into the Dell calls (despite the fact that you warned it was speculative) and might be the reason why it didn’t work out.


  38. The performance of this GS spread is very very instructive, thanks Phil!!!
     


  39. On the FAZ puts, the Jan 2010 30′s and the Oct 30′s are both the same price.  Would the Oct put be better than the Jan?  Also, why are there 2 different options for each strike price with drastically different prices?


  40. GS – I’m out.  DITM Aug 125 was huge.   Even against buying back the July 155s to clear the trade.   Can’t leave the profit on the table, right?  This was my trade to recover from an earlier GS put mistake, I got what I wanted and … greed is death.


  41. Phil-
    I am just sick.  I let go of some July DIA $85 calls when I had doubled them down to .70.  I couldn’t take it any more last week when they went down to .14 and let go of them.  I figured better to have a little left than nothing.  Lost a ton of $.  Today they are at .76.  My timing seems to be an issue as I also let go of those USO puts when oil never seemed to be going down.  Can you give some advice on patience?
    Celeste


  42. Re DELL
    Problem is rumours that their credit book is a real mess; they financed an *awful* lot of their stuff over the past few years and apparently threw out approvals like cookies – and now they’re feeling the pain. Don’t know how accurate it is but personally think there’s a lot better options than Dell.
    —--
    Still enjoying the site Phil, but under a new IT security regime Javascript is disabled so I can’t post unless I’m away from office! To be fair, disabling it and Flash seems to have improved stability & speed significantly… And you guys don’t have to hear my whinging Bear growls: win/win  ;)  


  43. yet, another silly computer driven day.  push, push, push.


  44. Technical question: how do I follow chat without having to refresh my browser every time I’m looking for updates?  is there a way to "stream" it?  Thanks, DS


  45. dstillwe,
     
    Reload Every or similar program if you are using Firefox…….from their description:
     
    Reloads web pages every so many seconds or minutes. The function is accessible via the context menu (menu you get when you right click on a web page) or via a drop down menu on the reload button .


  46. DELL/Steve – Given INTC’s sunny outlook, DELL looks even more pathetic in their performance.

    ERX/Smasher – Well they are coming on strong now!  You don’t want to let yourself expire in the money on the put side, either roll them to Aug or buy them back before then.  Right now, the $27 puts are just .80 so that’s got to be pretty good but still a lot of premium.  The $26 calls are $1.50 and only about .40 in premium left there but still, $1.20 in premium on the two positions so waiting for that to burn off and rolling to Aug (or buying them out on Friday) is probably the best course.  You don’t lose on the stock unless they go under $25 so, on the whole, you want this to just go up and wipe out the putter and call you away. 

    FAS/FAZ/SS – You are right, there are strange strikes so be careful about picking them up.  I’ll see if I can find out which ones are real.

    FAZ/FAS/Oncmed – I’m not getting them either, very hard to borrow (and for good reason!).  TOS says to call the trading desk to arrange shorts.   

    Upside levels/Trad – See previous comment block, last one. 

    FAS/FAZ – OK, the "real" contracts are not as high as the ones I looked at so The game plan would be to either short the stock and sell the Jan $40 puts for $10ish, so in for net $35 on the $45 shorts, or just hold them naked short, of course.  You can also do a synthetic short with the bear put spread of the FAZ Jan $60 puts at $27, selling the Jan $40 puts for $12(net $15 on the $20 spread) and the bear put spread of FAS Jan $60 puts at $23, selling the Jan $40 puts for $10 (net $13 on a $20 spread).  If all goes well, you collect $40 against $25 laid out

    Oil Inventory down 2.8Mb, gasoline build of 1.5Mb and distillates up 600Kb.  This is the first net draw in a month and could boost oil higher.  Refinery utilization was up 1% to 87.9% so demand coming back somewhat, should boost OIH and XLE and keep the rally going.


  47. CNBC sinking to new lows with their porn specials and "natural male enhancement" ads.


  48. celesteschein
    Don’t feel too bad. I did the same and worse. They play with time (and your nerves) to lower the value of the options. Then you finally get rid of them and boom, it shoots right up or down. Happened so many times to me i can’t even begin to tell you. I have a feeling that they have a count of how many calls and puts are out there and wait till people flush them out and then after they made all that money, they shoot them the other way. My sympathy goes out to you. If it will make you feel any better I can tell you that I lost almost  20 grand in only four months. As phil always says, take it easy, go slow. I can also give you some advice on some big mistakes you shouldn’t make. Good luck!!!!!!!!!


  49. I don’t understand how there are "real" and not real contracts for a strike price on FAZ/FAS.  I actually sold a FAZ Oct 30 for 25.40.  This is the higher of the 2 options for the same strike price.  If this is not the "real" option, what happens to it?  Can anyone help me to understand?


  50. re oil, check out ICE. Any trade here?


  51. Phil
    I was the one that made the big mistake buying calls instead of puts on ice. You told me to sell half which I did. I still have the other half which is 4 calls for aug at 110. They seem to be moving up okay today. My current value on them at the moment is $640. Any advice? Please don’t ask me to roll them because I just don’t know how. I only know how to buy and sell ,and even spreads are a challenge. Thanks


  52. FAZ is now below $45 (43.60); still short them at $45?


  53. short QQQQ’s (etf) and DIA 86 calls.
    Q’s not the most exciting position to take … SPY or DIA or a stock would probably be better.
    Basically lightening up on longs and adding shorts into this expiration week "recession is over" pump.
    Hey INTC revs are only what, 20-25% below last years ?
     
    This is of course FMD conditions, always dangerous to short into that.


  54. Phil,
    what you think of the FED minutes coming up?


  55. FAZ/FAS/Fab – Just be careful selling naked calls as a 10% up or down move in financials is a 30% move in FAZ or FAS and that can happen fast if they stimulate something.

    Oil could not get anything going off those inventory numbers and those were about as good as they could expect so be careful.  Watching OIH at 2.5% line ($97) and XLE at $47 for sector breakdowns. 

    ICE back to $92.50, good to short if energy sector buckles.  Oil at $60.50 again.  Gold at $940 so yay there!   CME kicking ass so that bull spread looks very safe. 

    INTC/Dstill – Congrats.  GS – Why not stick with the plan and let the premium expire on the caller.  At worst, you still are net $30 ahead of your caller at $155 and for now, the caller is just protection for you.  Ont he DIA puts, same as 10:12 comment to Pstas.

    VIX/Pharm – Good call, suspicious VIX activity could signal a sell-off.

    YUM/Conf – That really sucks.  NEVER go with half a trade, better off getting out into the close.  I would DD at $1.05 and lower the basis to $1.63 and hopefully recover some on a bounce.  Earnings were not bad, it was outlook that killed them and if the market is rallying then the assumption will be that management is too pessimistic and buyers will step in over time.  On the DIA puts, those are pure momentum trades and never to be held overnight unless we specifically go for it.  You might get a chance to go for it later if we sell off but right now the market is way too strong.   Are you still holding the $83 and $84 puts?   One way to salvage (if you have the margins) something here is to buy the Aug $81 puts for $1.12 and sell the $85 puts for .66, which is more than the $83 and $84 puts total.  If the DIA goes down, you will have (assuming you sell 1/2 cover of all DIA puts you hold) a downside delta of .67 vs your putter’s .47 so no downside worries and you already collected .67 rather than cashing the $84 and $83 puts for .45 so 50% more than you get now and maybe on Friday you can get some nickels to bring you up to .75 or so back. 

    GS/Steve – great, that’s the point of those things!

    GS/Dstill – Taking profits is good!

    Patience/Celeste – Sure, stick to spreads for now until you get used to timing.  Don’t make any play until the contract falls 50% lower than where you thought of buying it, then do a careful entry.  If your timing is "always" wrong, that’s actually a good thing, it means you see the inflection points but simply take the wrong action when you hit them – that is something you can practice your way out of but take the PRACTICE part seriously and trade lightly while you work on it.  Baseball players practice for years in the minor leagues before anyone lets them swing a bat or throw a ball in the majors but many new option traders want to risk it all in their first month – that just makes no sense!


  56. I"m hoping that we have just topped for the day.  If not, I will be forced to go long.  Ugggg!


  57. Phil,
    will we sell back those YUM calls that we bought back earlier?


  58. Re AIG in your morning post, "can’t wait for earnings" or something to that effect. I see that’s Aug 3. So the plan is to handle the puts, maybe grabbing more and covering as it moves in its track, and expecting a drop in response to the report?
    thanks for being patient with all our questions.


  59. I am getting sorely tempted to buy back the caller in this GS spread. If I can get it off for .5 it has done 85% of its work…am I trying to adjust too much?


  60.  Re. autorefresh, anyone having any luck with safari???


  61. Sorry – I’m a roll neophyte.  "sure close them out and roll your Sept puts, now $2.30 to Dec $84 puts at $5.50 and sell 1/2 the Aug $84 puts for $2 and keep a tight stop (25%) on the Aug $80 puts. "
    so does this mean my first step is just selling the Sept 82s and buying Dec 84?  (ps – i already cashed the related puts)


  62. ssdirk – you bought/sold a 10/100 option – a NonStandard option.  The strike price is actually 100*30 (I barfed when I realized what I had sold :-) ) andthe number of contracts is 10 – I just made the same mistake.  Pls. check with your broker.


  63. Is CAT running out of steam or will it drop due to pay out of dividend? Phil, you mentioned before that it would have a hard time getting over 35, but things may be different now.


  64. Oh, maybe you already answered that


  65. OMG! On monday opened a position on FOE and because was not moving as expected I reduced to half.  Is a small position and a speculative one. Today 20% up.  Does any know / like this company? Probably is a short squeeze. I will look to reduce or close, unless someone points a  true valor on this FOE  – TY Spider


  66. FAZ/FAS Bear Put Spread play: I have configured the FAS side as (Buy Jan10-60.00 puts at $23) and (Sell Jan10-40.00 Puts at $10). Is this correct


  67. FAZ/FAS Bear Put Spread play: I have configured the FAS side as (Buy Jan10-60.00 puts at $23) and (Sell Jan10-40.00 Puts at $10). Is this correct


  68. FAZ/FAS Bear Put Spread play: I have configured the FAS side as (Buy Jan10-60.00 puts at $23) and (Sell Jan10-40.00 Puts at $10). Is this correct


  69. Dear Phil,
    what do you recommend for ICE bull spread?
    I’m still keeping my GOOG 12/09 530 call at $6 cost…still keep it after earning release?
    thanks :-)


  70. PharmBoy – followed you into HEB yesterday at 2.02. Thanks.


  71. Ok, went long but am short again with QID.  Gotta believe we’re turning here.  If not, will try again around 1:30.


  72. FSLR looks like a great short here, before earnings next week.
    QCell warned yesterday, and FSLR gets a large amount of its $$ from Germany.   The EU is not having as much success getting out of the recession (blame the socialists!)
    FSLR’s investor’s meeting painted a pretty troubling picture, at least short term.
    Also, major put spread buying on FSLR last week.
    I’d sugget open the same put spread:   buy the Aug $125 puts, sell the Aug $115 puts.
    What do you think??


  73. This is just absurb how they are going about maintaining higher highs and higher lows.  Down to the penny.  Wouldn’t want to tip their hand that we aren’t going to go up forever.


  74. Phil – Thanks for the reply.  Yes, still holding the $83 and $84 puts.  The part about buying Aug puts makes sense to me but wouldn’t selling the $85 July puts be a huge risk if DIA starts dropping?  For example, if DIA were to drop to its low for the day (and that meant the July and August Puts would go to the high point of the day), the value of the Puts I sold would double while the value of the Puts I bought would only go up by ~20%.  I’m sure I’m mising something…not doubting your advice…just trying to understand it.


  75. Hey Anton!  Glad you could escape Big Brother and post…  Good point on DELL, they really go after those new, small business accounts that have to be poison this year.  If you have an IPhone you can post you know, maybe other PDAs too….

    Streaming/Dstill – I just hit F5 whenever I want to see the next batch of comments.  I think in the New Member Guide there is a point to a couple of auto-refresh programs but I like to control my own.   Thanks Ocelli! 

    CNBC/Cap – All the media are beyond desperate for ad dollars.  I can’t believe they just put RICK CEO up and gave him a block.  Soon they’ll have topless girls in front of the Nasdaq charts….

    FAZ/SS – The more expensive options are based on, I think, 10 pre-reverse split contracts so you are, in effect, paying what it costs to short 10 units of FAZ Oct $30s for the old, pre-split price of $7 so $23 in the money (roughly).  I’m not exactly sure but it’s something like that and those options should be avoided due to the obvious confusion they cause. 

    GOOG kicking ass! 

    ICE/Morx – No trade with the market flying, tempting though it may be.  At $100 I’d maybe go again.

    ICE/Miracl – Frankly, I don’t remember why I said to sell 1/2 but it depends what day I guess as it’s been all over the place.  It’s all up to oil for ICE, if they break higher than $62, Ice can go back over $95 but it’s a tall order and I very much doubt you’ll see $110.  Of course, you still have a month so you can let it play out as long as the market stays strong. 

    FAZ/Sun – Not so far down as we’re playing for, hopefully, both of them to be below $30 in Jan.

    Shorts/Cap – Very dangerous at the moment.  They are testing big breakouts here with Dow over 8,500 and S&P touching 925 and RUT 510.  SOX popped 280 so not a good short on the Nas if they hold it (still miles down off the highs).

    Fed minutes/Maxt – Well what are they going to say?  They are still concerned about the economy but not about inflation so they are already wrong based on CPI/PPI but the read is going to be that they stand ready to put more money to work so more rally fuel, not less most likely.

    $5KP – Cool, YUM coming back nicely!  No selling again Maxt, we in the play for net $1.08 and the Aug $35s are $1.30 now so that’s a goal at 20%, why mess around with it.  I think we can do a bit better but I’d be happy to take $1.50 off the table today

    AIG/Morx – Notice "earnings" was in quotes as I expect them to be a gaping negative hole that can hardly be described as "earnings."  I don’t see the need to do anything, I’m very negative on them and expect to be justified.  

    GS/Steve – 85% is our official trigger on expiration week unless you are almost certain they will expire worthless.  Of course if they go back to 75% you should take them out anyway. 

    DIA/Dstill – Don’t worry, you only learn this by practice.  Actually first step, if you have margin in an up day, is to sell the additional cover.  The roll to the December puts only gets cheaper as the market moves higher.  Since you had a 1/2 cover, there was no harm in covering the other 1/2 with the higher puts and putting a tight stop on the lower puts and THEN trying to get an advantageous roll.  The MAIN idea is to have the puts you sell finance a good portion of what you spend to improve your long puts.

    CAT/B1 – Dividend is not so big (.40) that it’s going to kill the stock.  I still think $35 is a good target, it’s just getting there faster than I thought! 

    FOE/Spider – they are in a good sector for a comeback but nothing more that I see.  Greed kills, when in doubt, sell half, yadda, yadda…

    FAS/Sun – Yep, $13 on a $20 spread that’s $15 in the money is a good start.  Possibly if there is a strong move against you (FAS goes to $50+) that we think is reversable, then maybe a chance to take out putter for 1/2 price to improve positiion down the road. 

    ICE/Lafitu – I do not recommend a bull play on ICE.  They may get regulated out of existance.  Just because people forgot that today doesn’t mean it won’t happen.

    GOOG/Lafitu – Dec $530s not getting much action considering the nice move in GOOG.  Mostly the falling VIX is to blame, which sucks.  Of course making $1 on $6 is nothing to sneeze at and if we go up $2 I don’t think it’s worth risking earnings

    Nas not holding 1,850, watch S&P at 925 for fail and those two can let us short the Dow below 8,550.  I like the DIA $85 puts for .50, out if 2 of 3 of those watches get broken over.


  76.  Feels like there is gonna be a flush before options expiration?


  77.  GS making a good technical breakout…. breaking over the chart double top and approaching first resistance test at 155
     
    AIG looks like the OE pin may be located on the July 14 strike
     
    SPY looking strong easily taking out 911 resistance level and the 50MA


  78. Topless girls/CNBC – really ? I have moved over to Bloomberg, perhaps time to move back to CNBC :-)


  79. VIX back to even….not good


  80. UNG – what’s wrong with it!


  81. Thanks re rolling.   Follow-up: I have a pretty big chunk of September 82 puts.  That’s all I’m sitting on now.  So sell what puts and roll what?  (I won’t bug you again on this).  DS


  82. Any ideas on shorting GS? Merk what are your plans if it fails ???.


  83. FSLR/Strat – Much as I detest them, they are a dangerous short here.  The company is notorious for calling figures written in crayon on a napkin "firm orders" and they usually sugar-coat the outlook so I’m surprised to hear the investor’s meeting was "troubling."  I think, on the whole, I’d rather go with the Aug $155 calls at $9.50 and the Aug $145 puts at $10 and sell the July $150 puts and calls for $6 to lower the basis and then keep the spread at, hopefully, $14ish, hoping for a big pop one way or the other on earnings (maybe selling the outside puts and calls for Aug as you can get another $6 for a $10 spread on each side). 

    Matt – Are you not buying the rally?  8-)

    DIA/Confiz – No because if you have X total puts and you buy X aug puts and you sell X July $85 puts, your total delta is higher than the puts you sold.  The idea (and it was a great one as those $85 puts are already down to .50 while your 2 puts kept .32 of total value) is to let the $85s expire worthless and, if things look very strong, you can take out your X puts, maybe for .20 which, added to the .67 we wanted to collect would have been .87 back on your July puts, leaving you with the naked Aug $81 puts (still holding $1.07) which could catch a nice pullback or you can sell lower puts to cover or just get out.   Yes, if the Dow dropped 200 points back and you didn’t buy back any of the puts you sold on the way down then you would be in trouble but that would be silly wouldn’t it?  If you stop 25% of the puts you sell when they go up 25% and another 25% when they are up 50%, you would stay out of trouble.  This is advanced stuff but that’s the best way to salvage such a horrible position.  Of course it’s late now and I just called a short on the DIA so that play is now void in favor of doubling down on the $84 puts and crossing your fingers (or takingt the $85 puts at .50 for yourself). 

    Friggin SGR at $26.90 today!  I always say don’t regret taking proift but the reality is:  Arrrrrrrgh! 

    UNG/Fab – Not looking good is it.  Weather has been mild so low A/C usage and money flowing into oil at the moment (up to $61). 

    DIA/Dstill – Yes, if you are looking for long-term protection then sell 1/2 Aug $84 puts, now $1.95 and roll to Dec $84 puts, now $5.30.  This is not a play you will win today or tomorrow, it’s a play that wins when the Dow drops 300 points, which it may do between now and December. 

    GS/Jamie – Good spot to speculate lower, easy out if they break $155.  You can buy the $160 puts for $5.70 and sell the $155 puts for $2.15 and that puts you in for $3.55 on the $5 spread.  Deltas are off by .30 so you shouldn’t lose too much if GS breaks over and you want to ditch it so figure .30 downside vs $1.50 upside on the play is not bad risk/reward for 2 more days to expiration.


  84. GS short calls off at .55, I am now naked short GS and scared :)


  85. Right.  I get its a longer term play.  Just losing track of legs etc while multi-tasking.  thx for your patience.


  86. Phil, are you buying this rally or do you think we could be heading lower for the rest of the day? Have finally gotten back to positive territory on GE and wondering if I should take it and run or what for it to go higher. Same with CAT.


  87. In DIA 87 Dec 09s P (1/2 position).  VIX still rising.


  88. I meant "WAIT for it" not "What for it"


  89.  GS breaking over 155…. chuggah chuggah chuggah… woooo woooooo… yeeeeehaaawwwwwww


  90. MrM – feeling very confident on the HEB play.  H1N1 is spreading like wild fire….and the agencies around will do anything to put the panic to rest.  Looking for 50% to 100% on them.


  91. I love the Republican talking point that "Americans don’t want the government between you and your doctor."  As if we love the HMOs who currently occupy that position!  I guess that logic means we don’t want the government between us and the police or between students and the schools or between us and our mail either – what idiocy! 

    Big push to break out now.  Nas retesting 1,850, S&P back over 925, Dow touching 8,550, RUT 510, SOX 280 and NYSE over 5,950.  Those DIA $85 puts are still .50 and if we fail this breakout we should get a nice pullback, maybe 36 points (20% of today’s gain) back to about 8,500 to test that next

    GS/Steve – FEAR THE MASTERS!

    Rally/Sthom – I think we need a healthy pullback here but it would take a 50% drop before we break a bull trend.  Fed is the wildcard at 2 pm.

    Money coming out of bond – maybe staging for a big buy-in if we break up from here.


  92. shorting GS is betting against God Himself (whomever that may be for you)
    GS controls this market and will do so till the govt finally puts some controls over them.


  93. FTSE and CAC finished right at 2.5% rule (still bullish).  DAX was up 3%, finishing at the day’s high. 

    We are up about 2.5% across the board.  SOX can’t break that 4% line, transports are lagging, up just 1.1% and oil is up so what the hell do these guys want (maybe an actual recovery and not just rhetoric?)??

    Dollar is down nicely but gold not breaking $940.  Oil testing $61.50 with 2 hours to NYMEX close. OIH up 3.5%, XLE up 2.8%. 

    This is a commoditiy-led rally, which is not good as we really needed rotation, not more of the same BS we had in May. 

    QID was $34.50 on Monday, now $31.25.  $31 calls are .60 and are very tempting.  Can’t go now as GOOG, AAPL and BIDU are all making new day highs at the moment (Nas just broke 1,850) so all put plays are off at the moment but this is one to watch if we think we see a top.


  94. Phil – Would it be accurate to say that the values of July DIA puts (and all other July calls and puts actually) will drop by 33% from the end of the day today to tomorrow……assuming there is no movement in the underlying……based on the fact that the time value will decrease from 3 days to 2 days (33% drop)?


  95. stratdaddy: The Gov can’t put controls on GS; GS is the Gov.


  96. Phil, need a recommendation PLS.
    I went bullish on Ag some days go, on Bunge (BG):
    Bought OCT $60 calls cost $4, now $8.00 And Sold AGU $60 calls at $2.35, now $6.20
     
    Today 6+ jump was too fast and didnt covered the short calls. What do you suggest for a roll.
    BG earnings are on 23 Jul BMO.


  97. I’m going for it on the DIA $85 puts at .48 and the QID $31 calls at .60 ahead of Obama and the Fed.  Just a craps roll but could be fun if something disappoints the market after a 400 point run (5%) since Friday

    DIA/Conf – Well the out money ones tend to hold .05 or .10 but the higher-premium ones tend to get hammered. 


  98. FAZ/FAS: My "what-if" sheet sez that if I short at $45 and sell Jan10-40 puts and the stock is trading at $39 I will make $1500 per contract. If I do syn short I make $700 does that sound correct?


  99. On the health care plan about to come out, PBMs should benefit nicely.  MHS was a play I mentioned a month or ago (made a nice profit on the run up to where they are now), but I am now looking at CHSI.  Their rev. growth is larger than ESRX and MHS, and they have NO debt.  Earnings are Aug 5….options are lightly traded as they do not get much coverage from the big boys.  They need to get through the upper resistance at 25 or so (what doesn’t right now on the upper resistance.  I will keep on the radar for a pull back.


  100.  Hi Phil,
     
    I’ll be going on vacation soon for a month and missing the August opex week.  In writing covers, for regular premium, should be nothing wrong with writing Sept contracts now or next week (for the ones that don’t have Sept right now) right?  Also in moving some of the long option positions I had for Sept (DIA puts, GLD calls), I should be moving them to Dec?


  101.  Just to clarify the previous post, anything I have pure stock for, I’m still writing Aug contracts as I don’t care either way on assignment or expiring worthless.  So it’s mostly about covers against leaps.


  102.  Phil, do you recommend adjust GS play at this point?  Short 4 July 150 puts / long 5 Aug. 145 puts??


  103. BG/Spider – So you bought BG and sold AGU to cover?  Well, you are about even on the trade so no big deal.  I take it you think AGU will have weaker earnings.  I would take the BG money and run with a 100% profit and hope for a pullback on AGU, I don’t get your pricing as AGU is at $38 on my charts.

    FAZ/Sun – Sounds right because you are paying all that premium if you buy the long puts.

    CHSI/Pharm – Very good play.  How about the Dec $20s at $5.80, wiping out the premium by selling the Aug $25s for $1.20?  You can do a 4/5 sell to give additional upside.

    Sept/Chen – Nothing wrong with it.  Don’t be greedy, covers should be conservative if you are away for a month.  Yes you should move DIA to Sept but the gold calls you should cash if you are well up as there is no way you can cover them properly unless you intend to make it a Leap with calls sold (and even then, dangerous if you can’t adjust).  The problem with gold is you can get a $15 move either way on GLD overnight. 


  104.  latter part is current position.!!


  105. Sunco1, it could be argued that GS is stronger than this govt. 
    Certainly less in-fighting.    Certainly a better balance sheet.
    "DON"T MESS WITH THE GS"


  106. IS THERE ANY PERSON LEFT WHO THINKS THIS MARKET ISN’T COMPLETELY AND UTTERLY CONTROLLED BY them?  How can you flatline a trillion dollar market after a huge spike overnight without utter and complete control over it.
     
    So who is ready to blast off and who is ready to drop?  1:15 should bring a clue…


  107. Sorry , I misspelled August. All options are Bunge:
     
    Bought  1x Oct $60 calls cost $4, now $8.00
    Sold 1x Aug $60 calls at $2.35, now $6.20
     
    I’m even, actually with a little profit. Just thinking on take some advantage of today move.


  108. Btw, would anyone sit down to play Texas Hold’em with the National Champion?  No, that would be silly!  But then why do we try and play a market that is controlled by the equivalent of a champion poker player?  It’s silly I say, S-I-L-L-Y.


  109. ..because they let us play.


  110. Phil, in $100KP I am still naked DBC Calls (you advice was to take $1 for Aug 21 callers) – would you cover here at .90 pls?


  111. confirmation – CHSI – buy (?) dec calls?  4/5 means that if you buy 4 calls you sell 5 puts?
    thanks, i had a wonderful time.


  112. Well, VIX goes up slightly and the market is going up.  That’s not good for Short Strangles.  Looks like the bulls are running hard again, so I’m rolling up the short PUT (more bullish) and use the credit to roll up the short CALLs also (getting out of the bulls’ way).


  113. Yep he’ll really Buck up health care if this plan gets approved…Oh my!


  114.  Matt, I understand your point of view but does it really matter if the market is "controlled" or not? I think we just need to follow direction, and profit from the movements. It is "flatlining" right now because it is stiting at R3 on /ES. There is not really much more to it.

    I don’t think there was a concerted effort to flatline it here, just a lot of traders reading the same charts. But even if it was the case, how does it prevent us from making money?


  115. Morx – CHSI -  buy dec 20s (5 of ‘em) selling Aug 25s (4 of ‘em).  all calls.


  116. Not to be pesky, but reasking a question of GE and CAT. Have they run their course or do you think there is room for more upside.


  117. Thoughts on buying USO July $33 puts @ $.35 with the expectation they’ll hit $.50 either today or tomorrow.  Oil has to pull back.  As you’ve said many times, there’s no reason for it to be this high…other than GS targets.


  118. i think Dennis Gartman has the best reads on Oil and commodities.


  119. Hey Phil earnings play setups… BIIB, JPM, XLNX, and HOG
     
    Got any interests or ideas in those names for today to a payoff tomorrow??


  120. btw, there’s absolutely no reason for RIMM to be under performing AAPL.  
    I’ve sold the RIMM Aug $70 puts.


  121. GS/Sgrun – Not now as the July $150 puts are just .48, not enough to be gained there and I woudn’t sell the $155 puts for $1.82 as it’s too dangerous.  You can go with the Oct $145 puts at $8.38 and sell the Aug $150 puts for $5.35 – that’s a nice put spread!

    Market hanging very tough coming into the Fed – be careful with bearish positions, looking to me like they want to pup us another point or so from here

    BG/Spider – Ah, that makes more sense then!  So what’s the big deal, you are even at the moment and plenty of time to roll.  You can’t react to one-day moves or you’ll just churn yourself to death.  Your long calls are well ahead with lots of protection, that’s all.

    Champion/Matt – The difference is you don’t have to play against the champ do you.  Rather than take a contrarian position and denying that the markets are being manipulated and defended, we go with the flow and bet they will be saved at 8,100 before the H&S pattern takes hold.  You can draw all the charts in the world but it doesn’t mean a thing if GS waves their magic wand and says up.  The trick is not to read the squiggly lines but to figure out which way GS is betting and go that way – not against them.  When GS said $85 oil, I wan’t betting against them going short, I was assuming they said it so they could dump out of their own posiitons and then let it fall.  What do they care if you remember they made a "bad" call on oil when they drop $2Bn to the bottom line for the Q because they sold all their oil at the top?  Ilene was tracking insider selling all during the run-up so we knew it was BS, no matter what the chart said and no matter what the TV people say.  If the game is fixed, it should make it easier to win, not harder.  GS isn’t out to get you personally, you just have to get on their side.

    DBC/Steve – No, I would not cover for less than $1, we’ll get it and we’ll probably regret taking it…

    4/5/Morx – No it means cover 4 of 5.  The other way would be a backspread and I would certainly specify that but 1/2, 1/3, 4/5 are all ways to cover less than the full position and leave yourself open on some part of your long positions for better upside potential. 

    VIX/Peter – Maybe just a lot of hedging into the Fed minutes….  

    Health care/Colberg – We should force students to spend a year overseas or in Canada and then we wouldn’t have these silly debates on health care.  For goodness sakes, what is the point of society if you don’t care for the sick?  On what planet is it OK for a parent to not get treatment for their child because they can’t afford it?  I am just shocked that we are still aguing whether or not the pursuit of health (life/happiness) is basic a human right 233 years after it was written into the Declaration of Independence. 

    GE/CAT/Sthom – I think CAT goes to $35 at least for a test.  GE is a wildcard and I worry about their commercial lending as well as possible big project delays but I’d be happy to buy more if they sell-off on poor earnings as they will bounce back one day.

    USO/Confiz – I don’t think so because they are pushing $62 right now and they may jam back to $65 by Friday.  Next Tuesday is rollover day and these NYMEX crooks are not going to eat $10 on their contracts if there’s any way around it.


  122. Opt, it prevents us from making money when they go the other way the charts tell us it should go.  Just last Friday, weren’t we in the so called head and shoulders pattern and it was nearly a given that we’d continue down?  Since then we’re up over 400 pts.  We could be stuck at R2 because all the chartists are looking for the next guy to pull the trigger or we could be at R2 because they are waiting for a preponderance of bets to be made before figuring out which way it’s most profitable for them to take it. 
     
    What about all the chart traders who made it to R2 and then sold?  There has been virtually no pullback to reflect that.  So either they aren’t following Phil’s #2 rule or there is a concerted effort to backfill any selling to keep us steady and prevent less technical traders from dumping and running because the chart doesn’t ‘look’ pretty anymore.
     
    As for QLD, which I’ve been watching very closely today, before we just came out of our ‘flatline’ they dropped it just below 38.60 which had been the bottom for the previous hour or more.  The first trade below 38.60 was for a 100 measly shares.  Then, a few thousand clicked off at the bid.  They were taking out stops before moving higher.  Is that a chartist doing that?
     
    But I’ve been watching alot of conspiracy stuff lately.  Wait a minute.. whose that on the grassy knoll over there! 


  123. regarding the Champion/GS.  So true.   And, I’m glad YOU are on our side.   Always, always, try to think how GS thinks. 
     
    For example, clearly GS is now long commodities, oil  and tech (again).  


  124. Phil, I agree.  I am always trying to think like GS.  I just over think it…. I think!   So please, by all means, when you feel a strategic move coming on.. let us know.  I don’t recall you going short because you knew GS was dumping contracts.. I thought you went short on fundamentals.  And I don’t remember Ilene saying anything about insider contracts being dumped.  But then, I"m not on here all the time.  Just too much time.  Sometimes!


  125. PETERD    .What are your parameters on Rut, Spy and Spx (and any other indexes in your portfolio) ?????? GABBY


  126. Talk about going Green (with envy, money and say what ?) : from NYT’s Freakonomics blog, for your amusement :-)


  127. I have a feeling there is going to be some dumping of stocks now that GS bought them up at the bargain prices last week.  That was when the world was going to end and the S&P was going back to 500.


  128. Phil
    What is your suggestion on overnight covers re: DIA long puts?
    I have gone 2x my Sept’s and added 1x Dec- anticipating a correction to sell Aug puts.
    What say you?


  129. Phil
    That is 2x and up to the Sept 85′s and 1x the Dec 85′s


  130. The problem with a market controlled by monetary govmt "stimulus" is determining when the hand of govmt decides to buy and when it decides to stop buying thus letting fundamentals take over and become more rational.


  131. Earnings – Up here (on this gain) we look to see who might miss and play them straight down.  

    $5KP Play - 5 CY Aug $9 puts at .28.  Hopefully they don’t drop more than 1/2 as CY won’t gap through $10 so easily

    $5KP Play - 3 MAR Aug $20 puts, for .60.  Same idea.

    Fed minutes – nothing exciting, certainly nothing to justify a pop over this level but they did upgrade the GDP forecast so something for bulls to hang hats on.  Not enough to get oil over $62 but still 1/2 hour to NYMEX close with oil at $61.50.  Fed sees unemployment at 9.5-9.8% next year, slow recovery if any. 


  132. Matt, the thing about Friday’s chart was that the S&P had JUST hit the bottom line of its trend channel.  This channel can be seen by plotting top and bottom trend lines that started early June.  
    On Friday, when the S&P smacking into the bottom line of the downward sloping channel, TA says that it is more likely that the next close (day) will NOT be below the line.  That line is resistance.  It would take major forces to break below that line.   So, the more likely thing happened on Monday, and that was that we close the day above Friday’s close.
    And then…the GS news.  So, now we are retracing up through that existing channel.  
    Closing ABOVE the TOP line of that channel will be a major event.   If we close above 915 today, its done.  The channel we’ve been in since early June is broken.  Personally, I would look to tomorrow and Friday’s close for CONFIRMATION of the break out.   If that happens, we’ll then we are clearly no longer in that downward channel.   Close your shorts.


  133. Peter, I understand all this. I am just saying that it does not really matter. That’s what stops are for. When your chart pattern (like a H&S) is not confirmed then you just get out and wait for the next one. No chart pattern works all the time anyway. Of course big traders run stops, manipulate prices etc..they have been doing it since the beginning of time. It’s the way this game is played and all we can do is find a way to consistently profit from it.
    You could say that there was a H&S last week and that “they” pumped the market to fool the chartists. But we could also say that there was support at the 200MA and that of acted properly. So you might feel like they fooled you, but someone who bought at support would feel like everything went as planned. There are hundreds of ways to read a chart, all that matters is that you realize fast that your pattern did not work and get out fast.


  134. DIA JUL 83 Puts, with a bid of .08  how much erosion will they endure if I decide to hold overnight?  ….. if the market doesn’t just blast off from here? 


  135. WOW, this are green shots:  SPY color MAP
     
    http://www.finviz.com/map.ashx


  136.  Phil/GE
    Would now be a good time to sell the August $11 put against my GE stock.  I have already sold the August $11 call.  Thx.


  137. Phil-
    Should we abandon $85 DIA put now or wait?


  138.  5K play…  Long put position(s), right??


  139. DIA JUL 83 Puts, with a bid of .08  how much erosion will they endure if I decide to hold overnight?  ….. if the market doesn’t just blast off from here? 


  140. Opt / Strat, I agree with you.  I guess Friday’s dip below at open did throw me off.  That and the force with which we’ve ‘bounced’ off the resistance.  I have not been short since then, I went short at close yesterday.  With this being oe week, it’s just all part of the games that are played.  My problem is I"m always looking for a reverse and don’t trust a rally or drop.  My timing could be a lot better.  I need to learn to go with the flow longer then half a day before I start looking for a reversal.  At least in the initial phase of a turnaround.
     
    So if you guys saw this so clearly, can you help a brother out and let us know next time?  Thanks in advance!


  141. Earnings/Merk – See above.  We did a JPM short spread yesterday.  HOG I hope gets crushed so we can buy them again.  XLNX very random.  NOK is a tempting short but expectations are too low I think.  After tomorrow we will have a lot better data set to play off. 

    $100K P Play – Speaking of selling naked puts.  FXP Aug $11 puts at .75 so in at $10.25, which is very low for an entry and you can sell Aug $14 calls for .53 right now with the stock at $11.67 so figure you should have no trouble collecting $3 a year on your $10.25 investment and, if you are scaling in, then a DD at $7 would average you in for $8.63, just $1.63 out of the money (20%) even if the stock drops 40% and you can still sell $10 calls for .25 and make $3 per year (34%) while you wait for a dip in China.  Let’s call that 20 in the $100KP, net $9,500 used ($11K in margin less $1,500 collected).

    I’m DD the DIA $85 puts at .40, still very speculative and I doubt I’ll hold it past .30 or past the close.


  142. Ok…I’m down huge.  Did a TD (Triple down instead of a double down) on my DIA $84 puts at prices that I thought were the low of the day….based on similar thinking as Atlas (S&P 920 was top).  That turned out to not be the case.  Also sold $82 puts against them at $.06.
     
    Currently, my average on the $84 puts is $.35 and I’m down about $2500 in unrealized losses.  The $83 puts are a lost cause…down $830 on them.  I don’t have any funds to buy additional stuff.  A rollover would involve my selling these at the losses mentioned and buying August DIA puts.  Thoughts?  Hold till tomorrow and Friday?  Dump now before the puts lose another 1/3 of their value tomorrow?
     
    Thanks in advance.


  143. Gotta love markets that make new his intraday after 1:30 on the 5th rally day!  It’s not that they’ve gone up it’s how they’ve gone up that can leave one wondering.  Anybody that watches intraday price action probably will say the same thing — whats happened this week and is happening now is extrodinary as far how this market is going up.


  144. Confizzled, in general, counter-momentum bets should be hedges, not the net direction of your portfolio.


  145. Forget about FMD …. this is a FMW !
     
    unreal …..


  146.  HOG reports and is technically oversold and at a resistance level here at the 17.5 level forming a potential double top…
     
    so blue collar factory working people are buying Harley’s when they are losing their jobs and collect UI?
     
    Phil, what do you think of Aug 17.5 put for earnings play?


  147. glad i asked on the CHSI call confusion. It needed it! Thanks for your responses Fill & Pharm.


  148. Hello Phil;
     
    i am holding GE stock for 11 something, time to sell calls now ? which ones ? aug $12 ?


  149.  HOG technically overbought… why did I type oversold…. uhhhhggghhhhh
     
    So anyway… HOG looking toppy to me, and MM is running away from my bid,
    usually when the MM runs from my bid that is tell what their direction will be… I get worried when i get a quick fill on a bid


  150. I will be pissed if 930 on the S&P AND 6,000 on the NYSE go down without a fight.  Dow also close to 8,600 (who’d have thunk it) but SOX can’t close the deal at 280.  VIX up 2.5% so we are on a crazy train at the moment…

    Oil Matt – Not insiders selling oil, insiders selling stocks in general (see Insider Zone box).  I was short on Fundamentals and THEN GS said $85 and then I stayed short on their BS….

    Bargains/Celeste – We’re not up all that much for them to be dumping.  Of course if we break through here to silly levels and go up near 10% from last week (back to June highs), that would be a good spot for dumping but I think this rally is a bit more solid (volume is 166M now) and we will behave normally so a 1% pullback from where we are now and consolidation around there before we leg back up would be nice. 

    Covers/Pstas - If we finish up here we’re probably going higher so the long Dec DIA covers with 1/2 Aug $84 puts sold against. 

    Hand of Gov/Bri – Well that’s kind of what the Fed minutes are about.  In theory, they are kind of telling you want the plan is if you read the tea leaves. 

    Charts/Strat/Matt – If "THEY" are manipulating the market and half the market decisions are chart based.  Doesn’t it stand to reason that they are manipulating the charts?

    DIA/Chuck – You should get a nickel tomorrow unless we gap up.

    GE/Jofori – I would sell the $12 puts for .62 and use that money to roll to the Aug $12 calls.  That costs you about .20 and puts your putter and caller into $1.20 of premium from .60 of premium and gives you a higher call-away.

    DIA/Celest – S&P not holding 930, NYSE not at 6,000, Dow not at 5,600 – I have to grit my teeth and gut it out here but not overnight

    $5KP/Sgru – Yes, we are bearish on both stocks there.

    Next time/Matt – Now is the time I would BEGIN building speculative puts on premise that we don’t cruise through 8,650 and 940 on S&P and 6,000 on NYSE and 1,875 on Nas and 520 on RUT.  If you go with a 1/4 entry and we blow through, then no big deal and you roll and DD at the next stopping point.

    DIA/Conf – You are down 50% after all that DD?  Ouch but if you can afford to be down $5K, then you have the jobs report in the morning, which may turn us.  Perhaps cover with some Aug $89 calls, just in case we hit full employment all of a sudden.  I think the jobs will be bad because the last number was low due to July 4th holiday, not because things were improving for real. I also think smart traders know this and will follow the 5% rule and sell off 1% into the close so right about 8,500 for the Dow is my target for the close.

    FMW/Cap – Right you are!

    HOG/Merk – I think so much bad news is baked in it’s tough to short.  You think of workers not buying a bike because they are laid off but they are, in effect, cheaper forms of transportation and may not have suffered as much as you think.  I sure wouldn’t go bullish but I’m not convinced they are worth just 1/3 of last year.

    GE/Micro – I’d sell the Aug $12 puts and calls, nice money for a month.

    Oh man, 8,600!  Damn DIA puts are at .31…..


  151. BIDU at 317. Any trade ideas?


  152. :-)   Wonderfull day for close my longs.  Bird in hand…


  153. DIA 86.08 … you have got to be kidding me …


  154. 86.11


  155. 86.15
     
    3 pm top ?


  156. The market is up so high, the chart just blew thru the top of the screen !!!!  Holy cow; never saw that b4… LOL


  157. just shorted AXP


  158. Ok I doubled down on my QID at 30.845.  I actually go the low for the day.  And I swear on my child’s college tuition I will sell everything if QID goes below 30.79.


  159. Rails, shipping, airlines, DJ transport are all up but the 6 truckers I track are all down.   Phil what’s your take on that?


  160.  I hear what you say Phil… but when I see guys get bikes for the cheap ride and high mileage, they usually don’t buy Harley…
     
    the Harley hogs are for showing off  at parties and at shows… besides they cost a pretty penny for a ride….
     
    MM kept pulling the bid away from me so I grabbed a 1x put buy  "at market" and then immediately laid a 2x order on him at a lower bid just to let him know I’m not gonna shakeout


  161. BIDU/Trad – If we finish up here, China can continue up tonight so not worth risk. 

    Well played Spider!

    Damn DIA puts teasing .30 but not cracking it so still in.  Not looking very promising for 100-point drop at the moment.

    Good luck Matt, I’m there with you!


  162. Quick, someone pull the plug on GS’s HAL9000!


  163. I love todays theme of "will we hold". Oh heck! just when we start getting into a groove of puts puts puts, the whole market takes a turnaround. Last week it was down down down and now its back up to where we started. All those calls we sold for loses….. These guys are making us feel like cr-p.


  164. So if we’re thinking like GS, we are probably going to go ___ tomorrow?  PRU is up 14% since Monday.  How can this stuff keep up or stay up?  I think they are just flushing PUT holders before Friday. 
     
    Uh oh.. here we go again…


  165. Didnt follow the DIA puts today. So, im opening a speculative 5  DIA $83 puts ( beting on close or tomorrow dump). Will see….
    Ty for advice on BG.  CY and MAR waiting for fill, but not happening, Yet.


  166. shoulda bought more HEB, Pharm. Thanks
    you think this is just a run with the market?


  167. phil,
    i have aapl @ 138.37 and have sold the jul 140′s against it for $2.93. do i hold thru announcment ot roll to aug 150?


  168. I mean DIA $85 Puts…
    If we have a stick-save to correct down days… why not an (anti)stick-save to correct up days? :-)
    Matt = You probably right on the flush thing.


  169. Truckers/Steve – My take on that is that there’s no real fundamentals to this move, just a shift in sentiment that forced all the head and shoulders bears to capitulate.  It’s a really strong move but we’re heading into a 50% retrace of the drop and we need something else to hang our bullish hats on to get back to 9,100 (5% over our mid-point). 

    Very telling if no one wants to sell into this close.  Huge one-week gain, scary earnings and jobs numbers tomorrow – hard to imagine investors are that certain. 

    $100KP - 500 TASR at $5.11, selling Aug $5 puts and calls for .83, net $4.28/4.64

    No regrets Miracle – Just have to watch the range and play it. 

    GS/Matt – There are some things out of their control.  Bad jobs numbers could cause a huge sell-off.  Today volume is 200M with 1/2 hour to go, to big for the stick so maybe we sell off into the close.

    DIA/Spider – I don’t like to be that far out of the money into expiration, you’ll find it doesn’t move much…

    AAPL/High – AAPL earns on 21st, after expiration.  You’re just going to roll anyway right?


  170. NO not TASR!!!!!


  171. Next will be CROX!! :)


  172. PHil
    DIA July 85′s- holding or bailing overnight?


  173.  chuckle…. HOG taking a lil dive now… man I hope that stock gets spanked after earnings
     
    interesting how AIG is staying above 14…. level2 shows big bids all day whenever that strike gets threatened


  174. WHEN IS THE NEXT JOBS NUMBER?


  175. CHSI just filled @ 5.8.  Now for the cover……


  176. DIA/Pstas – Not worth holding overnight.  Down 25% on the play and no point risking down 50% as premium erodes.

    Jobs/Lindsay – 8:30 tomorrow morning. 


  177. DIA spread to take advantage of premium:  Buy Aug $90 calls for .74, sell July $86 calls for .70.  Costs $6 in margin but .70 (10% of margin cost) is all premium and will evaporate on Friday.  If they go higher than this, then you roll to a bull vertical


  178. Hey Phil….. I just bought a 1x august put on SPY 93 strike…. i’m gonna build a large scale in all the way to 950 resistance on S&P
     
    2x put buy will trigger at 942, 4x put buy trigger at 950, stop loss set at 955


  179. TASR – market maker is taking the piss. 2 lot fills at .01 increments. Well, at least my broker will be happy it’s a new commission on each adjustment.


  180. For those who know Opie and Anthony from their NJ/NY days….WOW!!


  181. Phil, are there any big fish announcing earnings AH or PM?


  182. I like to be bullish, but I think this is really crazy.  Especially since I was herded out of my DIA $85 calls last week.  I hate to say it, but I bought those HOG puts and QID just because I refuse to believe this market jump is happening so quickly. 


  183. Phil, Great day.. all back to cash. INTC STX and X, wowey!!! Thank you for your guidance.


  184. For those keeping score, I covered my QID with QLD for an average of 38.98.  Now, how to avoid losing money in both directions….


  185.  whew… what a day… I feel tired


  186. Phil,
    Nice call on BIDU 2 weeks ago, you said even though it was off a little, it looked like it would shoot up within two weeks. You were right. Thanks


  187. Does anyone here think this week’s action is NOT option ex related?


  188. Somewhere on the site there is a write-up by Phil about the 5% rule and how to work it but I can’t find it now. Does anyone know where it is located?


  189.  Anyone running Safari on Mac who has been able to autorefresh???  Thanks!!  I believe F5 is for PC only!!


  190. Well good news for those of you holding DIA $85 puts, MM grabbed 1/3 of mine at .25 so fast I was shocked.  Logic to the sell of 1/3 was if it drops to .15 tomorrow, I can take that 1/3 at .25 and DD at .15. 

    TASR/Steve – Yeah a little thin.

    WOW/Pharm – LOL!

    Fish/Matt – Sure:  CCK, KMP, STLY, NCTY, XLNX tonight and BAX, BIIB, SCHW, CY, FCS, HOG, JPM, NITE, MAR, MTG, NOK, ORB and PPG tomorrow morning - all potential movers and none of them really set up for big beats other than JPM. 

    There were 4 misses this morning:  LUFK, MTOX, TXI and WOR.  Out of 10 reporting stocks, that’s not good.  Only 3 beats from AMR, GCI and GWW but the first two had very low expectations. 

    Crazy/Celeste – Being a bull doesn’t mean you can’t think a bullish move is overdone. 

    QID/Matt – I’ve just got the naked $31s, we’ll see.

    BIDU/John – You are very welcome.

    Not related/Matt – Of course it is, hell, WE were selling covers today in the $100KP and that’s what funds do, Jack up the prices, goose the VIX and sell options to suckers who think they see a pattern on a chart!   8-)

    That sure was fun!  We’ll see what the jobs are like but the sheep analysts, who were looking for 700K down last week and got 565K are now projecting 550K and will probably get 700K. 

    Woops, DIA just spiked down to $85.50!  Someone is playing games…


  191. 5% Allen – If not, remind me on the weekend as I meant to add it to the strategy section anyway.


  192. Phil
    DIA premium erosion- not sure I understand the adjustment if we go up.
    Keep the Aug 90 and short Aug – something above 90?
    I want to understand the process of making the adustment if needed.
    Thanks,


  193.  Anyone running Safari on Mac who has been able to autorefresh???  Thanks!!  I believe F5 is for PC only!!


  194. Phil – very heavy (imo) AH volume and downward spikes on lots of stocks – GS, BIDU, GOOG etc.  Any ideas ?


  195. Phil
    Just read your post on 1/3 th 85 puts —-just after I bailed.
    I am in the Aug/July call spread on premium erosion.
    Anything else you can turn us on to help me recover my loss on the 85′s?


  196. CIT trading halted….HERE WE GOOOOOO…..


  197.  Dang… I shoulda bought those XLNX puts… stock is getting crushed in AH


  198. Sounds like a few people need a laugh today. Someone had mentioned Lenny Dykstra the other day. Here is Jon Stewart weighing in. The best bit is he takes another hack at Cramer. Priceless….  http://www.thedailyshow.com/watch/tue-july-14-2009/lenny-dykstra-s-financial-career 


  199. Health care- too busy today to add my 2 cents on this issue but it aggravates the hell out of me when any question on costs immediately devolves into emotional diversions of throwing sick kids into the street.
    Let’s get real. Obama and his crew in Congress are quintessential "chicken in every pot" tax & spenders. Unfortunately, most Republicans are mirror images of that except they promise to do it more efficiently. They should combine the health care gambit with the Cap & trade bill and rename it " The Lobbyist Full Employment Act & The Incumbent Campaign Full Funding Finance Acts of 2009".
    They are all cackling with glee in the privacy of their enclaves over the prospects of these legislative monstrosities. They  will be able to play all the sides against the middle and secure campaign funding from the lobbyists and other influence peddlers for a couple of generations. Not to mention the additional benefits of doling out special favors for whatever new interest group/labor union/environmentalist polar bear worshipers or whatever that comes down the pike with the latest panic plea to save the planet or save the "children"or save humanity from the next flu virus crises.
    Talk about happy as pigs in slop!
    I am resigned to the inevitable creation of a national government run system. They promise the moon on cost control but will someone please explain the model for how this is going to happen? Medicare? Medicaid? Agriculture subsidies? Defense ? Does anyone think for a minute that,  short of jack booted goverment thugs wielding batons in hospitals admin offices, pumping up demand and cutting re-imbursements is going to net lower costs? The government has created a cost-plus operating environment with no incentive or system for consumers to shop around. Just what kind of market action will a government take over create? 
    The dirty secret is that the more government has become involved in health care, the worse it gets. The real solution is less government not more. We are,of course,  too far down that road and we are embarking on another grand experiment in central planning.
    How much do you wanna bet that 5 or so years down the road costs will be through the roof and  parents will still not be able to get treatment for their kids?


  200. Phil, I am just coureous was the CY call based on the 3-4-5 bar strategy? With a Put buy, you must be expecting a reversal rather than a pause in the uptrend?


  201. DIA/Pstas – Well, we know for sure that the $86 call will have no premium on Friday.  With luck, we finish below 8,600 and you are in the Aug $90s for net 0.04 and whatever is above that is profit.  If DIA finishes above 8,600, you owe the caller the amount over and you have to then determine whether to cash both out or roll the July $86 caller to something in August.  You can see this trade already working with the July $86 calls finishing at .63 and the Aug $90s still at .70 so net .07 up from .04, a huge gain already (as long as you have no fees!). 

    CIT still up in the air.

    4 misses so far this evening.  LSTR, RECN, SGK and STLY (duh!).  CCK with a beat and that’s something Buffett considers a great early sign of recovery (container companies doing well).  KMP with a nice beat so our dividend looks safe in the $100KP.  UFPI with a huge beat, almost a double, that makes IP a buy and maybe JOE, both of whome I liked from that wood chips for fuel article on the weekend.  XLNX beat and raised guidance but didn’t go up – maybe we are overbought up here….

    AH/Partha – I think the selling was there into the close but PPT was working hard to close us above technicals to paint the end of the H&S pattern. 

    Recover/Pstas – I would recommend patience and NOT trying to "get even" on one thing.  Let’s wait for something obvious…  Almost 6% gains in last few days seems a bit much but we could hit 7.5% with little effort now and, if they want to, they can turn that into 10%, at which point reality would kick back in.

    LOL – I don’t know if this is real by CIT just traded down to zero…  Could bode well for the AIG puts! 

    Oh it’s real, CIT looks screwed.  Futures seem surprisingly blase about this but it’s going to be a huge mess for buisiness that work with them as there is no way they can buy stuff with lease lines and those will take 30-90 days to re-establish, even if they can in this market.  Also, the reason they are dying and the reason no one wants to save them is the default rate on business leasing is through the roof and there is no value to the equipment since there are so many businesses shutting down that there’s not much of a secondary market to sell repossessed equipment. 

    Dykstra/Never – I was in a high-roller room in AC and Dykstra came in and started playing craps and blew something like $250K in an hour – so let’s say we could have seen that coming…

    Health Care/Pstas – That all sounds wonderfully horrible but pretty much every civilized country on Earth EXCEPT America has government health care and it works just fine.  It’s very easy to paint doom and gloom scenarios but how is it a bad thing to have something that is REQUIRED by every single citizen be run by the government we elect.  It may take 2 decades to get it right but it will be tweeked by our various elected officials and will be debated and argued over the years until it runs well enough for everyone to forget it and move on to other issues.  I used to travel a lot and I have to believe that if the 3Bn people who are covered in the blue countries on this chart manage to live – then the US can probably figure out how to run a health care system without killing everyone.  

    We don’t have the best health care in the world.  We don’t even make the top 10 and that’s for people who can afford it!  For people below the median income line (half), we are in the bottom 10 of the industrialized world.  People should be outraged about this and I am thrilled that Obama is one of those people.  All this economic terror-talk is total nonsense – which countries are the growth darlings with economies that are expanding by leaps and bounds?  Brazil, Russia, India, China – All but India have 100% coverage at zero cost for their citizens and China has the most people and the lowest debt of any industrialized nation – even after providing cradle to grave coverage for 1.3Bn people!  The US ranks 50th in life expectancy worldwide, getting our asses kicked by Japan, Singapore, Australia, Canada, France, Sweden, Switzerland, Israel (and they are getting shot at!), Iceland, Italy – and those are just ones in the top 20!  ALL of these countries have universal health care – you can scream and curse about how unfair it all is but this country will come out of the dark ages one day and that day seems to be right around the corner….

    CY/Sunco – I expect an earnings miss.  They are up from $3 in November to $10 with $5 of that run coming off February lows so up 100% in 6 months.  They are expected to lose .09 for the Q after earning .28 last year so in-line earnings will headline "CY earnings down 120%."  While they beat last Q they beat with a .22 loss vs .23 expected and they still own a lot of SPWRA, which is trading 20% lower than last earnings and down 75% from last Q2.  I don’t know for sure they will go down but, given we are up 5% for the week and CY is up 100% for the year, they are a good candidate for a small bet on a downward move in a risky portfolio.  Also, $10 should provide upside resistance so it’s unlikely that our puts will be wiped out, even if we’re 100% wrong.

    Hey Bears – Here’s Gary Shilling to make your evening:

    Shilling predicts weak earnings will drag the market down to new lows. He predicts, the S&P 500 will bottom at about 600 late this year, though he’s not calling for a crash. Instead, he says with a smile, "it may be Chinese water torture."


  202.  Looks like odds has increased that CIT is going to be allowed to fail… no gov’t bailout for them…. 4th largest bankruptcy in US history
     
    http://www.marketwatch.com/story/cit-says-us-support-appears-unlikely?siteid=yahoomy


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    mso-bidi-language:#0400;}

    pstas: I am not sure this is the venue for a detailed discussion about government and health care but for those who have seriously looked at the issues, aside from the propaganda and ideology, most nationalized health care systems in the developed world are reasonably well run (not perfect), they have far better outcomes than our so called competitive system in almost every health-related category, and there is universal coverage for all their citizens (we have 50 MILLION people uninsured, including many of our children). Our competitive system has huge waste: 20 cents of every premium dollar goes for overhead, not health care – and in contrast compare that to Medicare, our supposedly inefficient government-run system of socialized medicine for the elderly, where only 3% goes for administrative overhead (the average in the Canadian nationalized plans is 1% for overhead).
     
    Once you have a serious illness, you cannot obtain health insurance in this country when you leave a group plan for any reason, i.e., unemployment, going to work for an employer who does not offer health benefits, etc.. The only exception is in Massachusetts which is the only reason my wife and I still have health insurance due to our pre-existing conditions – we are unable to move because of that – but even in Massachusetts shopping for insurance in the competitive marketplace was a nightmare of confusing fine print and bewildering policy options. And we are highly educated in business matters – she is an attorney and I have an MBA, and even with those backgrounds it was impossible for us to accurately understand the ramifications and the risks of the myriad policy options.
     
    As if that is not bad enough, insurance companies have a practice called rescission whereby they attempt to remove very sick people from their roles for the slightest infraction at the very moment when the health insurance is most needed. Although supposedly these actions are taken only when fraud is committed, the reality is that rescission occurs for even unrelated minor mistakes. 20,000 Americans have had this happen to them – people who are in the midst of chemotherapy, about to be operated on, etc. I am personally familiar with this since my 24 year old son, who was diagnosed with Hodgkin’s Lymphoma last February, was recently notified by his Blue Shield plan that his policy was under "rescission review." Without notice they stopped paying the bills – this in the midst of chemotherapy and radiation – and ten’s of thousands of dollars of bills quickly piled up. We might be lucky since my son recently was told over the phone that his case was resolved (no formal notification yet) but can you imagine his stress in the middle of what he was going through already!?!
     
    Our health insurance system is scandalous – even former health insurance executive are speaking out, such as Wendell Potter, former marketing executive at CIGNA who recently testified before Congress about how rotten the system is. For more details, check out the organization formed by thousands of physicians to push for major reform: http://www.pnhp.org/. For the sake of all of us, it is worth supporting them.
     


  204. Health at 0 cost. /  You first have to get doctors accepting $1k or $2k max for a complex surgery. I can’t see that happening.  How much to you have to spend in a University to become a doctor? 300k? 500k? ;-)
    it may be Chinese water torture : If it goes too slow maybe is no good for options.
     
    I will call it a day. I think I missed 90% post today. How you guys manage to read, reply, keep on your trades, news release, CC, the world around (phone, coffee, etc) ?
     
    Cya! Spider.


  205. Let’s remember, as we have seen many times, strong FMD’s like today often close at the high of the day w/ a last 1/2 our burst of buying …. just like today.
     
    AIG – merk — check out Zero Hedge.  Apparently AIG is a new toy for those super battle bots.


  206. Here’s a clip from Michael Moore’s "Sicko" where he interviews a downtrodden British Doctor.

    Antother British horror story of the NHS - British minister interviewed makes good points.  "Choice depends on the freedom to choose and if you are shackled with debt you don’t have the freedom to choose.  The people in debt become hopeless and hopeless people don’t vote – keeping people hopeless and pessimistic is the goal.  An educated, healthy and confident nation is harder to govern…"

    Here’s a clip of guys Moore took to Cuba talking about Cuban health care.

    Here’s a Canadian waiting room in a hospital.  Here’s British people baffled by the idea of paying for health care.

    Here’s the MSM telling you how all of the above is lies.

    Well said Allen!  I went through that crap when my Dad had cancer – it’s a perverse system they have set up, that’s for sure!

    Doctors/Spider – Well their doctors don’t pay to go to college and they don’t come out of school $500K in debt and they don’t have to pay $250,000 a year in malpractice insurance…  As to how to read/reply etc. - I have 6 computer screeens and 2 TVs set up around me – good for multitasking!


  207. pstas …. right on, brother.   come visit my blog.
    75-25 sez Health Care aint gonna happen.  DOA.   O is trying to sound confident as if that will make it happen.  Very uphill battle.  He’s already bankrupted us.  There ain’t nothing left folks.


  208. Pstas, by the way, feel free to politely disregard Phil’s fantasies about the swell benefits of government run monstrosities in other countries, rationing care while people die.  This is one of his power issues.  However when you start to rely on Michael Moore’s paen’s to the Cuban workers paradise as your "proof" of how socialist healthcare is good, you know its hopeless to argue w/ the guy.  :wink:
     
    Free health care for everyone, especially those that can pay for it but would rather have flat screen TVs and I phones.
     
    Why worry about paying for health care when you can do Facebook ?
     
    "I’m from the government, and I’m here to help you."


  209. 100% coverage and zero cost !
     
    Explain why, then, this adds trillions of dollars to the deficit and you need to soak the "rich" and businesses ….


  210. CIT … I guess they don’t have unionized employees that fattened up Obama and the Dem’s campaign coffers.
     
    Not good….


  211. allen060 — are you Phil, or his twin ?


  212. Today’s post on ObamaCare:  Why it will (must) fail:
     
    http://hopeychange.blogspot.com/2009/07/why-obamacare-will-fail.html


  213. Phil-
    I need some advice how to handle investing as a mom of two kids, ages eight and nine.  It is REALLY hard for me to sit all day in front of the screen.  I have to drive the kids around to various things.  I am wondering if I should stick to paper trades and selling calls.  Any words of wisdom?  I cannot (and don’t want to) trade naked calls and puts.  I have entered into the FAS/FAZ play by buying $20 puts for 10/09.  I hope that was what I was supposed to do. 
    Of course I would love to have your sweet set up of several computer screens and a couple of TV’s, but unless I produce results, that won’t happen.  I doubled my husband’s retirement accounts but have dug a bit of a hole in the non retirement accounts.  Phil, I am giving it until year end to see where I end up.  If I can make some major progress, you will definitely be receiving a case of champagne!  Even though these markets are friggin’ rigged, I love learning how to invest and am trying to justify my losses as the cost of going to school (GS school, that is).
    I am also sad.  My husband is giving a large bulk of our non retirement money to some young investment guys he met on the golf course.  They promised him 8% conservative returns, but I have heard that so many times it is not funny.  I haven’t been doing that great so I didn’t make any fuss about it. 
    Phil, sorry to pour my heart out, but it has been a tough week.  The day I lost big on my DIA calls and surrendered, I was rear ended by a monster truck when I was waiting for a light to change on a freeway offramp.  The guy was uninsured, driving without a license, and had a warrant out for his arrest.  Thankfully the kids weren’t in the car and I was the only one who had whiplash.
    Thanks miracleniss and others for your supportive words of investing.
    Here’s to better times for everyone!
    Celeste


  214. Phil: On the FXP play today I can’t tell for sure if this is a buy/write or a naked put/call play when you add the Aug $14 call. It looks like they are both naked because the margin on 20 contracts would be about $11,500.


  215.    To Celeste:
               Glad to hear about the kids   (8 and 9) being o’k. they grow up so fast. Mine are now in their 20′s. 
    I think the best piece of advice I found on here is to take losses quickly if the trade doesn’t go your way. That way you  have money for the opportunities which never end.


  216. I am trying not to weigh in but I hate this argument so much:
     
    Pstas, by the way, feel free to politely disregard Phil’s fantasies about the swell benefits of government run monstrosities in other countries, rationing care while people die.
     
    Healthcare is rationed EVERYWHERE. In america it is rationed based upon how much money you have. In "government run monstrosities" it is rationed based upon the benefit the person receiving care will receive from it.
     
    Even in countires with government run monstrosities, you still have the choice to pay for your own care if you want to. Nobody is taking away capitalism. They are just defending the most basic of all human rights. The right to life.
     
    I find it quite disgusting that out of the western democracies, the wealthiest of them all America shows the least regard for it’s basic duty to preserve the life of it’s citizens.


  217. To Celeste:

    I joined about 5 months ago and had a similiar problem. So much information and how to act on it. By far the simplest trades to start with are the buy/writes. Where you buy a stock then sell a short strangle against it. I am sure Phil is getting better returns, but I have been making about 10% a month with just the buy/writes. The buy/writes are great because you don’t really have to babysit them. You just check in once or twice a day to make sure the sky isn’t falling. Phil has recommended some recently in the 111k portfolio. Personally I really like doing them on stocks which pay a dividend and have decent option prices. I think AFL is still a decent buywrite candidate but I would sell the at the money call and the out of the money put. Just work out the numbers so that if you get called away(which is your goal) you make 10%. Then you can tell your husband you made 10% last month which is what those money managers promised for the whole year!!

    Let me know if this was at all helpfull.

    Phil, maybe we should come up with a heierarchy of trades starting with the buy/writes going by difficulty. That way someone who just joined has what envision as 6 month course where each month they practice one additional type of trade untill they know how everything works.


  218. "I’m from the government, and I’m here to help you."
     
    Where does this hatred of government come from? Do people REALLY think that incompetent corrupt politicos will fleece them more than competent corrupt businesses. No way, businesses will be much more nimble at fleecing you than government is every time.
     
    I think some people are still fighting a war that ended nearly 250 years ago. Get over it and move on.


  219. Trading/Celeste – There’s a reason we say, in the New Member’s Guide, that you should read a month of posts and comments before doing anything else.  Few people do but this is exactly the sort of thing that you would find as at least once a month someone has a bad streak of luck and worries about what to do.  Usually, it’s a simple matter of not balancing the portfolio.  You never want to be 100% bullish or 100% bearish.  Usually you want to move from 60/40 bullish to 60/40 bearish with 70/30 in either direction being exreme.  Of course, that doesn’t do you any good unless you are aware of your trades and how they balance each other out.  It’s important to scale into your positions, no single trade should ever cause you serious pain.  Also, and we say this over and over and over again – buying front-month options is for suckers.  Selling front-month options is how professional traders make a living.  Our goal is always to sell premium, not buy it.  All of the trades where we play the front months buying puts and calls are speculative and, as such, should never be a large bet in any portfolio! 

    Sage wrote a couple of articles 2 years ago on "Smart Portfolio Management" and I urge you read those.  Part 2 is here and Part 3 is here.  The first thing you need to do is figure out what style of investing fits your lifestyle.  If you have ANY distractions in your life (and it sounds like you do!) then daytrading is probably NOT a good idea.  It’s not just about having the time to sit at the computer all day but also about having the mindset to stay cool, calm and collected under some very stressful conditions.  It is very easy to panic out of trades or, just as bad, not to panic when you should.  If you don’t go into your trades with a plan for what to do when a trade goes up, down or sideways on you (see my Salvage Plays article under Strategy) then you are probably going to fail the trade.  There’s an old saying that says "If you fail to plan, you plan to fail" – it’s amazingly true.  Almost as true as "practice makes perfect" but, with trading, if you go broke while you practice, it doesn’t matter how good you get at the end when you have nothing left to bet with. 

    Let’s take some time over the weekend to discuss your porfolio in more detail.  We have two active porfolios now and I will be starting the Buy List (and the new plays for that one were summarized in the weekend post), which is probably the best strategy for you to follow as it’s low-touch.  The $100KP is also low touch but the $5KP is not and any of the day-trades I make during chat are absolutely not!  As Craig said, if you set reasonable goals for yourself, you will find you can reach them but if you treat the market like a casino – then you will find it will treat you like a casino too!   Make sure you remind me Saturday morning and we’ll see what we can do with what you have to set up some balanced positions that might work for you with less stress. 

    By the way, on FAS/FAS – the idea was to short both ETFs at $45, that was the right play to make.  If you were unable to short them, then the play was to do 2 bear put spreads (a spread where you take the higher dollar puts and sell lower-strike ones against them to offset your premiums).  Buying $20 puts is exactly the opposite of this concept as you are taking a huge, speculative risk and paying an enourmous premiuem to do it.  I believe you wrote that you bought the Oct $20 puts, which are .75 on FAZ and .90 on FAS.  So you are $25+ out of the money over 3 month and you need the ETFs to fall $25 (more than 50%) before you break even.  This is not an ideal plan, especially since you are also betting against yourself and will only even possibly get paid on one side.  You MUST know why you are making a trade and if you can’t articulate HOW you are going to win and what you are going to do if it goes against you – you shouldn’t be in the trade in the first place.  We’ll work on this stuff in detail on the weekend.

    Also, it would be very good for you to go to the Portfolio Tab and find the original post of the $100KP and then the next and the next and the next and print them out and then sit with charts and see how and why we made 12 weeks worth of moves.  This cannot be something you consider tedious – this is your "job" when you are going to be trading seriously.  Why do you think I’m up at 4am most weekdays?  I need to know what’s happening in Asia, I need to see the EU markets open and see what’s going up and down so hopefully I get a little insight into the US markets for the day.  When I started writing these posts – they were trading notes for myself so that I could go back and see what the hell I was thinking when I entered a position and by going back and reviewing every mistake I was able to make small improvements over time.  Even now, you see me often referring back to my own old posts because I still use them to see what I was thinking at certain points.  Trading is serious work if you want to make a living at it!

    FXP/Sun – Those were naked put sells.  I said "Speaking of selling naked puts.  FXP Aug $11 puts at .75."  That is the trade, the rest was explaining why we were fine owning the FXPs at that entry ($10.25) long-term.  For the $100KP, I try to go into detail about the strategy of the trade as the purpose is to teach people how to hedge and also how to think about the trade in terms of WHY you are in the trade and WHAT to do if the trade goes up, down or sideways.  The sale of 20 naked $11 puts at 50% margin is $11,000 in margin less the $1,500 you collect for selling 20 puts at .75 gives you a net margin requirement of $9,500 – also somethin we are teaching people to be aware of in the $100KP. 

    Rationing Care/Steven – Oh that problem has already been solved

    Get over it and move on/Steve – I find that is the best strategy to dealing with Caps political comments…  8-)


  220.  I will be happy to trade full time and let obama and the nurses provide healthcare for everyone.  He said today "that nurses dont go into medicine to get rich"   Wow, comparing a 2 to 4yr undergraduate degree to 12 yrs  of training.  I  wonder what he thinks of lawyer salaries/reimbursement?  there is no transfer of wealth here (insert extreme sarcasm font)


  221. Celeste – paper trade for a month or two to understand the concepts here (I know you say you have a few months, but the last 3-4 should more than make up for it). Also, what Phil said – read the K1 project 2-3 times (I did).   When you want to dip your toes in, instead of 1/2 positions, do 1/4 positions.  That is the way not to get burned as well as learn the tricks of the trade. Don’t try to make it all up at once.  I have been here a year, and made most of my money back from the 14K fall.  The people here are more than willing to help whe Phil cannot get to it.   FWIW – This site is my brokerage firm, I was will Wells Fargo Portfolio and it was costing a fortune to trade, the costs here are more than offset with the data, trade ideas and profits you should make …..and I get a chuckle out of Cap and Phil’s rantings on govt, healtcare, guns, oh, yeah, and government….
    They are all Harvard Goldmanites anyway, aren’t they??  Thank the holy land of corn I went to Iowa….!!!!!


  222. Health care – "the us ranks 50th in life expectancy wordwide" – Ah, statistics. The final refuge of congressmen, economists; lawyers (especially lawyers) and other prevaricators. Perhaps I missed all of the New York Times articles on the planeloads of people heading to Russia and Brazil for their heart bypass.
    Now let’s see, I want to build a sports franchise. I suppose I could look for a "model" to follow. Perhaps the New England Patriots; or the Lombardi era Packers. No, nothing worth learning there.
    Well, maybe I’ll start a business. I suppose I could look for a model business. Google? Berkshire? Cicso? Nope , nothing there either.
    I know, let’s start a country. Where should I look? The USA? In a historically short time frame, the US has , based on principals of individual freedom,  personal responsibility, respect for personal property, has created a capitalist economy and representative democratic political system which has produced the most sought after standard of living in the world while it’s citizens enjoy freedoms unheard of elsewhere. Nope, nothing there.
    Perhaps we should look to European monarchists (1000 yr wars; Holocaust; etc.,) , the Russian Czarists (Dr. Zhivago anyone?);  the Soviet/Chinese Communists (Stalinist / Maoist purges?) or South American tinhorn dictators; or India (caste system)? Yep, now we’re getting somewhere.
    I wonder if they have a health care system?


  223. pstas,
    can you please keep the politics out. phil used to have a politics page, maybe it can come back and you cap and others can go there?


  224. last comment. 2-3 hundred years ago britain was at its peak and rising still. is the model of the british and european empires a model?


  225. Phil: Once again thanks for those inciteful comments, and the old links to Sage’s portfolio management (I hadn’t read before). I’m an experienced stock trader, but over the last 3 or 4 months have come to appreciate options trading here at PSW, and the consistency of your many premium-selling strategies. It is liberating to have to worry less about getting direction right and being able to generate 5% MONTHLY returns with close to delta-neutral positioning. Much appreciated!


  226. Good Morning Phil & all


  227. Asia/Pacific Markets    Thursday, July 16, 2009
    (The following is from Yahoo, please confirm with other sources)   

    Australia All Ordinaries*                     3,987.80        70.30        1.79%
    Nikkei Average*                                 9,344.16        74.91        0.81%
    Shanghai Composite*                        3,183.74         -4.81        -0.15%
    Hang Seng*                                     18,361.87      103.21         0.57%
    Seoul Composite*                              1,432.22        11.36        0.80%
    Singapore Straits Times*                    2,401.02        11.60        0.49%
    Bombay Sensex                                4,250.25         -2.99       -0.02%
    Baltic Dry Index                                 3,324.00       227.00        7.33%

    * at Close


  228. Asian Stocks Power to One-Month High

    Asian markets jumped Thursday, buoyed by strong U.S. earnings and global recovery hopes after China’s economy grew faster than forecast in the second quarter. Tokyo shares hit a one-week high and shares elsewhere in Asia-Pacific powered to their highest in a month. The U.S. dollar and euro held broadly steady against the yen, base metals prices rose and crude oil futures edged higher. China said its second-quarter GDP rose 7.9 percent against the previous year, beating expectations for a 7.5 percent rise, while its first half GDP rose 7.1 percent against a year earlier.

    Japan’s Nikkei climbed 0.8 percent as high-tech exporters gained on a weaker yen and after results from Intel lifted hopes for a rebound in technology spending. But the index’s rise was limited by caution towards earnings and political uncertainty at home.

    South Korea’s KOSPI also closed 0.8 percent higher, led by technology issues and shipbuildersSouth Korea’s KOSPI also closed 0.8 percent higher, led by technology issues and shipbuilders, fueled by robust foreign buying.

    Australian stocks posted a one-month high close, up 1.8 percent, rising for a third day after upbeat U.S. company earnings and better-than-expected growth figures from China boosted global economic recovery hopes.

    Hong Kong stocks climbed 0.6 percent. Shipping stocks extended Wednesday’s strong surge after the main sea freight index jumped overnight amid signs the global economy was on the mend.

    In Singapore, property plays gave the Straits Times Index a boost after government data showed private home sales soared to a record high in June. The STI was up 0.5 percent.

    China’s better-than-expected growth data failed to lift the market as profit-taking capped gains. The Shanghai Composite Index was 0.2 percent lower, reversing gains of over 1 percent logged earlier in the session.

    Bombay Stock Exchange’s Sensex ended at 14259.78, up 6.54 points or 0.05 per cent. Indian markets ended choppy session flat as traders booked profits at higher levels. Auto, oil&gas and healthcare moved higher while capital goods, metals and power capped gains.


  229. Euro Shares Mixed After 3 Days of Gains

    European shares were mixed in early trade on Thursday, after three days of gains ahead of key earnings reports from major U.S. firms JPMorgan and Google. The FTSEurofirst 300 index of top European shares was up 0.2 percent at 865.26 points, having moved in and out of positive territory.

    Banks were mostly lower on Thursday, with the DJ STOXX European banking index having gained 8.7 percent in the previous three sessions. Banco Santander, Deutsche Bank, HSBC and UBS were down between 0.9 and 2.2 percent.

    Miners also fell on Thursday as the price of copper and other metals slipped. Anglo American, BHP Billiton and Xstrata fell between 0.7 and 3.2 percent.

    Oils were slightly lower as crude prices slipped below $61.50 a barrel. Total and BP fell 0.7 and 0.4 percent respectively.

    Defensives were generally lower, notably utilities. GDF Suez and Veolia were down 1 and 1.8 percent respectively.

    Swiss drugmaker Novartis rose 1.4 percent after it raised its full-year forecast for drug sales and second-quarter net profit met expectations. AstraZeneca was up 0.8 percent.

    Later in the session, investor focus will be on earnings at JPMorgan  and and weekly U.S. jobless claims.

    Around Europe:

    FTSE     4,340.91    – 5.55        – 0.13%
    DAX    4,941.26     12.82         0.26%
    CAC     3,215.25     43.98         1.39%
    SMI    5,515.47     42.14         0.77%


  230. Yen Gains Broadly; Caution Before US Earnings

    The yen rose broadly on Thursday as traders booked profits in other currencies after their rally this week, while the dollar gained against the euro, with investors cautious ahead of key U.S. corporate earnings. This helped boost demand for the yen and the dollar, which typically gain in times of heightened risk aversion, to the detriment of perceived higher risk currencies
    such the Australian dollar and sterling which all gained earlier this week.

    The New Zealand dollar was a major underperformer among riskier currencies, however, falling sharply across the board after Fitch downgraded New Zealand’s sovereign outlook to negative.

    The dollar [94.0    -0.22  (-0.23%)    ] fell against the yen, as did the euro [  132.77    -0.18  (-0.14%)    ] .

    Against the dollar, the euro [ 1.4133    0.0026  (+0.18%)   ] , sterling [1.6458    0.0036  (+0.22%)   ] and the Australian dollar [ 0.803    0.0001  (+0.01%)   ] fell.

    The New Zealand dollar [0.647    -0.0017  (-0.26%)    ] tumbled versus the greenback after the Fitch outlook downgrade on New Zealand, where it cited a lofty current account deficit and higher foreign debt levels.


    Oil Dips Below $61, Chinese GDP Growth Supports

    Oil slipped below $61 a barrel on Thursday after gaining more than 3 percent in the previous session, as investors remained cautious about the pace of economic recovery despite strong growth numbers from China.

    U.S. oil [ 60.83    -0.71  (-1.15%)] for August delivery eased, after gaining 3.4 percent on Wednesday.
    London Brent crude [ 62.9    -0.62  (-0.98%)] slipped ahead of the August contract’s expiry later on Thursday.

    Oil’s large gains on Wednesday came after the U.S. Energy Information Administration (EIA) said commercial crude oil stockpiles fell 2.8 million barrels last week, against market expectations of a 1.6 million barrel fall.

    Gold eases as dollar rises, technical charts improve

    Gold eased 0.2 percent to $936.40 per ounce as of 0303 GMT, compared with New York’s notional close of $938.45 on Wednesday, when it rose to near $942.

    The world’s largest gold-backed exchange-traded fund, the SPDR Gold Trust, said holdings were unchanged at 1,094.54 tonnes as of July 15, after falling 1.4 percent the day before, its largest drop in three months.


  231. Good morning!

    Pstas – Foss is right, I no longer have a political page because Cap now has a whole blog for those of you who love to talk politics and you can stop by there any time to pontificate on the wonders of capitalism.  I will just mention that your model economy is in debt by 125% of it’s GDP and, if you look at long-term obligations, possibly 300% so you have a "capitalist economy" based on living far above the reality of our means and a "democratic" political system that offers just 2 parties to choose from vs 4-10 in most respectable countries.  I love this country but, for goodness sakes, it’s not perfect and, rather than put on blinders and worship it, I strive to improve it.  Does that make me unpatrotic?

    Models/Foss – 200 Years ago the world was expanding and England was in charge of it.  We are no longer expanding, there aren’t new countries being discovered every year or so to trade with.  It’s hard to model anything on the past when the World is so different now.  What we need is a realistic, sustainable model for the whole planet – survival of the fittest country is not a good plan anymore.  I said a couple of years ago when everyone had China growth fever – 1.3Bn more people CAN’T drive cars, we don’t have the fuel.  1.3Bn people CAN’T air condition their homes, they CAN’T own refrigerators and washing machines – we don’t even have enough metal to build them. 

    If you attempt to raise the standard of living of China and India’s 2.5Bn people from $14Tn to $28Tn then the rest of the world is going to be giiving up about $8 of $40Tn as only about 1/2 of that net change in GDP is likely to "grow" the global economy and the rest would be a reallocation of resources.  In order for 2.5Bn Chinese and Indian people to live like us, they would have to have a $90Tn economy, almost double the size of the planet Earth – they would have to consume 200% more materials than the planet currently uses every year – what do you think that will do to your oil, copper and lumber prices?  Of course, there’s another 2Bn people in Aftica, Eastern Europe and Asia who would also love to live the American dream – what’s the long-range vision to support all these people?  Keep that in mind as you shove the "model" of American society down everyone’s throat….

    We are 5% of the World’s people consuming 25% of the global resources and we’re buying them on credit – of course life looks good for us!  As we seek to expand our market by pushing an increased DESIRE for our products by promoting a lifestyle that is, ultimately, unobtainable and/or unsustainable – we are simply moving closer to the day that the have-nots decide we’ve had ours a little too long.  There is a great video called "The Century of the Self" which shows how consumerism was shoved down the throats of post-WWII America and we are now the 3rd generation products (well most of us, not Gabby) of people who have been taught to consume more than double the global "norm" for developed nations.  It may have been a great idea at the time but the end game is near and I’m very worried about where we will go from here….  Just my .02.

    Thanks Never!  It would be great if you and others could write something up describing what does work for you and how you arrived at your particular strategy.  Maybe we can find a common thread.

    Well JPM saved the markets, so far.  Really blew the numbers out and saved the pre-market Dow from 8,530, which was making me really happy.  Still my down theory was based on jobs and we get those in an hour.  Oil back below $61 despite China’s 7.9% GDP (no, that’s not suspicious at all!).  Dollar was at 2-week los but is coming back except, of course, against the Yen, which fell from 94.5 back to 93.5 to the dollar.  


  232. Hello Morning all
     
    Ramana, I see you posting Asia/Eu data all morning. You may find interesting this link:
     
    http://www.finviz.com/map.ashx?t=geo
     
    Those guys runs in their website  nice tools for visualize markets. In the maps (sp500, world, etc) you can use mouse wheel to zoom in/out, double click for quote, technical and key data.  Is like an google earth from the markets :-)
     
    http://www.finviz.com/forex.ashx  to see forex, gold oil and silver.
     
    The nice thing is they put the information in a very eye-candy way. The run a great stock screener and insider information. In the main page you find mayor indices and nice information like: top gainers, top volume, upgrades, downgrades, stocks grouped by chart patterns:  Channel up, channel down, wedges, double top, and big etc…
     
    I’m no way related to them, the "propaganda"  is just because they give all free. Least I can do for them.  If I had 6 screens like Phil (wow), for sure, one will be for them.


  233.  Good morning Phil & all,
     
    Looks like HOG missed by a mile…. only .08 vs estimate of .24… premarket bid looking down


  234. Nice analysis on the model Phil. I do agree with you. If  we view world resources as cake. If China/India wants more, others have to give them part of their current portion. 
     
    Speaking about this scares me. I always remember a TV documental  about some small farm rats (in England or Scotia) when they overpopulated ans resources becomes scarce they massively jump  of a cliff into the sea. This is a natural thing and brings balance back again.
     
    Now, I don’t see people jumping of windows to bring balance and make their sons and great children a better place to live in. But I foresee other "scaring" things. As humans we are selfish (as individual and at a society level) and there are no limits when we speak about survival instinct.  
     
    - Spider


  235. LOL, That TV documetal I saw was maybe 25 years ago, and i DO remember saying they don’t  understand why the jump a cliff.  I just make a search and found those rats are  actually lemmings and the jump not to commit suicide but to swim and go to other place. (many never make it) .  http://en.wikipedia.org/wiki/Lemming
    Anyway, I still don’t see people moving to the moon or other place in the galaxy. Sorry to be Off-topic. :-)
     
    So in few minutes we have initial claims…. will see.


  236. spider, cap, phil etc – some good thoughts. We may not have other places to go but i think we find other ways to commit "suicide". China’s limiting families to one child (and they all want a male), health care providers deciding if a life is worth saving (esp us old folks), bombings & ethnic warfare. In some ways all of this has been going on throughout history and only now do we hear so much of it on the news.
    But, for arguments sake, if we abandon the survival of the fittest nation plan we will no longer continue to grow stronger. What would darwin think abt that?
    the opinions expressed on this email are not necessarily the authors.


  237. Phil is right.  No country is perfect.  The US is still the shining light in terms of freedom and civil society and individual liberty and economic opportunity.
     
    What Phil and others fail to address regarding the politics of health care and other policy (but we do address every day in terms of the market and economy) is that our political system is FUBAR, with incompetent and corrupt elected officials largely part of a professional political class who exist to milk the system; and ideologues who desire to burden us with their ideology, including the costs of implementing it.
     
    The indisputable fact for those talking about the decline of America in terms of its debt and spending is that the politicians, especially Obama and the Congressional Democrats, are out of control tax and spenders attempting to turn the US into a non-competitive, less free nanny state.
     
    End of rant.


  238. oh, and a bankrupt one at that !