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Double Top Testing Tuesday – 8,900 or Bust!

Whee, what fun!

We got the S&P stick that kept us well and truly above 946 into the close.  If we hold it for a couple of days, we won't be calling it a "stick save," we'll be saying this was the day that 946 turned from resistance to support – a good chartist needs to travel to the future, look back at today's charts and think about them in context of the follow-through move they expect.  Looking further back in time, however, what we have so far is a double top on the S&P at the upper end of our primary range on very low volume.  956.23 was our June high and that still needs to be both taken out and held (preferably at decent volume) in order for us to don our rally caps for the next leg up

I'm encouraged this morning that we may be able to do it though – CAT had great numbers, beating estimates of .22 by .38 per share, that's very impressive for what was a $35 stock yesterday.  Fellow Dow component KO had a nice beat as well as did DD, MRK and UTX,  That's 5 Dow beats in one day and yesterday we finished at 8,848 which is why I'm saying 8,900 or bust today.  If we can't add 52 little points on these earnings, then surely the rally into these earnings was overdone.  If, on the other hand, we can hold 8,900 and build from there – then perhaps we are ready to move 8,650 to the bottom of our range and look to make a 10% move over that to 9,500, a mere 32% off the highs.

I'm excited because it's almost time to pull out a brand new Big Chart with all new targets – if only we can prove this move is real.   Let's not get too ahead of ourselves but I was already very pleased with last night's eanings when all 20 reporting companies beat estimates with PKG and TXN raising guidance of all things!  This morning we also have both ICSC and Redbook Retail Sales reports and Bernanke gives the old Humphrey-Hawkins address to Congress against a very pretty market background which will hopefully overshadow TARP Czar Neil Barofsky, who will be reporting to Congress under the shadow of his "leaked" report that shows that the government's POTENTIAL exposure under TARP is now $23.7 TRILLION.  To get to that figure, Mr. Barofsky combined direct spending with all the government guarantees and programs and assumes the "gross exposure" the government could face if all the programs were tapped to their fullest potential.   It's funny but I don't recall Paulson asking Congress for $700Bn so we could assume $24Tn in debt obligations…


It kind of puts California's $26Bn debt in perspective as that's just 0.1% of the TARP obligation but, unlike the US, California seems to have finally reached a deal to get their budget under control.  The deal, reached by legislative leaders after two months of frequently acrimonious negotiations, would slash spending for schools, public works and welfare programs amid the longest recession since the 1930s. If approved by the full Senate and Assembly, the agreement will also siphon money from municipalities, force companies and individuals to pay income taxes sooner and make it more difficult to receive state aid.  “We came to a basic agreement, a budget agreement,” Governor Schwarzenegger told reporters outside his office last evening. “This is a budget that has no tax increases and this is a budget that is cutting spending and it deals with the entire $26 billion." deficit.” 

California's neighbor to the East and major trading partner, Japan, was quite pleased with the news this morning as the Nikkei came back from a long weekend and jumped up 2.7% this morning.  There was never any doubt at the 9,500 line as the index gapped right over it, did a mid-day test but then had a hell of an afternoon, adding 150 more points to close at the day's high.  Tech stocks led the rally in Asia off good TXN earnings last night but the Hang Seng went flat and the Shanghai fell 1.64% but that is what we expected going with FXP protection as China, of all the world markets, seems to be a bit ahead of itself.  "Much of the equity gains have come on declining volume, [indicating] confidence is still tentative," said analysts at UBS. "We ultimately think the gains will prove unsustainable on a three-to-six-month" basis.  "Investors should consider taking some money off the table as we expect this rally to be interspersed with some pullbacks," said CIMB.

Europe is having yet another nice day (7 in a row) and the FTSE is teesting that 4,500 line this morning and it would be a very big deal for them to take it out.  The DAX is aiming for 5,150 and the CAC need 3,500 to make it's point.  Retailers and banks led the rally, which was nice as energy and metal stocsk took a break in an overnight dip in commodities that is already reversing ahead of the US open (8:30).  Today it was CS's turn to push the markets higher as that bank advised investors to trim their holdings in government bonds and buy equities, reversing a recommendation from June:

Investors should increase holdings of global equities to “overweight” and reduce government bonds to “benchmark,” according to London-based global strategist Andrew Garthwaite. The VIX and investment-grade corporate bond spreads have returned to more “normal levels” and this will allow money market funds to buy into the stock market, Garthwaite told clients in a note today.

Valuations on equities are “not expensive” and consensus estimates for earnings in the U.S. are now being increased, something which precedes a rising stock market in the subsequent two to three months, he wrote.  “Bonds no longer look attractive,” Garthwaite wrote. We expect “a positive macro surprise in the second half of the year. We believe that we are halfway through the first ‘V’ of an upward sloping W-shaped recovery, with a likely peak in the early fourth quarter.”

Gee, comments from MS on Asian markets yesterday morning, Goldman on the US market this morning and now CS on the European markets today – it does kind of make me think of plate spinning as they run around the globe and through the various sectors, upgrading their outlooks in a huge effort to keep everything going because we all know what happens when they stop!  Now I love TXN and I do believe we will recover over time but they earned .20 per $23.50 share vs. .18 expected and that is less than 1/2 the .44 they earned last year, when the stock was at $24.  IF TXN earns $1 per share (.78 estimated) this year then their p/e would be 24, which is a damn site better than QCOM (46) or INTC (36) but still a bit high for a large-cap company in an uncertain environment.  At some point in this process we may have to stop spinning all these plates and see what values actually hold up when the music stops

Still, when things go crazy we switch off our brains and watch the technicals and we only need to see 6,232 on the NYSE to have all of the major US indexes over the 40% mark, something we haven't had since early November.  We want to hold the June high closes of:  Dow 8,800, S&P 946, Nasdaq 1,860, NYSE 6,200 and Russell 530 and we'll be looking to take out the June intraday highs of Dow 8,878, S&P 956, Nasdaq 1,909 (yesterday's close was a new high), NYSE 6,231 and Russell 535.  It was the NYSE who pooped our party in June so we'll be watching that index closely.  We covered our long covers (flipping bullish) in the morning yesterday and picked up bullish plays on MTXX (bull call spread), PGF (leap), PGH (buy/write) and VNO (neutral spread) in member chat but mainly we watched the action as our bullish plays are now so far in the money that there's not much we can do with them at this point other than wait to collect the cash at expiration.

We also initiated a cover play (as we don't like to be 100% bullish) on the SPXU, the ultra-short S&P ETF.  Buying options on an ultra-ETF gives you insane amounts of leverage and we went with the Sept $80s at $3.35 as we expect them to drop in half if the S&P breaks over it's levels.  As it is, they should take a hit this morning and we will be looking to roll to the $75s if we can do it for .65 or less.  SPXU was at $85 11 days ago and these contracts have 60 days to run so a fun play if it turns up and, otherwise, it's relatively cheap insurance against our long gains. 

YHOO and AAPL earn tonight and it would be amazing if YHOO doesn't disappoint us for a change.  Out of 40 companies reporting this morning only 9 did not beat expectations.  They were BJS, BTU, CAL, EDU, LAB, LXK, PNR, PCP and RF.  Among the winners, AKS lost less than expected, FCX crushed numbers, LMT was BTE but outlook was iffy, MRK had a huge beat, SY was encouraging and AMTD pulled out a nice quarter.  So far, so good and tomorrow and Thursday hit us with another 200 reports so we should have a really good picture by the end of the week

Until then, better keep those plates spinning! 


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  1.  Man I tell ya….my mouth is salivating for the market to open !!!…
    My CAT plan is to buy out my Aug 35 putter, then sell my Sep 35 puts
    and then go naked with a buy of some Aug 40 puts for a mo play…. CAT has gone from 30 to 40+ in 8 consecutive days of green candles… half of it in the last two days…. what a run !!
    Whatchya think Phil ?!?

  2. AGain, Art Cashin w/ the Solar Eclipse !!
    Tell us what that means Art !

  3. From the field of "Astro-Economics":
    "As per astro-economics, any time post solar eclipse, stock market may fall very heavily. Expected fall in Indian stock market may 10% to 18% from recent peak levels. Therefore it may be boom for investors but doom for small investors.

    This solar eclipse is also not favorable for US capital market; impact may be seen on Indian stock market also. It is expected from July last week to September 09 some worst financial news are expected from US after which the impact may be felt across the globe. "

  4. Phil
    DIA- I am in Sept 88 puts with 1/4 cover with Aug 86′s.
    I need to roll these to Dec. Question- roll to 88 0r 89 at this time?
    Go to 3/4 or full cover on short Aug puts- seilling  more 86′s or go up to 87′s
    What is your suggestions.
    BTW, I agree- no more health care today- let’smake some money .

  5. Phil – need a little help with AIG, OIH, & MOS. 
    thank you.

  6. Phil,
    I’m getting sqeezed pretty good in SRS since the day Oxen recommended it…. what are your thoughts? You think its safe to just ride it out?

  7. Hi Morning All.
    Lets see,  Earning loos ok, over expectatives and some rising guidance. This looks Good. But as Karl Deninger points, we keep seeing those -30% profit drop all around. I understand this is part of the recession. But this future forecast they are giving will put a lot of pressure on next earning session. Or not?
    As Phil writes above, TXN  earns .20  BEATS .18 as is less than 50% .44 year ago, in a $23+ share. That is my point on the pressure building up  for next earnings… and probably same will go for other.
    This makes me some bearish. But looks its not the time to be bear. Yes, there are many cheap stocks compared with their highs. But many don’t seems cheap for me…. cherry picking will be the way to trough this?

  8. Can they do it?  Will they do it?  Should they do it?  Yes, yes, no.

  9. Peter D
    I have been reading your posts on the Short Strangles and find it very interesting. I am considering getting my feet wet on the RUT play you outlined yesterday.
    As you explained , these things are attraactive but certainly are "margin hogs" and given that the margin requirement will / could change significantly as the underlying moves, do you have a guideline or rule of thumb regarding how much marging to "keep in reserve" for such a play?

  10. "Earnings" beats: Yes, many companies are beating at the earnings level, but the revenue picture is shocking. This morning, CAT missed revenue consensus by 10%, and KO and UTX as well. I could go on. Many companies are missing revenue expectations. CAT’s revenues are down 41% year on year. So, how are they beating earnings? They’re working hard on costs, and that is great, but these companies are shrinking. So the new "base case" for these companies is going to be much smaller than what was normal a few years ago. This is why I cannot chase this rally any further. I’m looking for my spots to set up bear spreads from here.

  11. Dow’s over already, need 50 more NYSE points though…

    We want to hold the June high closes of:  Dow 8,800, S&P 946, Nasdaq 1,860, NYSE 6,200 and Russell 530

    We’ll be looking to take out the June intraday highs of Dow 8,878, S&P 956, Nasdaq 1,909 (yesterday’s close was a new high), NYSE 6,231 and Russell 535.

    So it’s just the NYSE and the RUT holding us back.  I guess it’s up to Ben to tell us how good things are now and if they put a muzzle on Ron Paul, we could have a happy, happy time up in Congress. 

    FSLR is off to the races and SPWRA whipped around from yesterday’s sell-off so something is up in that sector, although possibly it’s just oil at $66 after spiking very briefly to $68 on this last day of Aug contract trading….

    The only signal we’re looking for today is confirming the NYSE and RUT breakouts (and the others have to hold, of course).  I’m all for taking out 1/2 the Aug DIA puts that were sold here as it’s a nice opening move and if we do break higher we need to cover higher anyway but down is the easier path for the market at the moment so let them impress us by going up but let’s not bet too heavily on it happening.

  12. Yeah, boooy!  Unfortunately, no shares of CAT available for shorting.   Just amazing it can get bought up like it is with no shares available.  What a coinkidink!

  13. CAT – Up 18% for me from 5-28 buy-in.  No related options right now.  Should I collar it to protect?  Or?  Thanks.

  14. Looks like the UMT (Upward Manipulation Team) is on the job. 

  15. Wow, what suspense!  This is much better then the last oe day.

  16. Looks like it’s going to cost them dearly if they succeed in taking us higher.  The volume in CAT is going to be huge today.

  17. All – David of Oxen Group says "Go ahead and buy. Merck had great earnings, and the market is trading up. We are in a bit of a down swing this morning so a good time to buy" regarding STJ.  – Ilene

  18. Damn!  They are just buying every CAT share folks are selling!  Soaking up the supply until there is no more.  The only ones left will be the piggies and the MMs.  Calling all sheeple!  Buy CAT now!

  19. ZION beat estimates (losing less than expected) but is back to our buy tartget of $10.70 (sell target is $12.20).

    CAT/Merk – Always sell into the initial excitement is Rule #1 (of 2) for a reason.   CAT had really good numbers and deserves to be up here though so I wouldn’t bet too much against them.

    Solar Eclipse/Cap – It scares me that Art goes for that stuff but I’ll bet about 500M investors in Asia take it really seriously too! 

    DIA/Pstas – Roll as high as you are comfortable.  You want to capture at least a .50 delta, which is the $89 puts at the moment.  As above, 1/2 cover but no cover is good the way things look at the moment!

    This, by the way folks, is why we ALWAYS roll up our long end of the mattress.  Constantly increasing your delta allows you to take full advantage of these dips when they finally come. 

    Help/Morx – I like to sit in the lotus position and chant "Ohm" over and over again until the stock stops going up.  Try that…  (in other words, patience). 

    SRS/Roam – That’s a bet I would press ahead of earnings from that sector.  There is no way they had a good Q.  MAR already gave awful earnings and worse outlook and I think they know what they’re doing.

    Cherry picking/Spider – There will be plenty of ZIONs, who fall on a disappointment enought to pull us back in but I’m not inclined to chase anyone who is within 30% of last year’s high as that is about the MOST I can see us recovering from an earnings perspective.  We are not adding jobs, we are still losing them.  That means there are less consumers each week, not more.  There are less homeowners and less small businesses as more and more of them fail every month.  What we have here is a small return of confidence that is getting the survivors to spend a little but it won’t take much of a bump in the road to put them right back to tightening their belts.  

    I don’t know if I’ve mentioned lately how much is riding on this Christmas season (just 150 shopping days left) with all these retailers hanging on by their fingernails.  If they go, the REITS go and if the REITS go, the banks go (again) and if the banks go, commodities go (again) and then the markets go and we’re right back to square one.  That’s going to be a possibility until we get holiday shopping numbers in January and Q4 earnings that tell us that SHLD and GPS won’t be shutting 1,000 stores each…

    BIDU and ICE finally pulling back a bit. 

  20. It’s 10am and the volume in CAT is now higher then all but 2 of the last 30 days.  One of the other two days with higher volume is yesterday.  Hmmm… no insider information there!

  21.  This CAT needs a collar……. eh?

  22. Unless this is a major friggin headfake or we ain’t goin higher! 

  23. thanks phil – i’m going to pick some cucumbers. call me when it’s over.

  24. Phil, what are your thoughts?  Did they take us to the edge only to sell hard?  Or is this a fake before pushing us higher?  My first instinct is a reversal.  But when I start to overthink it.. I say it’s a fake before we go higher.  It’s a heck of a pullback.. but I can’t see them giving up so easily when they are about to pull money in off the sidelines.

  25. You think we can hit 3700 on transport to break a 52 week high. Else this 3400 is going to be third stall point in three months. I say we make it to 3700 for giggles in a week or two.

  26. Bernanke sees unemployment remaining high through 2011! 

    MS getting whacked ahead of earnings. 

    Volume 40M in first half hour, less than yesterday (50M) – those plates need a spin! 

    Things are slipping now and we have to see if 946 holds on the S&P along with our other watches. 

    Head-fake/Matt – On the whole, this is not much different than the crazy run-up we had at the end of May into early June where we added 600+ points and ran into this same top.  Taking a second run at a top with great speed and hitting it like a brick wall is NOT a sign that we’ll be breaking over – it’s more of a sign that the people who were BUYBUYBUYing were idiots so it is CRITICAL that we break over the tops with not much fuss or this will start to look ugly. 

    Good idea Morx!  Ohmmmmmmm……

    Transports/Thatway – I think the TRANQ paints a more accurate picture than the manipulated DJT.  Check out this chart and see what you think.  We may be bottoming here and forming a new base but I don’t see any mad break-outs in our future.  The BDI stalled this morning too and shipping stocks were the big Asian decliners. 

  27. I’m not much of a chartist matt, but on my 1 minute chart it looks like they’ve put in a little bit of a floor around the 88.75 level on the DIA. 

  28. Hi folks, quick check pls do you think ZION is good for a buy/write with Aug 11s?

  29.  Naz and S&P leading the way down, seems like resistance is too strong 
    DJIA being held higher by CAT’s huge gain

  30. Phil
    DIA- management question- when /if do we roll the longs down?

  31. Getting closer….Go HEB, go….

  32. pstas/Short Strangle Margin requirement – For normal accounts, reserve a margin of 10-20 times what we sold the CALL and PUT for (i.e. looking to make 5-10% a month), so that we can handle deep market drops or high spikes.  For Portfolio Margin account, a margin of 5-10 times the credit is sufficient. 

  33.  RUT support at 520…. breakdown of that 520 level could be first early warning this bull run to the top of the channel is over

  34. morning pharm, is this a buying op for MTXX?

  35. Nice dip on CIT, good on those shorts with a stop at $1.10 now.

    That’s getting AIG to be a little more realistic too. 

    DIA/Smasher – Try the 30 min chart – long way to go down if they fail 88.70, probably back to 8,800.  Now we have to see if 8,900 becomes overhead resistance.

    ZION/Steve – Oh yes, I put a buy on earlier at $10.70.  Now $11.02, you can sell the Aug $11 puts and calls for $1.70 and that’s $9.32/10.16 and an easy put roll to the Sept $10 puts (now .75) if we break below $10.50.

    DIA/Pstas – Roll the long puts down?  When we have a sharp market correction and we are uncomfortably in the money.  Usually more than 300 points.

    VIX back at 25 even with S&P flat and Dow up.  Very strange mixed market moves now…

  36. Morning Phil;
    What is up with C these days ?

  37. Morx – whoa, that was a drop.  I am DD now.  So, yes.

  38. ZION:  I was long from 10′s and sold 12.35 on Wednesday. When they go back to 11′s I bought  2010 $7.50 leaps to start selling premium. Sold the Agu 13 calls against at $.65 and today bought back because they fall > 70%. Looking to sell some calls, maybe Aug $12 or $13 again on any recover.
    I think that stock will remain very volatile and no dividend.  Thats will I decide to play that way.   If you think they will sourvive (as i think) I expect to kill all cost on those leaps…. we’ll see. 

  39. IWM $54 calls for $1.04, were $1.25 this morning, good protection against a run up if you are bearish.  Out at .90, looking for $1.25+.

  40. Phil i had a question about the put/call selling we do. if for example i get into a position like VLO
    buy the stock at 15.50 and sell the aug puts and calls for .94 and 1.36, do i :
    1. sell the sock and buy back the options to close everything out for a nice profit and have the cash to use on something else ?
    2. or let it go through the exp, and see if i still own sell puts and calls again?

  41. PeterD
    Short strangles-margin
    So, if I understand correctly- for the RUT example- total credit for one contract each (p/c) = approx $600. Then "reserve’ margin = approx. $3-6,000?

  42. How many days can we just keep going up before we get a healthy pullback?

  43. C downgraded ZION to sell, that’s why they fell.  I can’t believe they are even allowed to downgrade competitors, that’s crazy!   They lost .35 per share vs. a loss of $1.02 per share expected.  Last year they earned .65 per share in Q2 so my logic on them is that, if they survive and can earn just .25 per share per Q going forward, that’s a PE of less than $10 to my entry and I can live with that while selling some calls along the way. 

    Speaking of C – Down another 2% this morning!  C/Morx – the only reason to own C is to sell calls.  Clearly they are "too big to fail" but they may also be too big to succeeed as well.  Assuming they hold $2.50, you have to like the Jan $5s for .10 and it may be tough but if you offer, you may get .05 for the $7.50s and be in a $2.50 spread for .05.  If the market breaks up, C will probably go with it so it’s a cheap way (even at .10) to cover a bearish portfolio against a massive rally.  $50 (10 contracts) returns $2,500 if C gets back to their Novemeber levels.

    ZION/Spider – Good trade management! 

    Selling/Micro – Well your max profit on the above is the difference between your net $15.50-.94-$1.36 = $13.20/14.10 (assuming those were $15 puts and calls).  That means the most you can make is $1.80 when you do nothing at all and get called away at $15 on expiration day.  If you are able to close out the position for a $1.20 profit or better now, with 4 weeks to expiration – then yes, it’s a good idea but, otherwise, these are more "wait and see" plays.  As the premium sold wears down to below 20%, then it’s time to look at rolls too. 

    How many days/Sthom – Good question.  10 days certainly starts to get ridiculous but so is 7.  We’ve already stepped through the looking glass and Alice didn’t start having fun until she gave up trying to force reality on her present situation…

  44. Hi Pharmboy,
    HEB and HGSI  up more than 15% …
    You said in HEB you will selling 1/2 at $3.. almost there.

  45. Spider – HEB – close enough, 1/2 out @ 2.96 (whew).  HGSI, didn’t play it, and I am amazed how it is moving.  I will wait for a roll over and then could consider shorting.  Gotta B careful though, as they are in bed with GSK on that one (I think).

  46. Question on C: The pick Oxen had yesterday didn’t pan out so well, obviously. Can we expect it to recover or should we cover our loses. It was a straight buy in at 2.84, now looking sad. At the time it was near the low of the day.

  47. Well… would be fair now to ZION release a DOWNGRADE on C to garbage!! :-)
    fair is fair

  48. pstas – you are correct if you have PM.  For normal margin accounts, the Initial Margin for the spread is around $6,000, so you’d need to reserve another $6,000 in margin, totaling $12,000, 20 times the $600 credit (I just checked in TOS trading screen).  For PM accounts, the Initial Margin for the same spread is only $900-1,000, so reserving another $5,000 is suffient (totaling 10 times the $600 credit) – also checked in TOS.

  49. BIIB – some one is betting big on them.   A 3k lot moved through the 50 Jan10 strike (for $3 or so).  Don’t see any others of that magnitude…unless of course, they are covering their stock (but still, somneone bought them). They have a few gaps to fill on the upside.

  50. phil: I am requesting advice to improve a few positions.
    have some long calls which need more time and maybe some cover:
    GS aug 165, and DE sep 45,
    also: CY aug 9 PUT.
    what can be done, TXS.

  51. My favorite show is on:  "When Ron Paul Attacks!"

    Oh man – they cut him off!  How obnoxious!  I like how Bernanke claimes M1 is not growing quickly when they no longer measure M1 so a very nice arguement to pull out for a closing point to Ron Paul (when he has no time to respond).  I wish a dozen congresspeople would yield their time to Ron Paul and let him go nuts on Bernanke….

    I heard Facebook added 25% more users this Q.  Too bad it’s a lousy time to do an IPO! 

    $5KP – WFC backspread: Buying 2 Oct $27 calls at $1.60, selling 3 Aug $26 calls for $1.08.  This is a bearish to flat play on WFC for a .04 credit.

    C/SThom – Unless the S&P fails 946 you can hang on for a hopeful stick save.  You could get out here and sell the $3 puts for .52 as that gets you your losses back as long as C finishes over $2.67 and, otherwise, you are in for $2.67 and you can sell something in Sept.

  52. Thats new, back spread ?how does that work or should i start reading the book ?

  53. Remember that we camped out at this level for a month in June that killed both the callers and putters?  It’s unlikely to be the same this time, but just a thought.

  54. Geez instead of selling 1 $11 zion put for aug i sold 10 :)
    should i buy the extra back for a loss or just go with it lol :)

  55. Watching AKRX very closely. Blew through OH resistance @ 1.2.  Next is 1.7.

  56. Actually, the Nas is up 9 days in a row and today would be day 10 if they pull it off!  This would be day 7 for the Dow. 

    Rates are kicking up because the Fed had to buy $7Bn of $18.5Bn offered today.  That’s way higher than usual for the 7-10-year range.  So while Bernanke is spouting BS about "no inflation" rates are up half a point this morning! 


    GS – I said yesterday take the money and run.  Now it’s down $2 and I don’t feel any different.

    DE – How long have you had those?  Well they should do well with CATs numbers so you probably want to gut it out although I would sell the Aug $41s for $2.10 and use that money to add Sept $42s at $2.30 so you have a free spread with an easy 2x roll if they have really good earnings and at least some coverage if they don’t.

    CY – Those are toast I think.  You just have to hope there’s a semi-catastrophe (not a sort-of catastrophe but a catastrophe in the semi sector, of course) that causese a pullback.  When an earnings play goes against you, it is best to quickly take it off the table. 

    Backspread/Micro – Well the main idea is that We are buying 2 Oct $27 calls for $320 and selling 3 Aug $26 calls for $324.  If WFC goes down, as we expect, then the Aug callers expire worthless and whatever value the Oct calls hold is our profit (plus the 4 cents).   If WFC goes up, we don’t expect them to go much higher than $27 (none of the reporting banks have taken off yet) so we happily give our callers their money back and whatever is left in October is still our profit.  If it goes way up on us we can add another long (even at $4 for the new call, we would have 3 at average $2.40 with 3 covers sold against that we can roll to Sept). 

    Ramp and camp Peter! 

    ZION/Micro – Well you don’t want to over-expose yourself.  If you are not prepared to own 1,000 shares of Zion at $10, you should deal with your mistake now. 

  57. WFC:  Some pics on the WFC play (usnig visualoptions)

  58. I took the DIA 85s for 1.17 yesterday.  DD at .86 for 1.02 net, sold half out at 1.02, DD again at .88 to bring the net to .95, just sold half out again at 1.04.  Phil…I learned this by watching you (cheesy 80s drug commerical reference).

  59. Phil, thoughts on RF here?
    Sold some CAT from retirement account into initial excitement but a little too covered on leaps (d’em the breaks)  Did XOM receive an upgrade today or just responding to renewed schizo interest in oil?

  60.  NYSE support at 6100… looks like NYSE is gonna be first to breakdown support before the RUT does 520
    S&P support at 942 and DJIA support at 8770
    If all those levels breakdown, I’m looking for the markets to get very exciting today 

  61. Solar Eclipse – With tongue in cheek….from someone who knows it all (founder of and the link to tommorrow’s eclipse and its effect on the markets.
    As per financial astrology this solar eclipses will be taking place in cancer with conjunctions of four planets Sun, Moon, Mercury and Ketu(South nod of Moon). This combination is good for long term investors who missed golden opportunity three months back to buy at lower levels in Indian stock market. But short term investors need to be careful in their investment.
    This solar eclipse is also not favorable for US capital market; impact may be seen on Indian stock market also. It is expected from July last week to September 09 some worst financial news are expected from US after which the impact may be felt across the globe.
    This solar eclipse may bring good news for crude oil bulls since price of crude oil may again touch US $80 and above within 90 days from day of solar eclipse. This upward movement in crude oil may start from middle of August 2009 onward.

  62.  Phil,
    Do you have any thoughts on CAL after earnings today? I have a covered call against the Aug 10′s and was thinking of selling a Aug or Sept 9 puts? Do you still like this?

  63. Phil do you think this is a good chance to get into LVS on this pull back or still too far too fast?

  64. WFC/Spider – I like those, they’re kind of cool!

    DIA/Smasher – That’s great but if they keep going against you there’s a point at which you get out even and happy.

    RF/Jo – Well they missed, that’s bad!  CEO said: "While we do not want to downplay the impact of the increase in credit costs this should not overshadow the strong performance of our core business, particularly our sustained growth in households and customer deposits and the stabilization of the net interest margin." I think they’ll hold around $3.50 but, at $2.50 I would really like them again.  On XOM – people are anticipating good earnings now and oil over $65 helps with guidance. 

    Check this out – NYMEX crooks have Aug contracts down to 19,000 and they traded them 125,000 times yesterday.  That’s just 19M barrels now scheduled for delivery to cushing in Aug, shorting us about 1/2 the normal amount and I bet they knock another 10M off by the day’s end.  340M barrels jammed into September and they don’t really want 320M of those either but then some jackass will get on TV and tell you that people aren’t excessively speculating in oil! 

    Supports/Merk – Yep, S&P right on 946 at the moment, RUT right at 520 and I doubt either will hold.  Congress started talking about commercial real estate and things turned sour…

    CAL/Cal – I do like them long-term so if your goal is to keep the stock and sell a little premium each month – that’s great. Just don’t be greedy and take conservative positions.  You can buy them fresh for $9.23 and sell Sept $9 calls for $1.20 and Sept $7.50 puts for .45 for a net $7.58/7.54 with a call away at $9 – how do people not like this stuff?

  65. I think we’re setting up for an afternoon rally.  They won’t let her go down without the perception of a chance she might go up first.  I’m on the lookout..
    Phil, I just get my head around oil.  I can understand how they trade contracts over and over.. but I don’t know how they can push off delivery to a future month?  And if we KNOW we will be getting HALF of the normal delivery for the month and it’s only because there IS NO DEMAND, how can they, with a straight face, use that drop in supply to get people to bid it up?  I mean, c’mon.  There is ALOT more oil where the 19000 barrels will come from.  How can people bid it up knowing that?

  66. LVS/B1 – I was actually thinking of making them a $5KP short play but I was too worried that they could beat numbers (they can make their books say pretty much anything).  I regret not buying more on the last dip to $7 and I am just hoping they miss and I can buy them cheap again. 

    Oil/Matt – It’s all because one of the most impactful things in the global economy, oil, is run like a farce and trading has no bearing whatsoever on reality.  They short the oil so there’s an excuse to jack up the prices every Wednesday.  Part of rigging a game is creating the impression for the suckers that the game is not rigged so having CNBC say oil is up because of a surprising draw in crude allows the rubes to say "Oh, so that’s how the market works!"  If this were in any way a real market:  A) why would there STILL be net 500,000 contracts in the front 3 months.  It’s been the same since January – shouldn’t there be SOME fluctuation?  B)  Why are there 47,420 open contracts in Dec 2011 but only 1,528 in Jan 2012 and only 1,338 in Nov 2011?  If there were actual demand, wouldn’t people want oil every month.  On the other hand, manipulating Dec lets them control the pricing for the whole year.  C) Why has no one purchased a barrel of oil for June 2013 since it was $64, now $81?  People bought barrels for $87 in March of 2013 and for $87 in Oct of 2013 (the surrounding contracts) but no one "needed" oil between March and June?   It’s a total scam!  It’s like saying how come dealer "accidentally" bent the corner of the red queen card but didn’t get a new deck – you’ll still find a new idiot every day who puts $20 on the talble and picks the bent card….

  67. Wow, my screen must be upside down – everything is going the other way today!

    Volume 110M at 1pm.   That’s not too much so who switched off the buy program?  SPXU flying, SRS too.  FAZ and FAS heading back for a cross and totaling $89.64 at the moment so still a chance to set up that play, especilly if you catch an FAS short as a mo play and short FAZ to cover. 

    MOS now down 1%, OIH down about a point too as oil falls below $65 and gold heads back to $940.  Bernanke scared the dollar bears by sounding somewhat repsonsible and muzzling Ron Paul put the icing on the cake there.   They needed that to put a lid on that move in treasuries this morning.

    CIT continues down, now .92 so stop at $1 now (.10 trailing).

  68. Phil – Who switched off the buy program ? - Silly question since GS upgraded the S&P yesterday they are obviously unloading everything they bought since march.

  69. Nice lil 0.5% scalp.  Thanks!

  70. I’m thinking the Naz will finish at 1806.  Just to confound the chartists.  Tomorrow, down big.

  71. That would be 1906 for those of you paying attention.  8-)

  72. ohhh.. i have a long post about airlines and disappear when reloaded page :-(
    Ok, in brief I do like a regional alirline SKYW.  Key statistics are in much better shape than others and if dollar keeps weak after the recession don’t expect people traveling to Europe (spending euros).  After hight stress times and when work pickup, I understand people start to travel more, and take those deservedly vacations. Where?… where your dollars have value.   Cant tell the potential of this company, but at P/E = .5  P/S=.2  holding cash. Debt isn’t that bad.  Well. do your research, but I do like it. I hear they aircrafts aren’ t that good (bombardier, mostly) not easy on fuel and things like that.
    PS: I accept critics on this one,  maybe somebody it used to fly with them.

  73. Phil:
    Nice Buy/Short Straddle on CAL. I hate the airlines but luv the profits on the trades. Keep ‘em coming!

  74. phil thoughts on been short QQQQ and QLD going into AAPL earnings tonite or take my gain, which has been pretty good since I bought at closing ytday.

  75. SKYW: again, options are tiny traded, so expect big spreads.  hard to keep good deals, special if you like to close them before expiration.

  76. What have I been doing last couple of days … not that much.
    Shorting AMZN (flat); BIDU (nice) and AXP (nice – in and out).

  77. Phil just curious why the Cal 9′s is with Sep and not Aug? Am currently in Aug 9′s so caught my interest
    CAL/Cal – I do like them long-term so if your goal is to keep the stock and sell a little premium each month – that’s great. Just don’t be greedy and take conservative positions.  You can buy them fresh for $9.23 and sell Sept $9 calls for $1.20 and Sept $7.50 puts for .45 for a net $7.58/7.54 with a call away at $9 – how do people not like this stuff?

  78. AAPL 150 putters we have….holding through earns OR out?

  79. Phil,
    FAZ/FAS short play.  Are we shorting 100 shares of both stocks, or are we buying deep ITM PUTS?

  80. Lost post/Spider – I always copy my text before hitting submit, especially when a long comment.  I don’t follow SKYW but they do seem cheap enough. 

    Qs/Sheenass – How about sell some premium by selling QID $28 puts for $1.  QID is at $29.30 so you have a little leeway on that one…

    CAL/Steve – I liked selling the $7.50s as a target put and the $9 calls were attracive enough and the payoff (20%) was good enough not to need to have to play with it for 60 days.  A lot of the buy/writes we do are out 2 months.  The idea is to sell and relax so unless there is a big difference in collections without giving up much safety, we often go for 2 months out. 

    AAPL/Oncmed – What $150 putters?  I know I sold naked calls but not puts…

    FAS/FAZ/XLF – The play was to short both when they crossed at $45 last week.  Straight short plays on the stocks, which are sometimes hard to borrow.  It’s a long-term hold against the theory that all 3x ETFs lose value over time. 

  81. my bad…..callers.  what to do?

  82. anyone have thoughts on boeing(BA)?

  83. CAL/Steve – I liked selling the $7.50s as a target put and the $9 calls were attracive enough and the payoff (20%)
    Thanks Phil I missed the detail that the putter was at 7.50 this makes a lot more sense now

  84. wow.. ZIon its getting killed!

  85. Looking for a little pullback here before they paint the ‘all could be well’ finish.

  86. Any thoughts on CKSW. It looks like a solid company and they are coming out with earnings. Its ashame it doesnt seem to have options.

  87. Oh goody.  As if I needed any further proof of my down day tomorrow, Cramer is telling folks they should buy stocks NOW in anticipation of a ‘sorta’ recovery in 6 months from the ‘sorta’ depression we had.  Nuff said!

  88. AAPL/Oncmed – Well I feel good about selling the $155 calls but not $150s so if you are ahead, you may want to roll them up or just get out.  The $155 calls are still near $5 where we sold them.

    BA/Rambling – My thought on BA around $40 is always the same.  I bet that for the next 20 years, people will still fly planes and only 2 companies in the world seriously make planes and one of them sucks.  Unless they invent transporters or something I like them long. 

    Holy cow they could not sell the Watergate hotel for more than $25M!  That’s a big hotel right in downtown DC, they should just convert it to condos…

    ZION/Spider – You mean getting cheap! 

    Cramer time already.  At least this week has been exciting so far.

    CKSW/Miracle – They had a hell of a run but I know nothing about them.  $7.50 was an obvious spot to short them but they arleady survived a pullback to $6.40 which was a 20% retrace of the run so they could be just consolidating but who knows? 

    Oil finished below $65 after much kicking and screaming with inventories tomorrow. 

  89. what type of a zion play should I make. I currently don’t own any shares. Should  i buy some and put a spread. What kind. thanks

  90. The Watergate closed as a hotel and got sold about 3 years ago.  They were selling off the chandeliers and vanities.  Somebody took a huge bath on that deal if they sold it again already..

  91. WHR: Heavy Put action

  92. Interesting.. it took 320k shares to push QLD down just 11 cents but only 161k shares to bring it back up 28 cents.  Seems there are alot of buyers and not so many sellers.

  93. Hmmm.. 1905 on the Naz already.  They made quick work of that!  Not sure if they are going to push up closer to the open or just flat line us till close now.  I should just hold my fire.  I’m feeling like an Injun Trader with all the scalps I got today!

  94. Sorry bears but this is not suck a bad day for the bulls so far.  Poor perfomance from NYSE and RUT certainly prevent us from being more bullish though…

    California should just revote that bill to charge oil companies for the oil they take out of the ground there.  They are still the only state that doesn’t do it.

    Very nice call by David on sticking with STJ this morning!  He’s going to be going private next month with the Oxen Group but our members will still get access…

    ZION/Miracle – You can sell the Sept $10 puts for $1.  Should be $5 in margin less the $1 is net $4 laid out to make a buck and owning ZION at net $9 is just fine

    Watergate/Matt – Oh I see.  I haven’t been there in many years.  They weren’t sold, they were auctioned and there were no bidders so the bank was the "buyer."  I can’t believe that space isn’t somehow worth more than $25M though…

    Buyers are coming back.  Of course volume at 3pm just under 150M so just 40M since 1pm – back in the same old pattern of being ramped up on low volume. 

  95. Dear Phil,
    How do you think of SPXU today? I got in this morning at $3 for Sep 80 Call.

  96. Watch the buyers move in to get aapl in the last hour. 

  97. CSCO.  Who gets credit for getting me into CSCO 22.50 Oct calls as a ossible shortie? (My dumb lingo for day trade or couple days).  Thought I saw it here or dreamed it – anyway, in and out up 15%.  Grazie  (Ditto the STJ props also.)

  98. Oh, I remember.  I was just playing off the usual end-of-day hot options posting here re CSCO calls.  Which leads to my question:  How reliable are these "action" numbers (whatever the play) in signaling movement the next day or shortly after?  If at all?

  99. MCD.  I sold my stash (a extra value meals worth) of McD stock recently.  Using cash for other plays.  At the same time, I’m hanging onto YUM 37.50 Oct calls in the hope their crappy food will continue to appeal.  So…what of YUM?  And, more importantly, any good lookin’ Mickey D long or any kind of plays on ur collective minds?  ‘Cuz dollar meals are gonna rock for a good long while.

  100. Tho maybe I bought STJ too high at $39.51?  And missed their peak today?  Whats our sense of earnings for them tonight/morn?  Can I ride them thru noon tomorrow and into $41 perhaps?

  101. Wow, AAPL is pretty much back to where it was a year ago.  I can’t believe the last 12 months has just been alot of noise!  Unemployment then, 6%?  Unemployment now, 9.5%.  Nothing wrong there!   However, the bulk of the unemployed I would guess are blue collared and may not be the demo aapl depends upon.  Still, I love my new iPhone but, and I know they’ll beat these too low expectations.. but to me it’s a sell on the news event.  Not that I’ll be going short!  We’ll see. 

  102. SPXU/Lafitu – Well if you could have gotten $4 on that run up, it would have been nice but until the NYSE breaks 6,232, they have a nice chance of paying off.  I would offer .65 to roll down to the $75s (and then another .65 for the $70s….) as you do have 2 months to catch a dip so, when it goes against you, you can reposiition cheaply.

    Action/Dstill – You mean off Option Monster or Wilkinson’s stuff?  Option Monster just tells you what’s moving but Wilkinson does a lot of analysis and I take what he says seriously. 

    $5KP/Yum play.  We have 4 Aug $35 calls that we paid net $1.13 for ($452), now .40.  They hit .65 today and yesterday so let’s buy 4 more at .40 ($160) to bring out net on 8 down to .77 and hopefully get the heck out there even.

  103. Amazing; they don’t want to drop this bitch !

  104. AAPL….I’ve purchased the Jan 150 calls and will sell August 155 or 160 calls in the last 10 trading minutes.

  105. AMZN crooks still at it …..

  106. Watergate… What a shock! Had a condo at Watergate South (penthouse) for 5 years. The Watergate Hotel and Restaurant was THE place for so many years. ( lots of US senators in the bar below every PM) The location and views of the Potomac were unsurpassed… and just a few blocks from the hotsy-totsy Georgetown wattering holes. – The politics of change do make a difference!

  107. Wilkinson.  Frankly, I played off the header re bulls all over the CSCO calls and scanned the para.  Just wondering – apart from his analysis – if its worth taking a flyer on someone else big moves/plays.  Knowing, of course, there are two sides to every transaction I suppose.   Both sides can’t be "right."
    Sorry I’m late checking in – u still like the CAL play above? 

  108. YUM/Dstill – Why not spend .75 to roll them down to the Oct $35s, now $1.30?  That doubles your upside delta and if we get a run up you can do a 1/2 sale on the Aug $35s for .70 to pay for 1/2 the roll.   As to MCD, they are in the high end of my comfort zone.  I love them at $50 and they hit it often enough that I wouldn’t bet the trend to break by buying at $60.

    STJ/Dstill – Never chase a day-trade.  David is making this picks off yesterday’s close so if he says up 2-3%, that’s from $39, not from wherever you decide to enter! 

    AAPL/Matt – I don’t know what they can possibly do to look "hot" at this point unless Jobs comes out and leads the audience in jumping jacks….

    Bitch/Cap – I think if we’re going down then Asia will have to lead us. 

  109. Flyers/Dstill – They are always good with play money but you need to know who you’re betting against or a lot of bad "fun" bets can really add up.  As to CAL – if the net is the same then why not?

  110. HEB @ 3.51, 3.57…Done.  Thanks for playing.

  111. Phil,
    I have UNG Oct $8 calls covered by UNG Oct $13 calls – the stock is currwntly at $13.35 – my question is what happens at the time the Caller exercises the $13′s – what does ToS do if I don’t currently own the stock? Do they sell the $8′s to cover or what?


  112. What was today’s title??? 8900 or bust. You have to laugh at how accurate Phil is, congrats again Phil.

  113. Market turns up, GOOG turns down

  114. See folks?  All is fine!  Unless you’re looking at the RUT.  The hardest index to manipulate.  Which one is the easiest?  Just look for the one that’s most green.  I’m going out on a limb and holding QID overnight.  I may even buy more AH after any pop from AAPL.  I’m putting my foot down!

  115. Phil quote:
    "Out of 40 companies reporting this morning only 9 did not beat expectations"
    Did you checked if they beat  as TXN beat stile , or something better?
    Because if 75% beat by earning 50% year ago earnings will be some kind of worrying

  116. Damn Pharm!  I was still getting around to thinking about getting some of that!  It was $2 the last time I looked!  Why the hell did it catch fire like that so quick?  The friggin flu season is still 6 months away almost!  Guess the media got a hold of it.  Thanks anyway!

  117. phil,
    i’m long aapl stock @138.37 and am fully covered  w/ aug $150′s @ $6.41 . Any adjustments obvious prior to announcment today?

  118. thank you, pharmboy. i got 1/2 out at $3 then they scared the other 1/2 out of me by dropping back to the 2.80s. Oh well it was good anyway.
    now see what you can do with the mtxx crowd. they aren’t as lively as heb.

  119. This is an all afternoon long stick !

  120. Roger that re flyers.  I take Wilkinson in context – and I like CSCO generally (in and out over years and on my watch list) – so I shouldn’t say it was totally random or uniformed.  Who do you/we like to bet with on those high volume trades?  Any parameters you can share?
    Gotcha re chasing day trade.  My order was entered and executed at open.   Who gets that previous days close unless it dips early?  Or is that what I’m looking for early on?  A dip to his preferred price?  (David has done very well by me since I came around by the way.)   If I can bracket a day trade, I set my lower and uppers and def get out (happy) at 3% (even if its a 3% loss).  On STJ, even if I got in at $39, they never made 3% today, did they?  [Don't hit me, but I'm gonna ride them into earnings - I like his analysis for more than today and I have my stop firmly in place.]

  121. Oops.  Well STJ def hit 2% off yesterday’s close.  Lemme c whr Im at this last few min. 

  122. In AKRX for 1.26.  Looking for 1.7 or better.

  123. In AKRX @ 1.26. 

  124. They are such ball busters!  Closing at the high.  I should have figured.  Isn’t it great how everyone decided to buy at 1:10 today?  What a complete sham!  Oh well.  I may get squeazed some but I stand by my premise. 

  125. At least one person doesnt think CATs earnings were so great… (Sorry I couldn’t paste a link it’s subscription only )
    Take Caterpillar With A Truckload Of Salt


    If you want an image summing up Caterpillar’s latest set of quarterly results, it’s this: A big, half-empty, lightly manned depot.
    As a spectacular construction- and commodities-fueled boom has turned to bust, Caterpillar is doing the sensible thing: Cutting excess capacity and inventories. Indeed, without cost reductions and currency gains, its operating profit before exceptional items would have fallen 97% year on year, rather than by two-thirds.
    End-user demand has collapsed. Caterpillar’s revenue fell 41%, with some product lines suffering declines of between 60% and 80% for new equipment sales. Faced with this, cutting costs is one of the few levers management can pull. It’s also why they are idling factories and letting their warehouses empty out of inventories, just as the dealers to which they sell do the same. The ultimate buyers of Caterpillar’s equipment and services have closed the gate. That leaves product backing up in the supply chain.
    On the surface, Caterpillar beat the 22 cents per share consensus earnings estimate by a massive 50 cents. But accounting gains on shrinking inventories along with a two-thirds drop in the effective tax rate to just 10% and currency gains accounted for four-fifths of the outperformance, reckons analyst Larry De Maria at Sterne Agee & Co.
    Caterpillar still deserves plaudits for beating at all in such a weak environment. But these results hardly herald a sustainable rebound. And while the company raised its earnings guidance for this year, it trimmed the upper limit of its revenue range, which remains wide at between $32 billion and $36 billion. A third-quarter loss cannot be ruled out.
    As for 2010, if Caterpillar knows what’s coming, it isn’t telling. More likely, it’s just too difficult to say. Before Tuesday’s release, the highest estimate for the company’s 2010 earnings was 19 times the lowest, according to data from Thomson Financial. As with Caterpillar’s sales guidance, that’s a gap big enough to drive a bright-yellow hydraulic excavator through.
    The big uncertainty concerns the top line and is a worry for many other companies, not just Caterpillar. Cost cuts, idled capacity and inventory liquidation cannot offset slumping revenues indefinitely. And while they are perfectly legitimate corporate responses to a slack economy, they don’t do much for jobs, incomes and, ultimately, a recovery in demand.
    This continuing uncertainty over the timing and strength of an upturn in Caterpillar’s fortunes puts Tuesday’s initial market enthusiasm about its results in perspective. Even though the stock’s initial pop of 11.3% faded to less than 8% by midafternoon, it still commands a multiple of 26 times 2010 estimated earnings. If only Caterpillar’s products could count on pricing power of that magnitude next year.

  126. Good news for you permabears on the board (DB, Merk, Matt I think?) – I just had lunch with a friend who’s big into Elliott Wave and he, along with his three trading buddies, all agree that we’re starting the big wave 4 down to DOW 5000 between now and October.  Giddyup!

  127. Giddyup indeed MrM – thnx

  128. And how much money do these 4 EW market powerhouses control in the market MrMocha ?   LOL …

  129. LOL HEB close $3.30 
    Probably there is much expectations on tomorrow conference.

  130. Phil,
    Re: 5% rule – On Saturday I posted on the Salvage Play blog some follow-up questions regarding the 5% rule. Just a reminder that they are still there if you have the time to answer them after hours. Thanks.

  131. HEB – Nice Pharm!

    Exercise/Red – Well you’d have to check their policy but I’m pretty sure if it’s on expiration day they would exercise you both but if you get the stock assigned to you early, they will probably not force you to assign to cover unless it’s way outside your margin zone. 

    Thanks Jamie.  It’s just the same old levels as last month though…

    LOL – you go Matt.  Hey, what happened to Matt the bull?  Wasn’t that yesterday?

    Beats/Spider – I agree.  On the whole, I think earnings are about 1/3 less than last year, which is why I’m suspicious of any move by a stock or an index to closer than 2/3 of last year’s level. 

    AAPL/High – No, I think that’s fine coverage.  Protects you down to $144, which would be a pretty big hit for AAPL to take. Had it been mine at $138, I think I would have gone with a 1/2 cover of Sept $145 at $11.80 as that is effectively selling 1/2 with a  $25 gain and leaving 1/2 to run naked if we head up and, otherwise, it’s the same $12 worth of protection on the whole set.  Of course you could have sold all for $155 Up $17 and bought Sept $140s for $15 and sold Aug $150s for $7 so you have $9 in your pocket with a $2 position advantage to your caller plus one month with tons of cash on the side to adjust.

    Man did they stick it to the bears this afternoon! 

    Bets/Dstill – I don’t generally play them.  I figure if huge bets are being placed then the big boys are in and it’s easy to get crushed but if I see a lot of activity in a sector leader, then I get interested in who else might be interesting in that sector.  As to Dave’s picks – I’ve said very often that if you ONLY take the ones that go the wrong way, fishing for a nice bottom during the day, you will probably outperform by a lot.   That goes for my trades too.  Look how much better you’d be on YUM if you just waited until we DD’d for your first entry!   I like STJ too for earnings, they have a good outlook and some new pacemaker communicator that should do well.  

    LOL Matt – I am in awe of the stick!  How many times can the Dow go up without the other indexes?  

    ROFL – SBUX with a nice beat!!!!

    5% Allen – Oh yeah, I’ll do that.

  132.  RE:      $5KP – WFC backspread: Buying 2 Oct $27 calls at $1.60, selling 3 Aug $26 calls for $1.08.  This is a bearish to flat play on WFC for a .04 credit.
    I am having a hard time grasping the wining scenario here. Do we want the price to stay below $26 until after Aug expiration and then to increase above $28.60 before Oct expiration?

  133. Thx Mr. M., sounds totally plausible.  Problem is, if GS/MS/BLK don’t agree, it ain’t gonna happen.  They totally use chartists.  They make everything line up nice and pretty when they want the chartists’ help in moving somewhere.  Then, when the till gets a little light, they paint it to set the chartists up.  Sometimes they’ll put some change in the chartist’s pocket but alot of times they’ll be taking it out!

  134.  Cap/Matt - my friend is a small fish but says that his three friends are bigger and all "made a killing" correctly reading the Wave down since fall and up since March, so he believes in them and follows their advice.  But I don’t know them and they don’t live near me.

  135. AKRX … ?  well. you have been a good picker. Im in 1k shares @1.25 . Pure speculation.
    Whats behind this Pharm?

  136. OMG I am so sick of BTE.

  137. Mr M., interesting.  I didn’t know the e wave theorists were calling for March’s rebound..

  138. YHOO beat but guided down. 

    WFC/Sunco – We’re in the play for a net credit of .04 ($40).  We don’t want WFC to really finish over $26 but over $25 would be best.   If at any point on this play we are up $100+, we will probably take it.

    BTE/Matt – Well we have 19 out of 23 BTEs this evening so get used to it!  8-)

  139. Thx re YUM – ur right.  Any thoughts on SBUX?  I have a boatload of shares in one of of the kiddie’s Coverdell accounts.   After hours jump seems so big it’s a little scary.   I’ve been carefully shorting calls every month until now.   Any morning movement to cash in on ya think?

  140. aapl beats whisper #. $1.35 vs $1.30 Whisper!!!!!!!!!

  141. LOL  AAPL is unbeatable. There is no recession for aapl. Well, no matter i you have or not a job, you always need an iphone ;-)  

  142. A friend of mine owns a shopping center that leases space to Starbucks.  They beat him over the head with the threat of leaving if he didn’t lower the rent in the middle of the lease contract.  Another location that I know of has sued Starbucks after closing the store and stiffing the building owner on the remaining rent.  It is sad if this is the new "cost controls".  Some of these companies are using these tough times as a weapon just as they did last year with freight cost due to higher oil.

  143.  The AAPL Jan 150/Aug 160 Bull Call Spread bought at 3:50 p.m.  looks very good right now.  

  144. AAPL great as usual with the usual conservative guidance but no one believes it this time. 

    SBUX/Dstill – I have to read their earnings later.  Very much depends on if this is an end of recession thing or a cost cutting thing.  I expected them to do good because coffee prices are way lower than last year.  As are milk and sugar, fuel etc…

    AAPL/Spider – That’s right, they sell necessities at reasonable prices in fashionable packages.  People think of them like an electronics store but that’s not how kids see them. 

    Cost controls/SS – Oh the poor landlords are getting killed this year.  That’s why I don’t see how REITs are holding up so well.

    Bull call/Iflan – Looks better than my $155 calls sold naked at the moment!

  145. Sorry I’m slow to thank others for tips and replies. Will get better. Thanks for the various insight. Great to follow ur threads.

  146.  Phil, it seems like there has been talk in the blogosphere for nearly 2 quarters now about the coming CRE blowup that doesn’t seem to get a lot of press by the MSM.  Today, I heard a senator question Bernanke about it and he seemed genuinely concerned about it.  As SRS seems to have found a floor around 18 (+- 5%), and the options seem reasonable to buy thanks to the lowered VIX, is there any sort of reasonable farther out option play we can make on this?  Barry had a post from Martin Feldstein calling for a double dip and it seems like CRE could be just that catalyst.  Of course, I’ve been expecting some sort of response out of SRS since it was around 30 when I dipped my toe in a few times. 

  147. Red, if you or your broker do not take any action and both positions are in the money the OCC will assign your short and exercise your long automatically on expiration saturday.
    It gets awkward if the options expire very close/at the money. If neither you nor your broker take any action it is quite possible you would be assigned on the short and not have the long exercised, leaving you with transaction fees, stock borrow fees a naked short position and potential margin call the following monday.
    No doubt your broker will be attempting to contact you if you have not traded out close to expiration and do not have enough capital to support any possible outcome, or if UNG cannot be borrowed. If you do have the capital to cover all cases I suspect they would warn you about your positions by email and do nothing else. Only your broker can say for sure and whether they always treat  everything consistently may even be up for debate. Their focus frankly is on not letting you lose them money. If they end up issuing you a margin call you cannot meet they still have to guarantee your position to the market and can end up out of pocket.
    Rather than worrying about all of this I would advise simply trading out before expiration. That way your outcome is in your own hands.

  148. Nice reading DB.
    Tnx for sharing it.  The same apply to DD, UTX and others. So far, i understand we have to follow the trand. And the trend now is to accept this numbers as good ones. And hope for a improvements… think positive. Maybe the guidance we are getting is too pessimistic and they getting all wrong. So, we go up.
    Something like this was talk related to  YUM. The guidance was negative. But Phil told us if economy gets better, YUM can climb assuming the guidance was too negative. I agree. 
    Heading to look whats about those shares I bought on the bell, cant even remember the ticket name  LOL
    Thanks there is a log :-)
    Happy trading, cya! – Spider

  149. YUM. Okay. I sucked on the way in. But can I just say that any freaking company called Yum – esp if the genesis is the Yum Yum Tree of yore – ought to be punished. Imagine the tortous internal memos punning employees to death with “Yumminess.” Blech. In any case, I am reworking my position based on recos here. That said, let me share where I am and hope for minimal abuse. Please don’t ask how I got here but assume Blackberry trading and happy hour aren’t a yummy combo. I have Oct 37.5 long calls at an average of 60 cents. I’m 2/3 covered with August 35 short calls at 45 cents. Be gentle.

  150. Dstill – You are very welcome!

    SRS/Smasher – I just did a radio interview and the guy asked me why I like playing the ultras by selling shorts and I said "because the lower they go the harder they are to push down."  In other words, SRS is based on 2x against the Dow RE index.  At $30, a 5% move up in the Dow RE moves SRS down $4.50.  That’s why I said you were all nuts to play SRS at $30.  BUT if SRS goes to $10, then a 5% move up in the Dow RE moves SRS down just $1.50.  As with FAS and FAZ at $4, it took an 8% move in IYF to move them $1.  So the ultras can trade down to a point but, when they get lower, the options, especially the puts, become more and more attractive to sell.

    With SRS, you can sell Sept $16 puts for $1.15.  You lay out $8 in margin, get $1.15 in cash and the ROI is $1.15 on $6.85 (16.7%) as long as SRS doesn’t fall 12% (and your BE is about 18% down).  So the RE index has to climb about 10% to put you in trouble.  Even then, you can roll.  The Jan $12 puts are $1.25, that’s another 25% down and the 2011 $7.50s are $1.40, another 37% down.  So SRS has to fall from $18 to $7.50, which would require a 25% gain in the RE Index, before this trade is a loser (and then there will be 2012).  That’s why I like these plays.  You only have to be lucky once – they have to go up and up and up and up to beat you (kind of like the current Dow). 

    So I like selling the naked SRS puts.  You won’t get a double but it sure beats paying premium. 

    YUM/Dstill – That’s why I haven’t put trading on my IPhone.  I make enough typos as it is.  Well the Aug $35s are toast and we just bought more so why not take them out completely?  In fact, you’re not even down on the trade if those are your entries.  The $37.50s are pretty pointless on the whole but you can roll down to the Sept $35s, now .90 for net .30 so that’s $2.50 better position at the cost of 1 month.  The diagonal spread you currently have can totally screw you as the Aug $35 callers have a better (.28) delta than you (.22) so there is no upside scenario in which you win (on the 2/3 that are covered) and, if YUM doesn’t finish at $35 or higher at Aug expiration, then you will likely fall to the value of the Sept $37s now, which is .35 so it’s kind of a pointless position.  We do these ahead of earnings when we expect the quick death of the front-month premium and to retain some value in our longs but they are very dangerous and shouldn’t be applied randomly.  

    Here’s a nice chart that illustrates one legitimate reason for the rally:


    It’s going to take a lot of misses to reverse this trend. 

  151. Phil,
    Thanks for the 5% rule explanation on the Salvage Play page. I posted a quick reply to your question about the daily chart on that page.

  152. Thanks for the enlightened review of my remedially stupid YUM spots.   Good stuff.  Learning bunches.  

  153. Phil – Ur terminology and concise take on YUM is very clear.  I just want to be sure I didn’t mangle the description of my position before I internalize what you’ve said and act on it.   I’m long 30 contracts on October $37.50 calls – and I’m short 20 contracts on August $35 calls.   My average costs are as above.  Sorry if I misused "2/3" and "covered" here.

  154. ObamaCare update:
    It is a sign of how weak Obama’s position is on health care that he can’t argue for it honestly."

  155. Good Morning Everyone
    The traditional pre-market pump to get off the overnight lows has started. The S&P was way down at one point but is on the way to the flatline. I’m following the $23.7trillion story and wondering why your press hasn’t made more of these staggering numbers. I wish we had someone like Alan Grayson in our govenment. He seems really switched on to all this crap. Bernanke just looks so guilty.

  156. Good Morning Phil, DB & all

  157. Earnings beats – Too early to tell (and maybe my bearish bias) but it seems that manufacturing, chemicals, plant etc are all showing very large drops in revenue covered by cost and job cuts to save earnings. End user products and technology seems to be holding up and banks that didnt get bailout money are toast whilst banks that did are making hay. So I think that implies pipelines are being emptied and not refilled. Not sure how that pans out. Waiting to see what retail has to say but I dont think earnings justify the blanket euphoria.

  158. Good Morning Ramana

  159. Mornin’ from Scotland to fellow UK’ers and back home too.
    I dislike watching the futures, as It always seems to frustrate the heck outta me.  Well at least it isn’t raining!

  160. Asia/Pacific Markets    Wednesday, July 22, 2009
    (The following is from Yahoo, please confirm with other sources)   

    Australia All Ordinaries*                 4,068.90        20.60        0.51%
    Nikkei Average*                             9,723.16        71.14        0.74%
    Shanghai Composite*                     3,296.61        83.41        2.60%
    Hang Seng*                                19,248.17       -253.56      -1.30%
    Seoul Composite*                         1,494.04           5.05        0.34%
    Singapore Straits Times*               2,450.83          -3.50       -0.14%
    Bombay Sensex                         14,840.63       -221.86       -1.47%
    Baltic Dry Index                            3,455.00        -56.00        -1.59%

    * at Close

  161. Good Morning Where
    Its either futures or the cricket ! but since the test finished its futures for a week or so …

  162. DB – I think your observations are correct.  And at least from a fundamental standpoint are scary.  But it does seem to me that if the consumer can keep it up for a while (and they may) then many companies will continue to "beat" as they are selling the last remaining inventories while basically shutting dowm all production and associated costs.  I see that this could indeed last through the holiday season having the market mask the underlying problems.  The real issue lies with the consumer.  When will this apparently discressionary cash (i-Phone anyone?) run out?  That’s when the music stops.

  163. Asian Markets End Higher But Gains Muted

    Asian markets were higher on Wednesday after U.S. stocks marked their seventh straight day of gains, but gains in Asia were capped as some markets took a breather.

    Japan’s Nikkei clawed back into positive territory to close up 0.7 percent. The broader Topix gained 0.6 percent. But exporters took a hit as the yen crept higher against the dollar.

    South Korea’s KOSPI eked out a 5-point gain to end at 1494.04, staying rangebound following their recent rally.

    Australian markets were ended higher with the S&P/ASX 200 up 0.4 percent.

    The Hang Seng fell by 1.3 percent after a late-session selloff, while the Shanghai Composite gained 2.6 percent.

    Singapore’s Straits Times fell 0.3 percent and Malaysia’s KLCI rose 1.2 percent.

    Greater China markets were all in positive territory led by solar energy stocks after China launched an unprecedented and long-awaited plan to offer subsidies for utility-scale solar power projects.

    Bombay Stock Exchange’s Sensex ended at 14840.63, down 221.86 points or 1.47 per cent. Indian markets ended in the negative terrain Wednesday as traders booked profits after a recent surge in equities. auto space were down while realty stocks closed a little higher.

  164. DB/where – Cricket ? Please… when was the last time we watched one where the matches have not been fixed. :-)

  165. Euro Socks Halt Run; Miners, Banks Drop

    European shares slipped on Wednesday, snapping a seven-day winning run, as banking and mining stocks weighed, while analysts cautioned about earnings expectations, pointing to profit taking after the recent surge. The FTSEurofirst 300 index of top European shares was down 0.7 percent at 881.82 points.

    Mining stocks took the most points off the index and the DJ STOXX European Basic Resources Index was the biggest sectoral loser, down 2.1 percent. BHP Billiton fell 2.3 percent after the world’s largest miner said restocking of commodities in China may have ended.

    Banks also fell, with the DJ STOXX European Banks Index down 0.5 percent, and Deutsche Bank, Barclays and BNP Paribas shedding between 0.4 and 2.4 percent. Shares in Wincor Nixdorf fell 9.3 percent after the German maker of ATMs posted weaker-than-expected quarterly results, while the company’s full-year forecast disappointed.

    On the upside, the DJ STOXX European Telecoms Index was the top sectoral gainer, up 0.4 percent, with Deutsche Telekom, Vodafone and Telecom Italia up 0.5-3.1 percent.

    Later in the day, investors will focus on a raft of further second-quarter earnings by European companies such as GlaxoSmithKline and Fiat.

    Around Europe:
    FTSE     4,482.46       1.29          0.03%
    DAX    5,088.95    -  5.02        – 0.10%
    CAC     3,281.54    – 21.35        – 0.65%
    SMI    5,632.01     - 4.18        – 0.07%

  166. Ramana – Cricket – LOL watch the Ashes !!

  167. LONDON — The contraction in U.K. manufacturing output eased in July but order books sank to their lowest level for 17 years, indicating further trouble for the sector in coming months, the Confederation of British Industry said Wednesday.
    The CBI said that the volume of output eased to -14 in July from -17 in June.
    However, total orders — an indication of future activity — plunged to -59 from -51. That is the worst result since January 1992.
    The reading for export orders eased to -45 in July from -52.
    CBI chief economic adviser Ian McCafferty said "the further sharp decline in export orders is of particular concern as we are not seeing much of a boost from the relative weakness of sterling."
    "These figures reinforce our view that the road out of recession will be long and slow."

  168. Oil Falls Below $65 on Build in US Crude Stocks

    Oil fell below $65 a barrel on Wednesday after data showing an unexpected rise in U.S. crude stocks suggested demand in the world’s top energy consumer was still weak.

    he market awaited U.S. Energy Information Administration (EIA) data due at 3:30 pm London time to see if they would confirm the American Petroleum Institute (API) figures. "The API numbers will likely exert pressure on the crude complex over the course of the Wednesday session, as they imply that the EIA numbers will likely follow suit," said MF Global in its daily note to clients.

    U.S. light, sweet crude [ 64.74    -0.87  (-1.33%)] oil for September delivery was down, having fallen to a low of $64.42.
    London Brent crude [ 64.67   -0.94  (-1.43%)] for September was lower.

    U.S. crude oil stockpiles rose unexpectedly last week as domestic refining activity slumped, the API said on Tuesday. A Reuters survey of 15 analysts forecast the EIA would report a drop in crude oil inventories as slow imports countered a decline in refining activity. But refined products supplies were expected to have risen, despite the lower domestic refinery capacity use.

    Euro Eases as Stock Declines Dampen Sentiment

    The euro was pressured against the dollar on Wednesday when a recent rally in equity prices ran out of steam, dampening risk-taking sentiment.

    The euro [1.4191    -0.0033  (-0.23%) ] was down versus the dollar after hitting a seven-week high on Tuesday at $1.4278, close to its peak for the year.

    Traders reported hefty options activity in euro/dollar at $1.4200, set to expire later in the day. A holder of a digital option will get payout if spot is above $1.4200 at expiry, while other expiries at $1.4200 are thought to total 1 billion euros, market participants say.

    Against the yen, the euro [132.58    -0.78  (-0.58%)    ] fell. The dollar index, a gauge of its performance against six major currencies, was flat at 78.960 after touching 78.591 on Tuesday, its lowest since June 3.

    The pound [1.6373    -0.0086  (-0.52%)    ] was down versus the dollar on the day.

    Higher risk currencies such as the Australian and New Zealand dollars edged down after rising in recent sessions.
    The Australian dollar [ 0.8139  -0.0042  (-0.51%) ] fell versus the dollar after hitting a 5-week high of $0.8193 on Tuesday.
    The New Zealand dollar [0.6544    -0.0036  (-0.55%)   ] slipped against the U.S. dollar after rising to $0.6610 on Tuesday.
    The dollar eased versus the yen [93.4    -0.33  (-0.35%)    ] after shedding about 0.5 percent on Tuesday.

    Gold pares gains as dollar steadies vs euro

    Gold was bid at $948.90 an ounce at 1446 GMT against $948.35 an ounce late in New York on Monday, having earlier touched a session high of $953.40.

    Gold prices in India, the world’s largest bullion market, were flat as dealers awaited lower prices. On the investment side, holdings of the largest gold ETF, the SPDR Gold Trust, were unchanged on Monday.

    Silver was flat at $13.62 an ounce, platinum was at $1,179.50 an ounce against $1,180, and palladium was at $253 an ounce from $252.

  169. OK – Last of my bearish posts but it illustrates my points about earnings v cost cuts and revenues. Had to cut and paste because the link is subscribers only. Sorry
    Whirlpool 2Q Earnings Smash Estimates On Cost Cuts


    Whirlpool Corp.’s (WHR) second-quarter earnings fell one-third on what Chairman and Chief Executive Jeff Fettig called "significantly lower" consumer demand for appliances.
    But the company reported higher North American profit on its cost-cutting efforts and overall earnings were double what analysts expected. As such, the company sees 2009 income at the top half of its prior target.
    Whirlpool, which has also been dealing with pressures from raw-material expenses, has been trying to combat the weak sales environment with belt-tightening. But the housing slump and tight credit markets have been dissuading consumers from buying new refrigerators, stoves and other major appliances.
    Last week, rival Electrolux AB (ELUX-B.SK) reported a sharp jump in second-quarter income and suggested the crucial U.S. market was showing early signs of recovery. That company, which stands second in size only to Whirlpool and has also been cutting costs, said it gained market share in North America, Latin America and Australia.
    Whirlpool posted earnings of $78 million, or $1.04 a share, down from $117 million, or $1.53 a share, a year earlier. Revenue dropped 18% to $4.17 billion; excluding the impact of currency charges, the drop was 10%.
    Analysts polled by Thomson Reuters expected per-share earnings of 51 cents on revenue of $4.2 billion.
    Gross margin fell to 13.3% from 14.8%.
    Whirlpool’s North American profit rose 19% despite a 17% sales drop. U.S. major appliance shipments dropped 14% and the company reiterated its the region’s shipment forecast for the year.
    European revenue slumped 25%, half due to currency changes, while volume dropped 12%. The segment swung to a loss and Whirlpool further cut shipment targets for the region.
    Shares closed Tuesday at $56.34 and were inactive premarket. The stock is up 36% this year.

  170. YUM/Dstill – Yeah I got the 2/3 cover, I just think it’s the kind of position you need to take a stand on or what are you hoping for?  You want YUM to go up but not too much?  That’s a fine attitude into earnings (like our WFC backspread in the $5KP) but not from a bottom call.  If you don’t think they stock is going to make a nice move up, what’s the point of you paying $4.60 in premium over 3 months for the $37.50s?  The stock has to rise $1.40 per month just to get you even and it may jump $3 tomorrow and then nothing for a month and wouldn’t that suck if you are trapped against getting your gain because you sold calls that are $1.50 in the money?  Also, with a .23 delta, you would only double up on a $3 gain to maybe $1.30 x 3 ($3.90) a $2.10 profit but your two callers, if we shot up to $36.50, would be $1.50 in the money x 2 for $3 and a $2.20 gain.  Again, this is not a bad play if you are expecting upside resistance but not if you think you are buying at a bottom and the $2.50 you are giving up to your caller is a hefty percentage (8) of the total stock, which allows for a gap that can hurt you. 

    $23.7Tn/DB – It’s not a real number.  That’s why not enough people are making a big deal about it.  As I said the other day, that number assumes every single asset claimed is worth zero and every single loan outstanding is defaulted.  You can apply that logic to any bank that uses 10:1 leverage and create all sorts of scary numbers.  This is the basis of the banking system, a number of loans are made with the expectation that some will default and on those defaults there is an expectation that there will be some value retained on the assets.  You can argue for more conservative numbers here and there but once you start saying ZERO is your number – you are just being ridiculous, much more so than a bank who claims they expect to recoup 100% of all loans and assets because they are probably off by 10%-20% while you would be off by 80-90%. 

    As to earnings etc.  Yes, we see an overall contraction in revenues and layoffs and capacity shutdowns means we have a new "normal" that will likely remain lower than the old normal but, again, it’s not ZERO is it?  We have companies operating profitably at 30% reduced levels.  I don’t care what BXP used to earn, they earned $1.23 this Q and if they earn $4.80 a year I’m willing to pay $48 for them.  What is their price now?  $49.40 – that’s FAIR!  There are so many stocks where the CURRENT p/e is 10 or less that you can’t just run around being knee-jerk bearish.  They return 10% on your money and that’s much better than anything else you are going to put your money into, even if they have no growth.  If there is even a slim possiblility that the economy picks up over time and they do grow – even better….

    AAPL earned $1.35 per share and is going for $150, not quite the p/e of BXP…  Some things are a bit overdone.  SBUX made .24 so $1 per year and $16….  Of course, these are rough as who knows if Q2 is a big Q for these guys but there are so many obvious values like PTP, who made $1.90 this Q with a $32 price (p/e 4) that even a perma-bear should be able to find something they like! 

    China is getting strange.  Now the Shanghia flies up and the Hang Seng goes down?  I guess it was that solar thing and at least that explains why US solar companies went nuts yesterday. 

    WHR/DB – So the fact that a company can go from $18Bn in annual sales to $16Bn in annual sales and manages to skillfully control their costs and maintain a good level of profitablity supports your bearish premise???   Not everyone buys stock for one quarter and a lot of people will flock to a company that can get through hard times and adjust so quickly. 

    There is some insane expectation that companies must go up and up and up or they are worthless but if I can give WHR $50 and they can produce $5 a year in bottom line profits then I’m happy.  Over time, if you invest in the best companies, they survive.  If you invested in evil GS because they were the best, you have been rewarded already as their stock has come back AND they have eliminated several major competitors who were not as nimble.  That means if the world ever does recover, they will be swimming in cash, probably blowing the doors off XOM for quarterly earnings and GS’s market cap is 1/4 of XOMs.

  171. Hey, morning all.
    I totally agree with DB and Phil. Earnings are best than expected and masking some things BUT the market is accepting them and if they manage to ride this thunderstorm, they will be in good shape for future. Read Karl Deninger, he explains very well when speaking on KO:  (bold is mine)

    "EPS was up dramatically to 88 cents with the gain almost entirely due to restructuring and efficiency improvements (again, recessions force efficiency gains, which is a good, not bad, thing!)  If there’s a bright star in this recession in terms of revenues, it is found in companies like Coke which have managed to avoid the revenue disaster monster."

  172. Spider - Yes,  Phil believes that "most" companies are fairly valued around now and that by cutting costs they will benefit when the market picks up, hence there is no bear case for a drop in values/the market. I would argue , because I see no recovery (flat if best, down when the consumer/real estate get worse) that these companies wont be able to cut cost next Q , neither will they increase revenue. Therefore the lift in price that these earnings are giving them will have to be withdrawn. I’m not sure I believe this chart – but even if its half true then S&P is well overvalued …

  173. Sorrythe chart got removed from the last comment

  174.  Morgan Stanley horrible earnings miss…. single handedly is driving futures down

  175. Where - it’s not raining in Scotland?!?!? Heavens – you’ll be telling us the sun is out next……

  176. RGR DB.  Thats why I think we can cherry pick hammered stocks  with current fair values based on a slow recovery. Hard.
    But on drops and selling puts calls we can average down and get good entry.  Like phill call X at $30 a week ago, of others.