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Thursday, December 1, 2022


Testy Tuesday Morning

Our levels are holding so far

We came right back to 1,000 on the S&P yesterday but it held like a champ and that gave us the confidence to take a bullish cover on our longer DIA protective puts, right at 3:04, ahead of the usual 50-point stick save but it was a move we initiated right at the bottom at 2:30, catching almost the dead bottom on our roll.  Of course it's total nonsense but it's total nonsense we can count on with 8 stick saves of at least 50 points in the last 90 minutes coming in the last 10 market sessions accounting for 400 points of Dow gains or ALL of our gains since July 20th when we "broke out."

As illustrated in David Fry's SPY chart, the only exceptions to the stick save were the last two Fridays and I said to members in yesterday's chat, perhaps that is somehow significant that the collective we call "Mr. Stick", does not feel confident enough to make bullish plays into the weekend anymore.  Today we should head right back to re-test 1,000 on the S&P but we are much more bearish overall, having taken profits yesterday and covered our unrealized gains in our $100KP – the plan we discussed in yesterday's morning post.

We got a re-test and a re-failure of the Russell at exactly our 574 target right at 11:15 and the the Qs never even mounted a serious threat on our 40 line so it wasn't a tough call for us in the morning.  The other levels we are watching, Dow 9,297, S&P 1,000, Nasdq 2,017, NYSE 6,438, Russell 562 and SOX 308, are looking shaky and may not stand up to another test, especially if we get any bad news on our upcoming data with Wholesale Inventory and Productivity Reports on deck this morning.  Our bearish additions were an ERY spread (3x Energy bear) and COF Sept $40 puts, which are already up 10% from our 12:17 pick.  It wasn't all negative, we liked a couple of buy/write plays and we took a very bullish spread on FRE, which should do very well this morning.  At 12:57 we had noticed FRE moving up and, in Member Chat, we were discussing the merits and my take was this:

FRE/Ifl – The float of FRE is just 650M shares and they are capable of earning $5Bn a year in a stable economy so that would be about $7.50 per share.  If we ignore the fact that they lost $50Bn (10 year’s earnings) by virtue of the fact that it’s been swept under the rug by the government.  Even if you think it would take them 10 years to pay Uncle same back you still paid $1 for a stock that will let you retire on $7.50 a year in earnings.  FRE is not going away, the common stock may end up being liquidated or whatever but, on the off chance it’s not – we were buying them in the spring at .60 on this same premise.  What the hell, you put down $1,000 bucks and maybe get $15,000 a year off it down the road – that’s worth a toss.  Less so at $1.30 but now options come into play again so a world of possibilities like buying it here and selling the Jan $1 puts and calls for .95 for net .45/.73.  You can also spread the Jan $1s with the Jan $2.50s for .34 with a $1.50 upside at $2.50 and in for the same $1.34 as it would cost to buy it now but with less downside delta.

Those $1s should be looking pretty good this morning as FRE reported earning $768M this Q ans said they do not need any more bailout money.  Of course, this ignores the fact that the Fed is buying hundreds of Billions of Dollars of the company's debt at close to face value – THAT they do need to continue or this company will vanish in a puff of smoke so be aware of that before you start chasing them uphill!  Still it should make for a fun short squeeze this morning and, like I said, what a payoff if it hits…  EOG also caught our attention and we put a bearish backspread on them but the margin requirement was too much for the $5,000 Virtual Portfolio, which could use a good sell-off to push WHR and VNO below $59.

Of course the news isn't all bad.  The Wall Street Journal is running a heart-warming story this morning about how cities like Nashville, Tampa and Ontario California are all part of a growing movement of cities who embrace the tent cities that lie on their outskirts as they clearly have no better idea of what to do with the rapidly growing population of homeless people.  According the the WSJ: "After years of enforcing a tough anticamping law to break up homeless clusters, Sacramento recently formed a task force to look into designating homeless tracts because shelters are overflowing. One refuge in the California capital, St. John's Shelter for Women and Children, is turning away about 350 people a night, compared with 25 two years ago, said executive director Michele Steeb."  See – it's a growing business!  Who says this economy doesn't have any thriving sectors?

Actually, the homeless may be the fastest-growing segment of our economy with almost 25% of all US mortgage holders currently owing more money than their home is worth, a figure that is projected to rise to 30% by mid 2010.  Wow, what's the name of the company that makes Gortex?  “The negative-equity rate will rise and spin off more foreclosures,” Stan Humphries, Zillow’s chief economist,  “I see a substantial downside risk to prices and don’t think we’ll see a bottom until the middle of next year.”   A glut of unsold homes is also pushing down prices. The 3.8 million homes for sale in June would take 9.4 months to sell at the current pace of transactions, according to the National Association of Realtors. The inventory turnover rate averaged 4.5 months in the six years from 2000 to 2005.  More than 18.7 million homes, including foreclosures, residences for sale and vacation homes, stood vacant in the U.S. during the second quarter.  

So, let's do the math:  There are 3.8M homes for sale and that is a glut of homes that is more than double the rate we had in the "healthy" economy we had in the first half of the decade.  BUT, that does not include at least 14.9M VACANT homes that will, one assumes, either have to be sold by the banks or written completely off to the tune of (at the $186,000 national median) $2,771,400,000,000.  These are real numbers folks, no matter how much you try to sugar-coat it, these numbers eventually come back to bite the economy in the assets.  “We haven’t seen a bottom in home prices, and it could take into 2011 before we see equilibrium in the market,” said Michelle Meyer, an economist at Barclays Capital in New York.

I know – Ouch, ouch and ouch!  You may say: Phil, how can you point to these things and not be reporting from a fallout shelter in the backwoods of Canada?  Well, for one thing, I have faith that all this can be fixed over time – we simply lack the political will so far.  I solved this housing crisis 2 years ago and some of my proposed measures have actually been implemented but not my biggie, where I last posted in February "How to Solve the housing crisis TOMORROW."  Fortunately, I'm not the only problem solver in this country.  Our friends at GM, just 3 years after gasoline first hit $2.50 per gallon, is ready to go to production with a car that gets 230 miles per gallon (city)!  Automobiles use 40% of the world's fuel or 33M barrels of oil a day and most of that is city driving.  Make no mistake about it, OPEC is terrified of this and they have now lowered their forecast for 2009 by 480,000 barrels a day, not based on the GM Volt, but on the already rapid trend of permanent demand destruction as global consumers just say no to conspicuous consumption in a jobless (and homeless) economy.

Another reason you have to love this country is we sure can pull it together when we have to.  Productivity is up 6.4% in Q2 as a frightened worker turns out to be a highly motivated worker.  This was up considerably from the 5.3% gain expected but, unfortunately, Q1 productivity was revised down by 81% from 1.6% to 0.3% so it kind of calls into question yet another set of vital government statistics.  Hours worked dropped an average of 7.6%, something we discussed on the weekend as I had pointed out that the 150M people who do have jobs in this country are making 5-10% less for doing them and that is just like having another 15M people out of work.  Oops, sorry – this was supposed to be the bullish counterpoint…

Well, sorry but, while we're on the subject – I must share.  This was my favorite news item of yesterday as VLO is being sued for cutting their costs by cheating their workers out of millions of dollars in overtime wages and it is just the perfect microcosm of what's going on nationally in the Q2 profit picture.  The class-action lawyer is a vertitable quote machine so I'll let him have the last word on this subject:

"To keep its gas pumps flowing, Valero virtually pumps the lifeblood out of its workers who are expected to be on call 24-7, but are only paid for a fraction of the time they spend working.  This class action aims to turn off this oil Goliath’s unfair pay practices…  When it comes to its employees," adds Mr. Wittels, "the only thing Valero has refined is how best to fleece its employees out of their wages."

So now I've gone on too long and run out of time but Asia was up half a point and nothing interesting happened there.  The BOJ held rates at 0.1% but they won't give us home loans at that rate so what do we care?  Europe is down half a point at 9am with Latvia's GDP falling 19.6%, keeping our premise alive that the Baltics may still sink the EU.  The IMF was forced to lower Romaina's budget limits as well in order to keep that country running on life support and, of course, on a day when oil was testing $70 and OPEC lowered their forecast, it was inevitable that Rent-A-Rebel would come to the rescue and attack a pipeline in Nigeria.  This time it was Shell's turn to knock off a day's production in order for NYMEX traders to have something to hang their hats on as they desperately attempt to talk up the price of oil before it falls off a cliff. 

We're just waiting for the Fed tomorrow and then it's July Retail Sales on Thursday so nothing that happens today matters all that much but the Nasdaq already blew it's levels and we have some serious tests coming up on the rest.  We're already bearish so it's the bull plays we'll be eyeing today, especially the ones we reviewed over the weekend but, as I said last week – watch the newsflow in the MSM.  If it starts to get negative, look out below!



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Phil: now all comments but mine are shown, what is going on ???

MrM – ARRY should be fine for a scaled entry.  BIG volume on 6/8 that has kept them in a channel.  Support is 4 and they have almost filled that gap back to 4.25.  ARRY was upgraded today/yesterday (?) by one analyst.  Mid is 8, high is 15.  This analyst noted a glucokinase activator (ARRY-403.  Press release below.   Along with the MEK inhibitors for cancer, they should be ok.  I would expect either a purchase of them or a shelf registration as they are moving ~ 30M a quarter, and have 3-4Q left of cash (if I am reading it right).
The drug was well tolerated at all doses, demonstrated a PK profile consistent with once-daily dosing, provided a dose dependent reduction in glucose excursions (changes in glucose concentration) after a standardized meal, and reduced 24-hour fasting blood glucose. ARRY-403 provides a dual mechanism of action both enhancing insulin production in the pancreas and regulating glucose metabolism in the liver. Array is initiating several ascending dose studies to evaluate the safety and efficacy of drug over a 10 day period.

Phil, picked up the Dec 102 SPYs at 5.1 and sold Aug 101 SPYs at 1.7 yesterday. Both are down today around .80.
Does it make sense to roll my Dec 102 to Dec 100 for $1 and then swap the Aug 101 callers with Aug 99 callers to pay for the roll?

Phil: note says: comment waits for moderation.

Blair, it depends on your urgency.  If you want it right now, splitting the bid/ask in wide spreads is a good place to start, then go up a nickle every few minutes until you get it.  If you want it today and are willing to miss it, put in at the bid and just wait for it to come to you.  Also you can look at the last price; if it’s an hour old it’s not much help but if it’s a minute old it should give you some pricing clues.

Man, 1.88 for the WMT Aug 50 straddle.  Is there any news? Is this stock suddenly going to finally do something? Puts way ahead of calls too.

PharmBoy – thanks. Know anything about ARIA, some big buying there lately and last week the CEO bought 2M shares at 1.75?

Brianma I think you meant the VIX futures. Perhaps people are referring to the "curve"?
Current VIX 26.66
August Future 26.95
Sep 28.95
Oct 29.9
Futures are pricing in that VIX will rise and are therefore priced at a premium to current vix…..

Phil: looks as subscription expired a moment again, I sent a mail to renew at same terms.

Phil: have just renewed, need to make mor $$$ as your price went up.

Phil and Steven, thx!! 
Steven/Phil…in physical futures markets (CC, Surgar, Soybns, etc.) further out contracts are typically priced higher since the price includes the cost of carrying (storage, etc.) and I have tended to discount higher prices on further out contracts.  If volatility futures do not a have a carry charge can a higher price for farther out contracts always be interpreted that way?  Is the reverse true?  Lower prices below VIX in farther out contracts means often higher index prices, etc.? 

They were part of my writeup MrM, I am so sad…..http://www.philstockworld.com/2009/08/08/pharmboys-phavorite-phings/
Meanwhile, anyone need a little Zenvia?





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Avanir Pharmaceuticals Inc <AVNR.O> said on Tuesday a reformulated version of its Zenvia drug reduced emotional outbursts tied to a neurological disorder, meeting the main goal of a late-stage study and nearly doubling the tiny company’s stock price.

PharmBoy – never mind my ARIA question, I just discovered your weekend post and coincidentally it’s there. Cool stuff!

What’s up with that post?

Now I am πŸ™‚ MrM.

 Hey Phil;
how about some thing closer to home ? OC NY  been driving up there from DC as long as i can remember, its such a nice quite city, safe, its some how frozen in time. my father used to own a doughnut shop there when he was young, he didnt buy the place, something about not wanting his kids being filthy rich πŸ™‚
I have also been to san sebastian spain, very beautiful. tiny little city wraped around this tiny bay. its such a romantic city, but i was single when i went there so must revisit the wife now πŸ™‚

KBH back from the dead today !

Thanks for your help. I have been trying to play this option game for quite some time now and thought that its better to try and follow the big traders than be left a loser most of the time. I find it fascinating how the prices for the options fluctuate in different percentages and how some people could figure out exactly which option will increase or decrease in price. You sound like you know what the heck is going on and I wish I could have some of your knowledge.  Maybe you could give me some kind of course. All the reading I did really hasn’t help me much. A one on one is much more beneficial.

ERY.  I could sing it.  My daughters hear it all the time.  (not ERY)
Acela.  I’ll stop boring everyone.  But we had the driver take us out to Hoboken from mid-town about noon on Sunday.  Train at 3:14 Newark Penn.  Carlo’s is 7 miles away – seemed easy and less hectic than back in manhattan.   lesson learned.
Micro – OC NY.   Cool.  But my fricking daughters now think the beach and water around USVI and BVI are normal.  Imagine their horror when they meet the, re, it meets them, the "dirty and cold" Atlantic.  lol
Ciao ciao for now, gents – and ladies (esp ladies).

 QQQQ’s now back over 39.25 on a stick

DIG vs DUG / David R. – Hi, David, I didn’t play DIG today.  It was too late by the time I saw your recos.  But I am just wondering shorting DIG is the same as longing DUG, no?  I just want to see if there is any advantage playing one versus the other under various circumstances so as to get ready for the next opportunity.

 Phil are you covering DIA here?

miracleniss: I was offered something interesting from Zack’s, (that i didn’t do). You give them a certain amt of $, i think it was abt $6k, and they give you a personal trainer and guarantee that you will make your money back and the same amt more by the time the program is over. I forgot the time frame.
unless you just want to hang out with Parker all day. πŸ™‚

Phil – DIA Sept 93 1/2 cover – my conditional order triggered at 1:53. I set the BTO at 92.70 DIA not the index – mistake? Now I am full cover 1/2 AUG 93 and 1/2 Sept 93 against the DEC 95’s.

Thanks! Whats the website or connection?

Fabulous beaches, crystal clear water – Four Seaons, Exuma.  Opened 2004, closed 2009.  Cost 450 million to build, currently in negoitations with Sandals Resorts for 30 mill.  This includes Marina, Greg Norman golf course, Casino, Spa, Shopping center, etc.  What a crime.

it’s zacks.com You probably should get the ph # & call them.  I have never seen  it advertised. they called me, i guess cause i subscribed to one of their services.

Oxen Gamble of the Day, check it out!

I am excited about this stock…very, very. I think the stock is a give in.

Too good to be true…more like too good to be passed up.

David Ristau

PS if you have questions about it, ask on my board.

I havnt been able to get the DIA call to trigger at 1.05.
chase to 1.10 or be patient. deep breaths… exhale…

Looks like MR Stick is too afraid to play today !

"They are my favorite solar after FSLR"
Do you forget the irony font?

Phil, for a cheaper LDK play, what do you think about buying the DEC 9 calls and selling the SEP 11s.  $59 to get in, 4x win at $11, start losing money below $9.

LDK.   Remedial/Brainlock question: Am I selling calls/puts at 1:1 versus stock?    If so, that makes one leg naked for me, unless I reallocate to 1/2 calls and 1/2 puts, but that prob defeats ur immediate and intended purpose.  [Actually, I’m going ask those bast***s at ETrade to let me naked some puts in my IRA account – they make a mint on me these days.]

Thx Morx/Miracle –  Saves me working out how to be flattered but recommend an actual professional all at the same time πŸ™‚


Didja know … I am commenting from Cap’s Global HQ today !

PAAS or take a pass?  A few Sep 19s or 20s into earnings?

ET Naked Puts.  Done!

Naked-ish is more like it and good enuf.

I wonder what the Fed is leaking to GS right now about the ongoing meeting …. I wonder…..

Dementia- now I understand the leftist rants. It’s sympathy you need my son, not conversion.:)

PharmaBoy – someone just bought 250K shares of ARRY at 4.25, was that you?  (I owe you this comment from yesterday 8) )

Phil Just figured you meant favorite to short!" 
Quoter Phil! "I meant SPWRA is my favorite and in no way, shape or form would I ever knowingly buy FSLR (the LDK play was right though).  That is very scary for a guy like me a guy who counts on his brain for things"

Phil, my LDK numbers we based on buying the DEC 9 calls and selling the SEP 11 puts and SEP 11 calls.

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