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Testy Tuesday Morning – The Spin Is In!

We did get our stick save yesterday – only it came at 7:45 pm!

That's right, on pretty much no news at all and without any global markets open, the US futures all took off in synch at 7:45 last night and went up and up and up into Asia's open.  There was no particular news and Jim Cramer had just finished telling his viewers that the markets may be overbought.  Cramer also is now targeting a "3-5% decline," which is amazingly the exact decline I predicted last week and he also swiped my BBT pick as his "find of the day."  So good morning Jim, nice to have you back!  We don't mind Cramer stealing our buy picks because we have a full day advantage over his flock so welcome aboard suckers – er, fellow Cramer fans

Anyway, so the after-hours markets were flat but the ubiquitous futures market took off as soon as all the retail traders had their trading accounts turned off for the night and you would have thought something huge was happening to watch the relentless, non-stop, 3-hour climb in the Dow, the Nasdaq, the S&P and even the Russell futures that led into the Asian open.  Did this blatant manipulation of the indexes fool Asian investors?  Of course it did!  The Nikkei opened at 8pm EST and had gapped down to 10,200, exactly 4% off the high of 10,620 on Friday.  As I said to members in yesterday's chat, that 4% line is critical in the follow-through day on the 5% rule as it represents our expected bounce off 5%, so holding that line is still bullish.

Well, never let it be said that Mr. Stick doesn't know how to paint a bullish picture and the Nikkei was rescued from failing that 4% line by the relentless futures buying between 8pm and 10:30, which coincided with 9pm to 11:30 on the Nikkei, which just so happens to be when they close for lunch.  What happened at 11:30 Tokyo time?  Well, suddenly everyone lost interest in the US futures and they fell ALL THE WAY BACK to where they started in just 60 minutes.  Please Congress, whatever you do, don't look into this nonsense – better to just sit there in your little offices and say "the market forces are too complicated for me to understand" and let 12 people control the world, that's what America's all about right?

So, where was I?  Oh yes, manipulative BS!  Of course, coming back from lunch and seeing that the US futures had nose-dived sent the Nikkei right back to 10,200 but there was another way to prop up the Nikkei and that would be a dollar rally against the Yen.  The dollar had already been jacked up from 94.37 Yen at the Nikkei's open to 94.75 at lunch but, at 12:31, the minute the Nikkei reopened, the Dollar began flying up all the way to 95.30, which rallied exporters and lifted the Nikkei 100 points into the close.  After the Nikkei closed, the Dollar fell back to 94.9 Yen – mission accomplished, time to rest…

shanghai1The Hang Seng also had an exciting session.  Having already blown the 4% mark on Monday, the 5% test was inevitable and we got it out of the gate with a dip just below 20,000 at lunch (down 100) but that was all reversed in a 500-point up move from 11:45 to 3pm that even a sell-off into the close couldn't prevent from printing as a net up 169-point day (0.8%), which is EXACTLY the 4% line (20,400) so not bullish again until they cross it.  The Shanghai Compsite posted a 1.4% gain on the day (less than a 10% retrace of the drop - so not significant yet) with a huge run back into metal stocks by "bargain hunters." "The rally in equity prices has disguised what are still large imbalances in the real economy. And, as equity prices fall, these imbalances will find themselves under more scrutiny, especially after July's economic data disappointed," Royal Bank of Scotland economist Ben Simpfendorfer wrote in a report.

What was the big news that rallied China's metal markets?  No news at all, just speculaion on behalf of big-three manipulator JPM's Jing Ulrich, the head of China equities and commodities, who said "In the event of further correction, the Chinese authorities will be prepared to put a floor under the stock prices." Beijing may do that through measures such as slowing measures to absorb excess liquidity and eliminating stamp duty on equity transactions, she added.  So the promise of more government stimulus in China from one of the 12 guys who control the markets in America keeps things going in Asia – very neat! 

We've already discussed the fine art of global plate spinning by our beloved I-Banks so I won't get into it here but this is one fine example of the way that a small buy here and a little rumor there can move the entire world's markets as money never sleeps (and neither do, effectively, tens of thousands of global employees of the Big 12, who coordinate announcements in Asia, Europe and the US to craft the headlines in the cooperative media).  The media never stops looking for quotes and investors never stop jumping on news.  Archimedes said "Give me a place to stand and, with a lever, I will move the whole world…"  Leverage is what it's all about as the analysts get to stand on a global soap box and tout the party line while the bosses run the buy programs to make their analysts look even smarter which reinforces their influence in the eyes of the retail investor, making them easier to control the next time the bosses want something bought.  Simple enough, right?

If you look in your favorite media outlet this morning, you are unlikely to see this Bloomberg story that Corporate Credit is deteriorating rapidly and yields relative to benchmark rates on U.S. corporate bonds jumped the most since March, while credit-default swaps tied to investment-grade debt rose to an almost-four-week peak. Investors are concerned the recovery in Japan’s economy, which emerged from its deepest postwar recession in the second quarter, will falter once governments worldwide complete $2 trillion in stimulus spending. Speculation the U.S. consumer will help revive global growth was dented last week when a confidence index fell to the lowest since March.  “While there is a rebound in economic activity, consumption is still impacted,” Philip Gisdakis, a Munich-based strategist at UniCredit SpA, wrote in a note to investors today. “This problem will not disappear in the short term and indicates that the current recovery might not be sustainable.”

You'll have to excuse, Gisdakis as UniCredit is not one of the 12.  Of course it is coincidence, not self interest that contracts on JPMorgan, the biggest U.S. credit-card lender, rose about 5 basis points to 81.6 basis points, the highest level since July 16, according to CMA. Credit derivatives tied to debt of Goldman Sachs gained 10 basis points to 150 basis points, the highest since July 13, CMA prices show.  Credit swaps on Citigroup Inc. jumped 21 basis points to 298 basis points, the highest since July 29, according to CMA. All three banks are based in New York and all 3 banks have analysts talking up the economy, which will lower their borrowing costs by Billions if effective.  Motive, means and opportunity – case closed! 

In the Fed's Quarterly Survey of Banks it was found that: "With delinquency rates rising to a record high, banks were still clamping down on lending to businesses and consumers over the past three months, and they said they planned to keep their credit standards tight for at least a year."  In its quarterly survey of banks' senior loan officers, the Fed said lending standards got even tighter for almost every type of loan, from prime residential mortgages to commercial and industrial loans. The survey covered May, June and July.  "The degree of caution exhibited in the survey of senior loan officers over coming quarters will act as a drag on the coming recovery," wrote Richard Moody, chief economist for Forward Capital. "This is one factor that has been, and remains, behind our forecast of a tepid recovery from the Great Recession."  

Doesn't this sound like something the MSM SHOULD be talking about?  Isn't a credit crunch what crashed the markets last Fall?  Isn't it almost Fall?  Didn't we give these banks TRILLIONS of dollars so they COULD lend money to keep businesses going and isn't this the OPPOSITE of what was supposed to happen?  SHOULDN'T we be concerned???  Outstanding loan balances FELL by 2% at 22 banks receiving federal assistance from the Troubled Asset Relief Program.  WHERE IS THE OUTRAGE?

In a separate report released Monday, the Fed said the delinquency rate for all loans and leases rose to 6.49% in the second quarter from 5.58% in the first quarter. That's the highest delinquency rate since 1985, when the Fed began collecting the data.  The charge-off rate rose from a record 2.03% to a record 2.65%. Before this recession, the highest charge-off rate had been 1.70%.  Delinquency rates for real estate loans rose from 7.10% to 8.27%, the highest since the data begin in 1987. Delinquency rates for commercial and industrial loans rose from 3.12% to 3.73%, while delinquencies for consumer loans rose to from 4.69% to 4.92%, also a 22-year high.

Not surprisingly to members of PSW but apparently a shock to "expert" analysts is today's PPI report, which came in -0.9%, 350% worse than the -0.2% expected by the usual idiots they ask, even though we JUST got a CPI report that flat out told us we were going to be down more than 0.2% unless Corporations bought a lot of apparel and visited the doctor, which were the only two parts of the CPI that had increases.  I mean REALLY, are economists actually so dumb that they can't pick up a CPI report on Friday and adjust their outlook for the PPI report the next week?  Well, it seems they can't so the MSM is "taken by surprise" this morning as the PPI disappoints (and that JPM analyst in China must feel very silly). 

Also from the land of Duh, Housing Construction and Building Permits fell 1% in July.  Could it possibly be due to the almost total lack of lending?  As I pointed out last month when the markets rallied on a 1.7% gain in starts, we're talking about 581,000 homes a year – it's still down 75% from the highs so who really cares if the number is 581,000 or 586,810 (+1%) or 575,190 (-1%)?  The margin of error is 4% as this is a survey, not a full count.  Housing starts for July are off 37.7% from last July, when they were down 50% from the previous July – now THOSE are numbers that dwarf the margin of error!

The bottom line is that just 55,600 homes are being built in 50 states for the month of July.  Just how many people can that really employ?  How much material can be consumed?  How many realtor and broker fees can be paid?  How many new appliances will be placed?  How much carpet?  Housing has a massive effect on the economy, second only to consumer spending in it's effect on the GDP and housing remains dead, dead, DEAD and you can try to ignore the unemployment, credit debt and bankruptcies that are killing the consumer and you can try to ignore falling prices, tighter lending requirements and excess inventory that plague the housing market but, sooner or later – these things WILL matter.   You can fantasize about a recovery all day long but one day, something needs to actually recover besides expectations.

So forgive me for today's rant but this ridiculous pre-market pumping has really ticked me off.  I do hope we hold our levels today – only the Dow held the levels we predicted in yesterday's morning post and the others hovered just below it.  Tuesdays are often test days and certainly all the stops are being pulled out to prevent the markets from failing but we're going to remain cautious with our cash on the sidelines, waiting for some REAL bargains to present themselves. 


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  1. But what shall we Buy and what shall we Sell?

  2. AMD ? BAC ? VLO ? YRCW – forgive me?

  3. Morning!!!
    Ok look, I admit it. I am short 5 Aug DHI 12.5 Calls and Long 4 Sep DHI 13 Calls and I have no idea why.
    Looking it over I think continued weakness is in order and so I can now roll the short calls to Sep 12s
    Anyone recognise this trade?

  4. Housing starts, chain store sales, and PPI are all worse than expected this morning.

  5. Phil – You are funny!!!

  6. Give ‘em hell, Phil! 

  7. Good morning.
    Phil, Your article points very well how delinquency is rising, but you are missing the credit card 0,0000000000000000000000000005 % improvement !!  Verrrry bulishhhh :-)

  8. Stevenp
    Your shorts are going to expire worthless – why roll them?

  9. Phil,
    Been away from the internet for a week (except for a few short sessions at public libraries, etc). Finally caught up this weekend. Looking over your main themes last week, the "China may fall first" and "if you missed it previously, Thurs am gives you a second chance to short" were absolutely on target. I had to rely on stop-losses because of my schedule but just those two calls could have been worth a small fortune. Keep it up and I look forward to your new portfolio.

  10. stevenparker
    That DHI spread came up a few weeks ago. at the times a fifth 13 call was recommended. Maybe the 12.5 Augusts will expire.

  11. The Euro gave back almost all of its overnight gains, despite the nice sentiment number in Germany. Not very bullish short term.

  12. AZO — volatility has returned to this one.

  13. Waiting is fulfillment Red!

    DHI/Steve – I’m still short DHI calls too but I didn’t long anything to cover.  I’m not expecting much but DHI shouldn’t get too far past $12.50 by Friday.  Why pay the premium to roll them if you don’t have to?

    LOL Spider – I guess I’d better print a retraction!  8-)

    Welcome back Ocelli!  Thanks, I’ll try to keep it real but the markets sure don’t want to let me. 

    Well those DDMs ($33s) are back to $1.20, which is a good example of how cashing at $1.10 is better safe than sorry as we only missed a dime by being safe. 

    Let’s keep an eye on those levels.  Still:   Dow 9,100, S&P 980, Nasdaq 1,950, NYSE 6,400 and Russell 550 and we’re not going to be impressed with XLF under 14, QQQQ under 39, SOX under 300…  A long, long way to go just to get past a weak bounce off the falls.

    20% bounces for the indexes are (rough numbers):  Dow 9,200, S&P 986, Nas 1,946, NYSE 6,400 and RUT 555.  Those are 20% retraces off the tops that held Wed and Thurs last week from the bottoms that held yesterday.  If we get 3 of 5 over, we can take bullish bets on the laggards.  If we start seeing rejections there, then we can short the high flyer.

    At the moment we’re getting the SOX leadership we need to get going again but the Transports are not very exciting and volume is just 18M after 15 minutes so not much conviction to the buying so far. 

    Watching and waiting is the plan!

    On the DIA spread.  Dec $96 puts are holding $7.80 and Aug $92 puts are down to $1.05 and we want to have tight stops on them here as the Dow comes near testing 9,200.  If we take them both (halves) out for around $1, that’s a nice win and we can re-sell 1/2 cover on the Sept $92 puts, now $2.75, using our 3 of 5 rule for an/off switch.   

  14.  Pharmboy – a couple of weeks ago you recommended a strangle on MYGN with the sept 25 puts and the 30 calls. Do you still like that play? I’m asking because it’s slightly positive now after being down roughly 20% at one point and I’d like to honor buffet’s rule (don’t lose money) if you’re no longer a fan of it.

  15. I am still in MYGN, just the call side. Have not re-sold any puts as of yet.  I am a med-long term holder of MYGN.

  16. Phil: On the DIA spread you say: If we take them both (halves) out ???  what is BOTH ? close half of aug 92 puts and what else ???

  17. Back into BAC 17 calls at .32 with stop at .30, worked yesterday and the day before so what the heck!

  18. Got it  - thanks PhB

  19. VIX dropping, TRIN .5 … and I sold my SPY calls. Looks like we are all set to be heading off to the races.

  20. German sentiment/Eric – Yeah, I forgot to get to that one.  Those ZEW polls are all over the place but they have a 1% refi rate on loans so it’s a little easier for businessmen to be confident in that environment.

    RBC massively raised outlook for AAPL ($250), PALM ($25) and RIMM ($150) - speaking of plate spinning by the usual suspects.  GOOG not too happy about Bing gaining 0.5% in market share but MSFT up 1%, helping the Dow and the Nas and the S&P.   Also spinning is GS putting HBC on Buy List.

    DIA/RMM – I lost track then.  I thought we had a full cover on the Aug $92 puts, not half.  With a 1/2 cover there is no hurry to buy back the $92 puts as they are still all premium but watch that 9,200 line as you need to sell 1/2 cover of Sept puts if we break over (at which point you put .10 stop on Aug $92 putter).

    BAC/Mr M – Never be ashamed to go back to the well – That’s how people get water year after year, why not do the same with reliable stock plays?

    Wow, we are right there knocking on all our levles…

  21. DHI - oops looks like I did a dumb thing lol. I felt extremely bearish on DHI and thought I would gain more from being short .8 in premium at .5 delta with Seps than .1 in premium at .25 delta with Augs.
    That said I suppose the lesson is the .1 in theta was the most reliable return over the next 3 days and I could have waited :)


  22. Volume not quite 30M at 10am. 

    NYSE with gentle rejection at 6,400.  S&P trying hard – Don’t forget those were rough looks for the bounce, not life and death but using the 3 of 5 rule is the way to go here

    I’d have to say go for it in buying out the DIA Aug $92 puis for .92 and then just be ready to sell 1/2 the Sept $92 puts, now $2.55 for not less than $2.25 and, if those fall to $2.  We sell 1/2 the Aug $93 puts, now $3, for whatever and put a $2.25 stop on the $92 puts.

  23. Also, we’re contending with a 4% pullback in the VIX this morning. 

    If you are willing to lose some money, I like the DIA $93 puts at $1.50 as a bear play.  It would be DD at $1, about 9,300 and that would be 2x down 20% and a real nail-biter to hold overnight so a very painful way to be bearish but greeat if our breakout levels fail.  

  24. Time to short COF ….

  25. AXP up 4%, driving the Dow, HD up 2.5%, JPM up 1.9% despite the fact that no one wants to lend them money.  BAC up 1.9%.  MRK having a bad day, down almost 2%, XOM flat, CVX and IBM up half a point…

    Dollar continues to fall so your stocks better be going up.  Oil up at $69.50 and gold back to $940.

    CME not buying the commodity rally and still falling.   ICE too. 

    Nice PPI chart from Bespoke:

    Yeah, that’s a healthy looking sign!  Last time things fell off this sharply a multi-Trillion dollar war was ending…

    COF/Cap – I still like selling the $35s naked.  I’m fairly sure they pin that or lower into expiration.  I guess  you could be more aggressive and short the $34s, now $1.50 with .65 in premium.

  26.  Phil
    I have UAUA, basis at ~ $5, fully covered by AUG $4 calls – ouch.I could roll up to Sep $5 puts & calls – what do you think/suggest? Thanks,

  27. RBC raised outlook

    Heres one from Sept 08 from the same guy that just raised AAPL RIMM and PALM….

    "Apple is not recession proof," wrote RBC analyst Mike Abramsky in a research note today. And it is the current economic climate that worries the Abramsky and Apple’s potential future sales and prompted him as well as colleagues from Morgan Stanley to downgrade the Apple stock from buy to neutral. Investors reacted almost immediately, sending the stock down $22.30 to $105.94, which was down more than 17% from the Friday close of $128.24. Apple’s stock recovered a bit in mid-day trading and hovered around $111 and 6-month lows.

  28. COF / I also sold some 36′s naked, but a day trade stock short here should pay off as well …

  29. Phil, need your advice for some ICE n CME putters….what strikes would u rec and your action plan for the downside if need be.  thanks.

  30. Its us against the machines, baby !

  31. RBC, they are trying to get their clients out before the turn down…

  32. Phil: DIA:
    closed all my aug 92 putters for 92 cents,
    have long puts dec 95 and oct 91,
    for bearish play, could open some aug 93 puts,
    for bullish play, have a few sep 93 putters, would need more and use sep 92.

  33. just out of curiosity…. is it possible to buy/sell options on SGG?

  34. UAUA/Deano – You say ouch but I assume there’s profit at $4 right?  You can push your buyout up $1 by spending .50 ro roll to the $50 puts and calls, which makes sense as long as you REALLY want to DD on UAUA at $5 if they head lower.  You can spend no mony and roll the $1.80 caller to the Dec $5 calls at $1.80 and that gives you + $1 (25%) for free with no downside risk of assignment.  You can even sell the Dec $4 put for .65 and that’s another 15% over 4 months, all for doing not much at all with your position…

    RBC/Kustomz – Hey good find!  Well you know, the overall economic outlook is just 150% better this year…  8-)

    ICE/Oncmed – You say putters, which would be puts I’m selling, which would be a bullish way to enter those stocks.  On ICE, I’m not bullish at $86.80 over concerns of a regulatory crackdown that could really crush them.  If they get down to the 200 dma around $83 you can play them for a bounce but not for a long-term bull play.  My play on CME would be to wait for ICE to fall, which will drag down CME as investors are too dumb to differentiate that CME is already under most of the regs that ICE is avoiding so it will make little difference to them and they may even pick up a ton of business once ICE loses its stealth trading advantage.   On CME, I don’t think they are paying enough ($11.20) to risk selling naked Sept $260 puts but I think if you can get $10 for the $240 puts on a sell-off, that would be a nice entry (net $230).  That means you can sell the $280 calls naked for $9 and hopefully sell the $250 puts for $10+ as long as you really want the stock at net $230 and you are willing to buy to cover if they go over $275 (using that as an on/off switch for owning the stock).

    DIA/RMM – That’s a little too bearish if you have 1.5x between Dec and Oct puts and no cover.  Take that 3/5 rule very seriously for covering up with Sept putters and don’t forget the purpose of the Oct puts is to give you cover to take your Dec puts off the table with a profit.  You can always work back into a Dec position after the rally ends.  To be clear though, I’m not expecting a rally but volume is very low here with less than 50M at 11 (projecting next 6 mins) so anything can happen.

    SGG/Roam – No options on sugar.  I’ve heard consistently there are shortages but it’s not showing up in the prices so far. 

  35. LOW demonstrating why it is NOT a good idea to buy a stock the same day as poor earnings.  We are generally way ahead of the retail market in what we look at so, even though things seem obvious to us, they still take a day or two to filter through to the people who would pick up a paper and bail out of a stock on bad news and then there’s the analysts, who are the biggest sheep of all.

    GRMN is still going down!  Another few bucks ($26) and I’ll be interested.  A lot of the sell-off is they are spending money to buy a marine GPS company.  This is also just one mother of a gap fill from their massive earnings beat. 

    BAC paying off like a broken slot machine.  C still over $4, XLF closing back in on $14, UYG over $5 is another one to watch for bank sector health and, of course, ZION is having a good day and they are like a weather vane for the financials…

    Confidence building not building much stock confidence in Germany, DAX has flatlined since the open, up 0.6% and below the 4% line so can’t punch through the bounce zone.  Same story on CAC and FTSE.

  36.  hearing on CNBC GM to raise output due to cash for clunkers, not one GM vehicle on the list of best sellers
    1. Toyota Corolla

    2. Honda Civic

    3. Ford Focus FWD

    4. Toyota Camry

    5. Toyota Prius

    6. Hyundai Elantra

    7. Ford Escape FWD

    8. Honda Fit

    9. Nissan Versa

    10. Honda CR-V 4WD

  37. More dellusion: 81% of Americans think their house will not lose any value.  Only 60% of the homeowners believe their homes have lost value in the past 12 months – Zillow says it’s 83% so people are about 25% too optimistic about housing, which explains the values we’re seeing placed on builders.  Really shocking is 22% of the people surveyed thought their home’s value had gone up this year!  “Hope springs eternal for the U.S. homeowner,” said Stan Humphries, Zillow chief economist, in a news release.

    Fewer people are willing to consider that their home will continue to lose value. Nationwide, 19 percent said it will decrease in value in the next six months, 47 percent are hoping for status quo and 34 percent thought it would increase. When it comes to selling, 29 percent said they would be at least “somewhat likely” to put their home up for sale in the next 12 months if they saw signs of a real estate market turnaround.

    Oh that’s just great – 1/3 of the people would sell their homes if they could.  This is not a recipe for a housing turnaround….

    GM/Kustomz – Very hard to make that top 10 list.  Kudos to Ford for making 2 spots. 

    Woo hoo, 3 of 5 over the line.  Waiting for Dow 9,200 and RUT 555 to give us a sign but, more likely, this is a blow-off top so be very careful around here.  DIA $93 puts still $1.50 and I still like them as a bear play

  38. On a related auto note, I think F is a decent long-term short: buying Jan ’11 7.5 puts and selling Sept. 7s, say. This is eally as much a revenue generator as a short position — IV on the Sept. options is high. I don’t expect F to suddenly collapse, but this is a company that is still burning through $1bn a month, and although they raised another $1.6bn from the credit markets in May, things may not be so easy next time.

  39. Go ARIA!!!

  40. Tech "AAPL"  being pumped up big time today

  41. Looks like another squeeze is on in the home builders.  SRS marching down down down.

  42. More spin:  IMF Chief Economist declares: "The global economic recovery has begun" but also says: "The crisis has left deep scars, which will affect both supply and demand for many years to come."  Which quote will CNBC use?

    Backspin: The performance metrics of commercial real estate (CRE) continue to deteriorate at an unprecedented pace, Fitch says in a preliminary report this morning. Firm notes CRE loans represent more than 125% of large banks’ total equity, and more than 200% for smaller banks with assets under $20B.

    This makes it VERY hard to get bullish.  SRS down .30 from yesterday’s high…

    F/Eric – As an income producer I agree.   It’s been a great run for them and negative things are bound to come up at some point. 

    There is no data tomorrow so it is a good day for a pump job.  Thursday we have Jobs, Leading Indicators for July (which I think will disappoint) and the Philly Fed, which should be BTE as the NY Fed was fantastic (relatively) this month. 

    So, in a nutshell, if you are not back in those DDM $33s (now $1.35), then the DIA $91 calls are a nice upside play at $1.63 with a stop at $1.50 and that should be right about 9,200, which can be a protective reentry if you have the puts already.

    Now we are 5/5 over so that is bullish until it goes the other way.

  43. This market can make a bear look like a loon

  44. Arrrrrrggggghhh. I know it’s wrong, but why o why did I sell my SPY & SSO calls this morning. Would have made a nice 30% profit.

  45. Pharm, I don’t recall you posting about ARIA before, what’s with them?  Good for a speculative FEB 2.5/5 spread at .40?

  46. I just closed out the rest of my SPX985s, an overall profit. I view this action as a delayed stick from yesterday. Do we really need to turn bullish now? Sadly, I now have a bearish bias in my positions.

  47. In the coming weeks, Ariad Pharmaceuticals (ARIA) is expected to announce the first interim analysis for the Phase 3 trial for ridaforolimus (rida), an mTOR inhibitor therapeutic indicated for soft tissue and bone sarcomas – aggressive, less common cancers that attack healthy connective tissue.  They are in bed with MRK.

  48. MRM – they were in my write up….

  49. Loons/Kustomz – Bears are loons, you can’t fight the Fed.  They have infinity dollars and if they want to prop up the markets, they can prop up the markets.  Sure getting the Dow back to 15,000 may take $2,000 gold and $100 oil but it also means they collect $2Tn in capital gains taxes to help balance the books…

    Bullish/Barf – I’m not bullish, just protecting myself as we cross the 5 bounce levels.  In a rational world we won’t hold them but, when you get there, be sure to send me a post card! 

  50. Phil/DDM – I’m still in that BUY 93/SELL 92 Spread with DDM and about ready to cut my losses, worth hanging on til tomorrow or got any roll suggetions for today? Thanks!

  51. Delta appears meaningless for OTM expiring options.  I bought BAC 17 calls two hours ago when BAC was 16.80, now it’s 17.  The Delta is .5, so a .20 rise in BAC equals a .10 rise in the options right?  Not.  The options are up a mere nickle.  FWIW.

  52. Pharm,
    Are you still in SUNH and what do you think of how it’s behaveing today?

  53. Pharmboy: Do you have a link to your write-up? Thanks.

  54. Max – still in ‘em, and they are holding lower support bouncing right off 8.05.  Scale in, but i am looking for 8-10%.

  55.  Hello Phil;
    well so what do we do now, start easing into the positions we talked about yesturday, or watch and wait ?
    any point in getting into positions for the next leg up yet ?

  56. Citadel continues to front run my trades.
    The Robo trading is so artificial its ridiculous.

  57. HPQ spread of Sept $41 puts at $1, selling Aug $42.50 puts for .80 is net .20 (and not a penny more) hoping the putters get wiped out and the Sept puts hold some value (or possibly the Sept $40 puts can next be sold for .20 or better and it’s a free put spread

    DDM/Skas – Oh, I was hoping you bought a few more $33s or those Septs I suggested in yesterday’s chat to change the delta in your favor.  I guess you are in for $1.20, now $1.40 and you sold $32s for $1.60ish, now $2.25 so down about .45 on the spread.  I would add 50% more $33s at $1.45 and sell $32s to cover at either $3 (which would lock in a .50 gain for you) or $2.25 if they head down.  Either way you are averaging up your caller and playing for a turnaround.  This trick would also work better if you buy the $34s, which is a bigger margin spread but gives you a lower downside delta.  You can also just add 1x the $34s and then put tight stops on the $33s, which hopefully cashes your $33s at the top and let’s you ride the spread back down.

    Delta/Mr M – Premium decay rules all this week. 

    Leg up/Micro – Only if we hold up today or really it will take until Thursday for me to be satisfied and then it will be the weekend when I’ll be looking to work on my new $100KP so I guess we should just take the rest of the week off now that I think about it!  8-)

  58. Phil,
    Do we know what we’re going to do with our CHSI spread or waiting?

  59. CHSI/Maxt – It depends what spread, we had a buy/write, which is pretty much going to be a call away way up here and a bullish spread, which I think we adjusted already so where are you?

    SRS – David just capitulated on his morning trade which may mean it’s time for us to take a look.  Let’s keep an eye on them to hold $12.75-12.80 as a possible entry.  

    Denninger/DB – Wow, he got up on the wrong side of bed today.  I guess I felt the same this morning but I’m much calmer now as we just have to accept these things and move on…

    Speaking of bending over and accepting things, oil back over $70 after a straight up run from $68 at the open.  Topped out at $70.50 and now a retest lower.  Gold fell back off $940 but the dollar is still weak across the board. 

    Just like plate spinning, they have so many balls in the air and if just one of them falls (dollar pops, oil falls, copper drops, Yen rises, China falls, news turns sour, companies lower guidance, banks fail…) the whole act can collapse all at once….

  60. could i get one of you experts to ck me on this roll, plz?
    Covered Call: have now PGH Jan 7.5 sold for .62 now at 1.25; roll to Jan 10 now 2.20;
    My calc tells me i will have 1.57 credit after the roll. Can someone verify this? Stock has moved up 30% since purchase but getting out of the call will kill me and if i hold it to Jan, i don’t think i will want to get called at 7.5 + .62; PGH is now down a bit and trading for 8.43.
    Lay it on me. Thanks

  61. Man, anyone besides me buy way to much TZA and QID for this supposedly big downturn week?  Ouch…

  62. Morx – huh?  Jan 7.5s are 1.25, yes, but the 10s are only .25.  If you roll, it is $1 debit.

  63. Morx – you are looking at the PGH Jan 10 puts…..

  64. Pharm, glad i asked; i was looking at the puts. back to the drawing bd.

  65. Hey Pharm:
    Are you following ISPH (Inspire Pharmaceuticals)? Last week a director of the firm bought 40 mil of the stock at $4.50. They have two drugs in Phase 3 ( close to FDA approval) and 2 in phase 2. Lots of cash on hand. Their option tree has few leaves, but I like the Jan 2.50′s. I’m going to jump in and wait for surge that might evolve.

  66. Phil,
    it’s possible I missed it. I have the CHSI Dec 20 calls and the aug 25 callers.

  67. Gel – hadn’t heard of them b’f now.  At first glance, it appears they are/were in bed with Allergan, but it looks like that has ended or is ending.  I don’t see the insider buying, but I do see a director (who most likely funded their some of their financing, buying.  They need to break through 4.9-5, but their 1yr high is 5.60s (besides the spurious day).   I would definitely scale in here and sell a few rounds of premium.

  68. Maxt – should be a 5/4 split then.  Take the money and run.

  69. PGH/Mox – ???  Jan $7.50 puts and calls are $2, Jan $10 puts and calls are $2.55.  I can’t imagine what you are looking at othewise.  If I understand right, the gist of this is you took the $7.50 buy/write entry and now you have seller’s remorse re. getting called away at $7.50 in Jan.  Bear in mind that this was a consevative play meant to protect you while you collect the 0.9 per month dividend (12%) and was not meant to be an aggressive play on PGH.  Given that you are willing to spend money to move the caller, if you have the $7.50 caller at $1.30, you can roll it to the $10 caller at .30 and the $7.50 puts at .70 so it only costs you .30 (plus margin) to give yourself $2.50 more room to be called away.  Also, don’t forget the very radical concept of waiting until the print the 2010 contracts, as that would give you many more choices. 

    Everyone is going now, even GOOG is up. 

    Oil back at $70.50, gold back over $940, XLF just under $14, Qs broke 39 – what a party! 

    Money moving out of bonds a bit, maybe some people staging to get back into the market if they hold up. 

  70. Any pending news the rest of the week that could move the markets ?

  71. Copper futures are looking weak here, surprisingly. A failure to hold support 2.7 would almost certainly lead to a pull-back below 2.6, and that in turn would likely herald a leg down for commodities.

  72. Eric – if that is the direction, PCU should be a nice short….

  73. Pharm,
    CHSI, I don’t have a 5/4 split. it’s 4/4.

  74. Thanks on the PGH. sorry for the glitch. I can wait, i just didn’t want to get a lecture on being greedy. :)   Is that print date set or just when they get good and ready? I was also trying to free up some cash for next weeks excitements but i’ll find it somewhere else.

  75. Pharm, good idea. Pretty fat option premiums for selling September puts on PCU too. Maybe put diagonals or calendars?
    Or short-term, selling the August 25/30 call vertical for 1.65 (very risky).

  76. Phil: all day trading the channel on DIA, puts and putters and calls, collecting cents. Hard work.
    My trade of HPQ spread so far not trading for 20 cents.

  77. After yesterday, even though you could see today’s abrupt reversal (with little to no hesistation) a mile away it still pisses me off.  Why is that?  I know it’s how the market moves.  Particularly now that GS’s computers are in charge.  But it’s still hard to swallow.
    There is absolutely NO volume in IYR.  Yet it’s up over 4%.  Are people REALLY buying real estate right now?  After yesterday’s powerful drop?  Hell no!  But SRS continues to sell, sell, sell.  I swear they must be just selling naked.  It makes no sense how this thing works.

  78. Bidding 1.15 on a few PCU Dec/Sept. 22.5 put calendars. Small starter position.

  79. Has anyone made a gain of 1$ or more today so far and in what ?
    Before the opening of the market I had researched and found a stock called HURN, did enter the wrong figure , now its up 5$, bad miss on my part.

  80. Phil,  do the ETF’s FAZ, FAS and such base there price only on the movement of the underlying or does their price have anything to do with the supply and demand of the ETF specifically.  For instance, If someone with a billion dollars suddenly decided to buy as much FAZ as possible, would it change the price?

  81. RMM, I closed Phil’s VIX DEC/AUG 25 call spread today (didn’t want the roll, too margin intensive) for 60% gain, one of his simplest, best trades in awhile.  Made a nickle on some BAC calls from 10 to noon.  Other than that, watching my QID, SRS, and TZA bleed, I bought into that drop to S&P 970 or lower that Fast Money has been talking about for a week…

  82. RMM, I would google HURN.  They had a huge accounting scandal recently and had to restate like bajillion quarters earning.

  83. Eric – I was looking a the 20s for the same, but i like your spread a bit better on the delta.  PCU bounced right off the 25.5 support, so small position is right!

  84. VIX – On the other side of the coin, I’m waiting for all premium to leave Phil’s VIX AUG 27.5/30 put spread so I can close it, in contrast to the call spread, this one’s a 30% loser.

  85. FWIW – I noted them a month or so ago.  JAVA is STILL bouncing b’w 9.1-9.2.  ORCL is purchasing for 9.5.  If you believe the deal is going through, nice 3.1%. One can also sell put spreads.  You better like them though if something does happen!!!!

  86. The computers easily rammed the brakes on that little sell off. The bears need to have more conviction.

  87. craig: after restatement, they jumped 5$, my point is that the WIZETRADE boys predicted a jump before the market opened.

  88. Phil, you must be taking market share from Bernie Schaeffer.  He just sent me a letter discounting his Elite Trader Service.  Used to be $5K per year, now $2K FOR A LIFETIME!

  89. Phil: are my aug 93 puts going to make some $$  ??

  90. Phil…This week I inadvertantly bought SDS Aug 48 calls (meant to buy Sept 48′s).  I assume I should get rid of these immediately (now at .45).  Alternatives are roll them to September, or hold for a drop in the market within the next 3 days. 

  91. CHSI/Maxt – If you didn’t go 5/4 then no big deal.  As Pharm says, taking the money and running is the best option.  Let the caller run to Friday as they may drop off but, either way, you pay less premium to buy them back.  The contracts are no longer attractive for selling so little point in the Decembers now.

    News/Iflan – Thursday’s got the data I mentioned above and we still have earnings, but nothing anyone has said has bothered the markets so far.  In fact, no one even mentioned CITs 100% miss today, losing $4.30 per $1.40 share and it barely budged the stock.    Tonight we get HPQ (should beat), ADI and LZB (should miss).  Tomorrow am is BJ, DE, EV, FLO and PERY and later is GYMB, HAR, HOTT, JDSU, LTD, NTAP and PETM.  That’s lots of consumer info and a weak report from DE could knock us down but that’s it ahead of Thursday’s data, which takes precedence over earnings that morning from FLWS, BKS, PLCE, DKS, GME, HNZ, HRL, ROST, SHLD, SFL, STP, TK, BKE and TTC, which is a huge consumer day.  

    Don’t forget that June (the end of Q2) was pretty good, it’s July that was a big disappointment and these earnings are all about June for the retailers.  Now that July is booked and back to school is looking like a miss, we may see a lot more cautious guidance from these later reporters

    Copper/Eric – I don’t know, the JPM analyst in China says the government will keep buying commodities at high prices whether they need them or not.  It’s called the "China is run by lunatics" market theory…

    Print/Morx – When they are good and ready I think.  They usually start popping up around the end of Aug but those trusts are the most unpredictable.

    PCU – Already took a big hit.  If they had $27.50s to sell I would like it but strikes make them no fun at $26.50.  RTP seems in worse shape to me and is probably stuck between $130 and $160 so selling the Sep $140 puts for $5.30 and the Sept $165 calls for $5.70 is not a bad trade with a $7 stop on both ends.

    HPQ/RMM – They took off right after I picked them, easier to buy on the way down.  Don’t knock scalping pennies – beats losing them…

    90M at 2pm.

    SRS – Now Matt is fed up – this is getting good!  I’m up for selling the $13 puts naked for .45 but you have to WANT to own them and flip to a Sept buy/write where you are in for next $12.55 and you’ll sell Sept $12 puts and calls for $3 for net $9.55/10.78.

  92. Phil: have DE dec47 long calls, earnings is tomorrow before opening, they probably look good, up today over 2$,
    any action to be taken ?

  93. Phil: please review with what DIA positions to go into tomorrow ?

  94. Phil: I had a buy order in for SRS at limit 12.99$, it just executed, that was the low today (so far), is this to keep for tomorrow ?

  95. DIA- I missed the morning festivities- see DIA steadily going up. I am long Dec 95 Puts; full cover on Aug 92′s- still recommending taking the aug 92′s out and selling Sept 92′s?

  96. Phil/DMM – Bought 1x DMM 34 @ .70, sold my DMM 33′s @ 1.40. Now I’m holding on and waiting to ride the spread down. My entrance on the 32 Sale was 1.80 (not 1.60), so hopefully it’ll rise down a bit more. Thanks for that strategy, I wouldve never thought of it and now I can add it to my disaster toolkit. ;)

  97. Phil-  Need another X/GMCR/OIH(when it was at $108) type pick…..something that has significant premium in August calls which will expire OOTM.  Thanks

  98. *DDM, gotta love the iPhone’s T9

  99. Phil,
    I’m curious, when you’re trading something like the SRS play above, where there are likely to be many legs in the trade and high trading costs, it seems to me there is a minimum of contracts that one has to buy to make the trade profitable after trading costs. Do you do that calculation for your own account and is if so can you make that part of your trade idea ?

  100. said like the OHHM and the AHHH meditation:
    I will not trade SRS,
    I will not trade SRS,
    I will not trade SRS…..

  101. Phil: scalping pennies,
    traded SRS twice and each time made 0.7 %.

  102. DIA- couldn’t help myself- took out the Aug 92′s @ .73 (vs basis of 1.35) – too good to pass up. Now naked on the Dec 95′s.
    Still go with Sept 92′s? 1/2 cover?

  103. Gains/RMM – Not a good day for it, even the DDMs are barely budging.

    ETFs/Craig – During the day there is some supply and demand pull but, overall, they generally stay true to the movement of the target index.  Don’t forget that when you buy FAZ, you force them to short their basket with the money you give them so giving them $1Bn, which is about a good day’s total trading for them, would have a pretty profound affect on the sector. 

    VIX/Mr M – Wasn’t the VIX about $28.20 yesterday?  I would have thought the spread was favorable then. 

    JAVA/Pharm – You can just sell the Sept $9 puts for .20. 

    Schaeffer/Mr. M – That’s funny.  He’s the reason I started blogging.  His service was so bad I was sure I could do a better job!

    DIA/RMM – Did you sell them or buy them?  If you bought them and took the offsetting calls – no big deal, we stick with the plan to DD if they hit $1 on an afternoon stick.  If not, we keep both overnight and see what looks good tomorrow. 

    SDS/Iflan – That is unfortunately inadvertant!  You can sell the $47s for .80 and roll to the $46s at $1.20 so you are .65 in the money at the same .45 you have now.  It doesn’t mean you won’t lose it but you have a way better chance of a double!

    DE/RMM – I don’t know, I consider a $2 bump ahead of earnings to be a lucky break and you can get another $2 by covering with Sept $46s, which pays for you to roll to the Dec $43s, which would turn your out of the money $3.50 in premium into a $3 spread with $1.50 of intrinsic value.

    DIA/RMM – At the moment it should be a 1/2 cover of Sept $92 puts, now $2.35 against the Dec $96 puts, now $7.50.

    SRS/RMM – see above buy/write.

    DIA/Pstas – I’d take out those Aug $92 puts, now .76 as that’s .75 in your pocket and you can sell 1/2 the Sept $93 puts at $2.87 and maybe do the roll back to 2x the Augs again tomorrow if we sell down.

    DMM/Skasiah – Where are you even getting options on those?  Do you mean DDM?  I’ll assume you do and you are not betting housing drops 30% more….  On DDM that was a good trade-off.  Maybe do a DD so you are in for avg $2.05 on the $32s.  They have .30 more delta than you so you need a move back to about $33.50 to get even.  If you don’t DD, then it will take a drop below yesterday’s lows to get you even.  Of course, if we count the .20 profit on the $33s, then even would be just .20 more….

    96M at 2:42, less than yesterday!

    Oil closed at $71 – bad craziness!  Gold still $940. 

    OTM/GS – How about DIG $27 calls for .75?  They are .25 in the money after gaining .53 today ahead of inventory.  Dangerous but fun.  OXY is another one I like for shorting with the $70s at .85 and FAS $72 calls for $1 seem unlikely to hit. 

  104. SRS/Maxt – I do not take trading costs into account as they are so varied from person to person.  I do assume it’s going to cost someone .01 per leg so if there isn’t a nickel in a trade I wouldn’t touch it.  SRS is far from expensive if you sell 1 put for $45, then buy 100 shares for $13 (net $1,255) and sell Sept $12 puts and calls for $3 (net $955).  For a call away at $1,200 that’s a $245 profit and on TOS that would cost no more than $1.50 per leg or $9 (assuming sell and buy on 1st put) and then about $2.50 each time you roll out the puts and calls (hopefully for more than $2.50 profit).  If you have more contacts, it’s proportionally the same.  If you have a flat cost per trade, on the other hand, hopefully you are playing that way BECAUSE you trade larger lots and already did the math.  We will be experimenting with an on-line portfolio for the new $100KP that charges $10 per leg so that will be figured in to all transactions. 

    Pennies/RMM – Well, that is cutting it close!  Still, there are many hedge funds that would call 1.4% a great day and send out a special report….

    DIA/Pstas – My logic is tomorrow is not the bad data day and HPQ should say nice things, which could push us up. The cover is not likely to hurt much if we go down and you’ll hate not having it if we go up. 

    So far, we haven’t done much of a breakout over our bounce levels but we are over and you have to respect the move today – even if you don’t believe in it.

  105. Good afternoon all.
    Sugar – Here is an amusing story. A North Korean ship carrying sugar suddenly decided to change its course and waited in the waters off the coast of South India. The reason : the Indian Govt decided to lift the import duties on sugar. The announcement was made on July 31 and the policy went into effect on August 5. Since the ship waited in the waters raising all kinds of suspicion. Spooks and probes and arrests. Welcome to the world of ‘lets make a fast buck’ :-)

  106. Phil
    Whats your wisdom on the DIA Puts from today.  I’m concerned about  holding overnight.  Seems like Mr Stick just haled a taxi for his appearance on Wall Street?

  107. ANF looking weak here: it broke its uptrend line and is down on a day when most retailers (SKS, TGT, etc.) are soaring. Closing some 33/32.5 put calendars that have swung bullish, and re-entering at the 30 strike.

  108. Hey everyone,

    I have another High Risk Trade of the Day for you.

    Today, I am looking at ADI.

    I like its cheap price currently this afternoon, and its prospects for an earnings beat in after hours. The stock has lowered EPS expectations quarter over quarter while some companies, like TXN improved quarter to quarter EPS by 1900%. The company is undervalued, and I think is positioned well to make a nice gap up tomorrow.

    Read more of my analyis here.

  109. Mr. M
    I have been in and out, over time, of Bernie Schaeffer’s Elite Trader. I don’t even open the e-mails anymore Pics are real sloppy! FREE for life is still too expensive IMHO. Phil is the REAL DEAL , if you are in this to make money

  110. matt- your 1:34 comment was right on target.   I just took a 2 hour drive w/ my kids and re-plugged in; haven’t missed a darn thing !
    Let’s sell this bitch off into the close !
    Maria just made the stupid comment of the day "money flowing into financials".
    The reality is theGS autobots are juicing the financials.

  111. CAP/Sell off ??? This market doesn’t do sell off. Its only a good stick from erasing yesterdays fall :-)

  112. Read HCBK 10k if you want some insight into whats happening in the real world

    All this bull going on in the markets makes me angry, all the bozos on CNBC pumping up the markets and ringing every last penny from uneducated investors borders on the criminal, we are being set up for the next fall…..believe it

  113. Oh, man, I am out of the DIA 91 calls, as Phil suggested in the morning.  In 1.63, out 1.66, about even after commissions.  I chewed off enough nails today!  I don’t about yours, my nails taste pretty bad.

  114. Phil – thoughts on any UNG plays? Looks like it’s heading down the hill with a big bear flag.

  115. Cap, we haven’t quite closed the gap in srs from yesterday.  I’d be careful into the close…

  116. Gel, thanks for the feedback.  I’ve also had a Schaeffer subscription in the past and was underwhelmed…

  117. Sugar/Ramana – That’s a good one.  Smart move by them (other than getting strip searched).

    DIA/Chuck – It is hopeless to be a bear.  We’re still below the Wed/Fri lows across the board so nothing to be really bullish about other than the bears seem to feel it’s impossible to win despite the fact that we dropped twice as much yesterday as we gained today.  The problem is everyone’s a day trader and they only remember the last move the market made, not the overall direction of the market.  Here’s the "bullish" SPX chart for the last month – is this something you would bet your house is going to go up?  This attitude that we have to have a 10% drop right away or your premise is shot is ridiculous for a bearish investor.  Being a bear is a patience game, expecting that – over time – the fundamentals will win over sentiment. 

    ANF/Eric – That’s a good one, I couldn’t believe they went up after those earnings. 

    Volume has been going down and down and down as the market went up.

    SOX and Transports have both broken over the lows of last week – that is what the bulls need to break this downturn and there’s noting to stop a move up overnight or tomorrow morning other than a massive build in oil that shocks the energy sector so need to stay neutral as possible into the close and maybe wait all the way through tomorrow into Thursday’s heavy data and retail earnings.

  118. Eric, I’m sitting on some ANF 29 puts so please push it down and down and down!

  119.  Phil – How would you play a pullback in retail (XRT)?  I was looking at buying a JAN ’10 $27/22 put vertical and writing a JAN ’10 $34 call to pay for it (net $0 outlay)…thoughts?

  120. Gotta disagree guys; this is a phony bounce; a weak FMD.  The market goes down more this week.
    Anyway; not doing much; just still short COF for the day; about breakeven right now.

  121. Gotta disagree guys; this is a phony bounce; a weak FMD.  The market goes down more this week.
    Anyway; not doing much; just still short COF for the day; about breakeven right now.
    I think we can easily give back 1/2 of today’s move – and Pisani will proclaim it a victory for the bulls.

  122. Gotta disagree guys; this is a phony bounce; a weak FMD.  The market goes down more this week.
    Anyway; not doing much; just still short COF for the day; about breakeven right now.
    I think we can easily give back 1/2 of today’s move – and Pisani will proclaim it a victory for the bulls.
    and yes, I am aware of the stick-yness potential.

  123. Pisani could pull a bulls horn out of his ass and declare it  a victory for the bulls… he is such a joke!

  124. "so need to stay neutral as possible"
    Full covers on mattresses?

  125. UNG/Trad – They don’t really pay enough relative to the risk.  They make a ncie buy/write as you can collect $1.80 for the Sept $12s against the stock for $12 (15%) so you don’t have to "win" too many times to have a nice year – that’s the best play for now – you certainly don’t short them during hurricane season.

    XRT/SS – I think RTH is more fun right now.  You can just go with Sept $80 puts at $1.35 and those can double fast if Thursday has disappointing numbers.  Don’t forget companies like HD and TGT are the best of the best at cutting costs and saving money and they have the muscle to stick it to their suppliers – not so for the mid-size realtors who are coming up who may have too much inventory, too much staff and too little space in their sad little, empty strip-mall locations.  I don’t like your vertical as you are looking for too much of a move down just to get in the money and boy are you screwed if they take off – like they would with a $200Bn tax rebate that the administration better announce by the end of Sept or Xmas will be dead this year. 

    Mattress/Chaps – If that’s what keeps your portfolio market neutral. Generally a 1/2 cover of your portflio hedge is neutral so it really depends on what bullish positions you have left.  We’re miles away from our buy/writes being hurt so no need to protect them and we’re out of naked calls so generally, the Dec DIA’s are a naked play with nothing to protect and, if that is your case, then a 3/4-full cover is appropriate, maybe full cover on the Sept $92 puts.

    Of course if HPQ misses or lowers guidance – say goodbye to all of the day’s gains.

  126. DUG $17s at .70 have .20 in premium, a fun play on oil not being worth $71 after inventories tomorrow.

  127. Trying to break out the stick in the last 8-9 minutes …
    F U STICK !


  129.  Thanks, Phil.  Exact analysis I was looking for.

  130. Pharm / anyone - got an opinion on VTIV?  I own the shares in an IRA but it looks to be making a strong comeback so considering an options play…

  131. puppets on a string!

  132. Such lame volume, 140M at the bell.   Doesn’t say much for the stick at this level unless perhaps they used their firepower both yesterday and today early on and had nothing left for the closes.

    Tomorrow/RMM – Fence sitting, as is the market right about at our bounce levels.

    Puppets/Drum – You said it!

    Ah well, that was not at all fun today.  More of the same tomorrow is likely.

  133. HPQ with a nice beat but not better than whisper numbers.  Big news is 5% raise in guidance for this Q, that’s nice and specifically bullish from a company you can trust to make numbers.  A lot of that seems to be China though, not so much US and Europe and, of course, China is all stimulus so as long as everyone insists on treating stimulated demand as real demand – no problem!

  134. Anyone see AXL today?  I made some money earlier in the year on another Auto-Stimulus play (HAYZ).  Should have kept a closer eye on this bastard. 

  135. Phil/DDM – I went for it and DD’d. My average for my 32′s is now at 2.03 and my average for the 34′s is still .70, plus the .20 profit made off of the 33′s. I’m feeling pretty comfortable with my position right now. Your suggestions today have been invaluable, thanks!

  136. ADI not looking good after hours, is the Oxen gamble a flame out?

  137. GE- I am in a buy / write- 400 sh -cost basis $9.51 which includes the premiums on the Aug 11 calls-sold @ 1.39 & Aug 11 puts sold @ .31. Puts will expire; Roll to the Sept 11′s calls @ 2.65 & wait for selling puts? What do you think about going out to Dec P/C’s?

  138. EDS saved HPQ this Q
    Services revenue increased 93% to $8.5 billion due primarily to the EDS acquisition. Infrastructure Technology Outsourcing posted revenue of $3.9 billion while Technology Services, Application Services and Business Process Outsourcing posted revenue of $2.4 billion, $1.4 billion and $711 million, respectively. Operating profit was $1.3 billion, or 15.2% of revenue, up from $567 million, or 12.9% of revenue, in the prior-year period. The EDS integration is tracking ahead of plan.

  139. Phil,
    CMCSA has sold off on rumors that it is in the market to make an acquisition. I’m in this stock with the Jan 12.5 @3.70, Do you think a cover is warranted or wait it out?

  140. ADI not looking good after hours . . .
    A 10% earnings beat and raised guidance somehow leads to an after hours sell off.  What gives?

  141. mee too, Maxt. Jan 11, $12.50s. Down 11.64% at the moment.

  142. Phil
    Looking at your favorite TASR for buy / write- what do you think about Sept p/c vs. Dec? Pros/cons?

  143. ADI from Briefing:

    Can you find anything negative in this:

    Analog Devices beats by $0.02, beats on revs; guides Q4 EPS above consensus, revs above consensus Reports Q3 (Jul) earnings of $0.22 per share, excluding non-recurring items, $0.02 better than the First Call consensus of $0.20; revenues fell 25.3% year/year to $492 mln vs the $479.6 mln consensus. Analog Devices reports Q3 gross margin 54.1% vs 54.8% First Call consensus, guidance was for 54-55%. Co issues upside guidance for Q4, sees EPS of $0.24-0.26 vs. $0.24 consensus; sees Q4 revs of $510-530 mln vs. $498.30 mln consensus. Co said, "There are near-term indications that business conditions are improving. Order rates strengthened throughout the third quarter and have remained strong during the first two weeks of August. Our book-to-bill ratio for the third quarter, as measured by end customer bookings, was above one, and our fourth quarter opening backlog was up from last quarter…. While we plan to continue to tightly manage inventory levels, we expect a small increase in utilization, which should result in a gross margin in the fourth quarter of approximately 55.0%. In addition, we plan to continue to closely manage operating expenses and expect them to increase slightly by approximately 1% to 2% in the fourth quarter."

  144. Phil – RTH – re: your comment to ssdirk with price having to drop to be in the money – what about a vertical bear call spread – sell Sept 85s, buy Sept 90′s for a $2 credit? RTH closed 83.09 today – a $2 price cushion before eating into your credit spread.?

  145. The answer is YES….DUG is down and DIG/USO are up because I bought Calls in the former and Puts in the latter two in anticipation of the oil inventories tomorrow.  It should be fun if nothing else LOL.

  146. MrM – sorry, don’t follow VTIV….I would think that industry is cutting back on the ‘value added’ scene.  Then again, they may outsource it as they reduce OH…

  147. What a boring, useless day … glad I cut out for part of it.

  148. Alan Greenspan 1966
    When business in the United States underwent a mild contraction in 1927, the Federal Reserve created more paper reserves in the hope of forestalling any possible bank reserve shortage. More disastrous, however, was the Federal Reserve’s attempt to assist Great Britain who had been losing gold to us because the Bank of England refused to allow interest rates to rise when market forces dictated (it was politically unpalatable). The reasoning of the authorities involved was as follows: if the Federal Reserve pumped excessive paper reserves into American banks, interest rates in the United States would fall to a level comparable with those in Great Britain; this would act to stop Britain’s gold loss and avoid the political embarrassment of having to raise interest rates. The "Fed" succeeded; it stopped the gold loss, but it nearly destroyed the economies of the world, in the process. The excess credit which the Fed pumped into the economy spilled over into the stock market-triggering a fantastic speculative boom. Belatedly, Federal Reserve officials attempted to sop up the excess reserves and finally succeeded in braking the boom. But it was too late: by 1929 the speculative imbalances had become so overwhelming that the attempt precipitated a sharp retrenching and a consequent demoralizing of business confidence. As a result, the American economy collapsed. Great Britain fared even worse, and rather than absorb the full consequences of her previous folly, she abandoned the gold standard completely in 1931, tearing asunder what remained of the fabric of confidence and inducing a world-wide series of bank failures. The world economies plunged into the Great Depression of the 1930′s.


  149. Kus, that’s interesting.  Looks like Greenspan must have Halveseimers cuz he sure forgot that history lesson.

  150. David Ristau:
    Very Positive news from ADI… I sold Sept. 27.50 puts for a net of 26.05. If market can’t figure out today what good news this is, then I’m happy to be assigned the shares at this price, and will profit later. Thanks!

  151. Let me ask, did anyone else notice a substantial increase in their credit card interest rates this month? I was just hit with a 50% increase ( I had a historically low rate, carry a low balance and pay 3x the min ) ahead of the new OBAMA regulations ( thank you Mr. Pres. ).
    The CS representative indicated that the rates were increased "across the board". Does anyone think this is good for the increasing CC default rate? I personally think we are going to see a huge increase in defaults as people simply stop paying on their cards.

  152. And Phil, I am almost done turning my charts upside down, TY. LOL

  153. CaFords – Apparently a lot of card companies are raising their rates now before the rate constraint provisions of the Consumer Financial Protection Act go into effect.  I had a card that was never late with a low balance go from just under 6% to 18.5%. I’ll keep the account alive because it’s got such a long track record but I made sure that card is the last thing I reach for and even then, only in an emergency.  
    There are also a lot of games going on with cards that have high limits and low balances.  Banks see them as potential time bombs and their trying to compress the limits.  I was just at a conference where a guy was talking about lending money as a function of FICO scores.  One of his main themes was that the real difference between a guy with a 550 and a guy with a 750 score…the guy with the 550 had most of his problems behind him and the guy with the 750 had most of his problems ahead of him.  Weird way to see the world but that’s bankers for ya.

  154. Cap – the SEC is shopping around a new short sale rule.

  155. Keyser – I agree, I am not concerned with the impact to me as I made it a point to not carry debt into this mess. The thought process behind your second point is simply amazing to me, albeit rational from a bankers point of view.
    I was told that the companies block of business was performing, and that the recession warranted higher rates, even though current market rates were low. This seems to be a bit of an oxymoron to me.
    This action will definitely reduce outstanding debt: by way of defaults. I think this will simply be the final nail in the coffin so to speak for the consumer and for the CC companies. You gotta love that banking lobby that changed the bankruptcy laws.

  156. All I know is that I am going to short the hell out of JP Morgan.

  157. Matt……..Amazing how quickly they forget

  158. MY MY MY how they’ve lost their way and we losing our wealth, Greenspan continued
    Under a gold standard, the amount of credit that an economy can support is determined by the economy’s tangible assets, since every credit instrument is ultimately a claim on some tangible asset. But government bonds are not backed by tangible wealth, only by the government’s promise to pay out of future tax revenues, and cannot easily be absorbed by the financial markets. A large volume of new government bonds can be sold to the public only at progressively higher interest rates. Thus, government deficit spending under a gold standard is severely limited. The abandonment of the gold standard made it possible for the welfare statists to use the banking system as a means to an unlimited expansion of credit. They have created paper reserves in the form of government bonds which-through a complex series of steps-the banks accept in place of tangible assets and treat as if they were an actual deposit, i.e., as the equivalent of what was formerly a deposit of gold. The holder of a government bond or of a bank deposit created by paper reserves believes that he has a valid claim on a real asset. But the fact is that there are now more claims outstanding than real assets. The law of supply and demand is not to be conned. As the supply of money (of claims) increases relative to the supply of tangible assets in the economy, prices must eventually rise. Thus the earnings saved by the productive members of the society lose value in terms of goods. When the economy’s books are finally balanced, one finds that this loss in value represents the goods purchased by the government for welfare or other purposes with the money proceeds of the government bonds financed by bank credit expansion.
    In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.
    This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.

  159.  Phil-I have GE Jan ’11 calls (4-7.5 & 4-10 Calls) fully covered against Aug -9′s. What are your thoughts on adjusting this? 

  160. RTH/Concreata – Yes, I do like a vertical bear like that.  Do consider the merits of paying an extra $1 for the October $85 puts selling the Sept 80 puts as you have almost the same delta, certainly the same positon and much more time to be right. 

    DUG/GS – The API report showed oil down 6.1M barrels last week with gasoline also down 1M and distilates up 1.5M.  API data is generally unreliable but this is such a big draw number it would seem outside the margin of error.  We’ll have to see how a 6M barrel draw is explained as it could be stepped up refinery runs (which has a lag between using oil and creating product so causes a draw) or it could be lack of imports as tankers held off from making deliveries as prices were falling.

    Debt/Kustomz – Best not to think about it.   I tried to explain the debt to my 3rd grader and she had a nightmare and woke up worrying how she could ever pay for it…

    Speaking of Debt, Greenspan and inflation:  Nice paper on what happened to Zimbabwe, who pretty much started out right were we are now doing the same things we’re doing now to stimulate the economy.  Zimbabwe’s solution in the end was simple, the just halted and crashed their stock and bond markets and wiped out all speculators, re-establishing the value of goods and services from scratch.  Something to look forward to and something I talked about last year when we discussed value in general and the illusion of wealth on Gilligan’s Island. 

    ADI/Gel – It was a good call but they had such a huge beat last Q (133%) that a 10% beat this Q isn’t thrilling people.  Fine stock to hold onto.

    Credit cards – As I see others mentioning, the companies are jacking up rates ahead of new regs and this is simply going to destroy Christmas as the average family (going back to Kustomz’s debt chart now) has about $10,000 in CC debt and 18% is $150 a month in interest payments alone.  Talk about trying to get blood from a stone….

    Between 18%+ interest on CCs and $70 oil (100% more than last Xmas) and 6M more people out of work and 2M more bankruptcies and 4M new foreclosure notices filed this year – the only white we’ll be seeing this Christmas is the bread the government will have to start handing out to keep people from starving…   So that’s why I’m short on the RTH! 

    Meanwhile, very nice list from Bespoke on the most volatilie stocks intraday – love my CROX!:

  161. GE/Calch – I’d take the 4 2011 $7.50s at $6.50 ($2,600) and roll them to 12 March $12s at $2.60 ($3,120) and roll the 8 Aug $9s at $4.55 ($3,640) to 16 Dec $12s at $2.25 ($3,600).  You are spending $560 to put your callers into $1,040 of premium.  You could also consider simply moving the 4 2011 $7.50s to 8 2011 $12.50s for about even and then rolling the 8 $4.55 calls to 12 Dec $12 calls at $2.25 and 12 Dec $13 puts at $1.15, which is net $4,080 collected but, of course, you have the margin obligation on the puts (but you can offset most of that by buying the 2011 $10 puts for $1.28).  GE would have to fall below $10 for you to lose out on the sale and, on the upside, the expired putters pay for you to roll to the Jan $13 calls at least.

  162. UNG – its NAV is now at $10.69 (so it’s trading at 12% premium).

  163. Shanghai tanking, followed by Hong Kong.
    SRS – Manhattan office building sales at standstill

  164. Good Morning everyone.
    Everything down after a bad night in Asia (Shanghai down 4.3%) yet well off their lows as the morning pump tries to work up a steam. S&P holding above yesterdays open so not great for the bears yet.

  165. Pump doing its job again. SPY is now $0.4 off its lows, And Phil wonders why Bears are impatient – what with the pre-market pumps and the closing sticks there’s hardly time to get in a good short :-(

  166.  Good morning Phil & all,
    I’ve got 985 drawn as a fairly important support for S&P right now. If the bears fail to breakdown the index here, then it’s probably bullish for the market and an early tell that it is going to go up and test 1050 resistance.

  167. Good morning!

    Well lots of fun and games overnight.  Still holding our breakdowns so far but the suckers aren’t buying what GS was selling yesterday and don’t forget you get to a point where GS gives up and exits the game.  Look for signs they are turning negative like one of their major shareholders (Buffett) dissing the market or GS downgrading a Dow/commodity component like AA…. 

    SRS/Fab – This is what’s diving me and Cap crazy.  We KNOW this is happening, only the buyers of REITs seem not to…

    Patience DB-san!  Chinese proverb say: "Patience is power; with time and patience the mulberry becomes silk."

    985/Merk – Doesn’t look like it’s even going to get a chance to hold in the morning so you have to try to get it back.  I can’t see 1.050 without some real consolidation after a proper sell-off. 

    LOL Where!

  168.  I hear ya Phil… but I think we already have had our consolidation. We spent 12 trading days in August consolidating S&P 1000.
    This quick drop down to 985 support we’ve had this week could be a setup for another quick move up… it’s like the crouch a cat makes before making a big leap up on top of something
    My expectation is that we trade today in a narrow flat line around 985 on the S&P, if the bulls still control this market. If 985 breaksdown, then look out below.
    But I doubt this is IT for the bears to start having free money days… no not yet. Given that consolidation of S&P at 1000, the bulls could have enough to juice the markets for one more sudden pop and catch the bears by surprise.