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Thursday, December 1, 2022

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Thoughtful Thursday Morning

Maybe I am being too bearish on the economy.

Maybe there is a shining city on the hill with 1,000 points of light and if I simply close my eyes and believe in it, I will be transported there and everything will be wonderful and China will expand and Europe will expand and the US markets will rise and rise as the 18M unemployed people line up in the streets to cheer us as we all drive past them in our new cars as we head over to the gas station to pay $4 for gas, honking joyfully as we pass by each empty storefront and each abandoned home

It was good to take quick bearish profits, as I warned in yesterday's post because quick profits are all the bears get these days as it was indeed a "Whipsaw Wednesday," and Buffett's warning went in one ear and out the other of investors so quickly that clearly there was no gray matter slowing it down along the way!  I was very proud of our short plays on COF, HPQ, RTP, SRS, RTH and our DUG long but all had a half-life on their success so short you could have run an atomic clock with it.  Fortunately, we had our bounce levels to guide us and our 3 of 5 rule to get out of bearish positions so the damage was more to our pride than our virtual portfolios.

Although I could see the turn in my 9:45 Alert to Members, I didn't have the heart to make any bullish calls as it just seemed like such nonsense.  By 10:12 we were even more concerned that something was up and I said: "Don’t get too excited bears.  As I said in the post, profits need to come quickly off the table – this is not a market for riding 20% profits too far."  Sadly, I then proceeded to make a short play on OIH at 10:26 that stopped out at 10:34 and an incredibly poorly timed idea to get the DIA $93 puts at 11:22, just minutes before the market went flying and stopped that one out too as we flew through our bounce zone of Dow 9,200, S&P 986, Nas 1,946, NYSE 6,400 and RUT 555.   Now that they've held up so well, those levels now become our watch levels to the downside and it makes the previous support levels of Dow 9,100, S&P 980, Nasdaq 1,950, NYSE 6,400 and Russell 550 even less likely to be broken. 

Amazingly, right about 11:30, the markets began a 100-point "parabolic" run for no particular reason (see David Fry's chart) on not even any significant volume and that accounted for 100% of the day's gains.  Of course, the energy sector led the charge with oil up 5% on the day but oil was already up 2.5% ahead of the energy report and that was at 10:30, not 11:30.  While we have real issues with the energy numbers, there wasn't much we could do about it so we looked at bullish plays on UNG and UYG, looking to cash in on the insanity.   The most bullish items I saw yesterday were:

I’d have to say that last one, which hit the wires at 11:57 but was certainly known earlier by the big boys (who sit at the table with the Fed govs) so effectively this was a money dump coupled with the 5% jump in crude for the day – all nonsense that doesn’t change the overall fundamentals but we also have to know when we're beat and go with the flow, even as we look for the exits at all times.  We went into the close still a little bearish overall, with 1/2 covers on our long DIA puts as we now fear the pre-market action but we essentially stuck to our game plan for the week, where we expected a flat Wednesday and a drop on Thursday as we got retail earnings reports and jobless claims.  If we don't get a turndown today, it may be time to throw in the bearish towel…

[Continuing claims for unemployment benefits]8:30 Update:  We have the jobs numbers and 576,000 jobs were lost, right in line with the 4-week moving average (so 2.3M people a month losing their jobs) and up 15,000 from last week and much higher than the estimates of 550,000 jobs lost.  This by iteself shouldn't be enough to tank the markets because, if we didn't care about the 9.3M people that were already on unemployment last week (and we are totally ignoring the other 9M people whose benefits have run out and are considered "out of the workforce"), we sure aren't going to get too worked up about an extra 26,000 people getting pink slips.  After all, look how good it's been for corporate profits to fire all these people!  Heck, we should have done this years ago – what a great economy we would have if we could get rid of all the blood-sucking workers and just sell stuff!

Retail earnings, on the other hand, may actually matter as GYMB, HOTT, PETM and FLWS all lowered guidance since yesterday.  SHLD also had a big miss and none of the reporting companies raised guidance and even companies that beat low estimates, did so on poor revenues overall.  Congress is stepping in to save SHLD and appliance manufacturers with a new "cash for clunkers" program aimed at consumer durables.  $300M has been authorized for the fall for rebates on high-efficiency household appliances, furnaces and air-conditioning systems.  WHR and GE are going to be the big US winners.  We already like GE since they control the media anyway but SHLD is going to be the bargain baby of the group after that terrible earnings report and we'll be looking to dip our toes in on that one as they sell off, looking like $64.44 pre-market (9am).  If the economy is really bottoming, Sears is a bargain.  If the rebate program works, Sears is a bargain.  If commercial real estate comes back, Sears, with 3,900 of the best retail locations in America, is a bargain with a market cap of $8Bn or about $2M per store.  Most likely we'll initiate a play by selling naked puts, perhaps the Sept $65 puts for about $6. 

Asia hadn't seen our jobs numbers or retail sales (after all, those are their manufactured goods we're not buying) as they keyed off our happy, happy markets yesterday and the Shanghai Composite shot up 4.5% this morning, erasing all of Wednesday's loss PLUS 1 point (just for emphasis).  That was such happy news that the Nikkei rose 1.8% but still just under the 10,400 line it needs to prove a rebound and the Hang Seng gained 1.8% (374 points) but not one penny more than the opening gap up that also, almost to the penny, erased all of Wednesday's losses.  This is a market condition the Chinese refer to as: ??????, which means "Manipulated pile of dung," or an "MPD Day" for short

EU markets are up about a point ahead of the US open but off their highs after hearing our jobs numbers.  They too are shaking off news that would worry more rational markets as the UK and German budget gaps widened by huge margins with the UK needing to borrow net $13.2Bn vs $320M projected by "economists," who we've already learned not to listen to but WOW, that's off by a lot!  The recession has left even deeper scars in Germany, where the government forecasts gross domestic product contracting by 6% in 2009.  "Even though economic data as a whole are pointing to a stabilization of the economy, the situation however is still fragile," Deputy Finance Minister Joerg Asmussen wrote in the ministry's August fiscal update. "The crisis and its consequences are far from overcome."

Tax intake has shriveled. During the first seven months of the year, German tax receipts were 5.2% lower than the year-earlier period, while federal government tax receipts were 2% lower during the same period. One of the hardest-hit categories has been the intake from corporate taxes, tumbling 57.9% during the first seven months from a year earlier, while income-tax revenue was down 4.4% in the January-July period on a yearly basis.

We'll see if all this negative news actually matters today.  RTP is a good short at the bell as their earnings were awful and they will only improve if you believe in the commodity fairy and the Sept $160 calls can still be sold naked for $9, which makes an interesting play.  We're not going to do much today, other than watch our levels and see what sticks.  We had really hoped for a bigger sell-off into expiration day as it will be tough to make buys for next period at these elevated prices. 

 

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Phil- Urgent question regarding assignment.  On Wed, I sold some $37 USO calls and $27 DIG calls which are both $1+ in the money right now.  Basedo on your past experience (and I realize that wouldn’t necessarily mean the same thing would happen here), when is the buyer most likely to exercise those calls?  If the answer is "could be any second", should I buy those calls back now (or by end of day at the latest) if I don’t have the money to actually cover those calls with actual buying of shares?

Also, if/when the buyer exercises those calls, how would it work with my TOS account?  Would TOS ask me to actually buy (at market price) and deliver (at the strike price) 4500 shares of USO and 2000 shares of DIG?  There’s a very good reason I’m not asking TOS customer service….which might be the common sense way to approach things.

 (In a loud CAP voice):
F U SRS!!!

 Phil, on the kindle – i think that amazon has a good head start on establishing the standard for the ebook.  Apple may  try to undercut the price, etc but the publishers will realize that amazon is probably a better partner than jobs – look at the recording industry – jobs has got them by the nuts.  I think all of this is priced into AMZN’s stock price.

This glacial pace is something. I suggest that the traders be available for trading only for ten minutes after each hour. Those trading halls look very spacious, and the gals and guys could play catch or stickball in these totally slack periods. Get Erin and Maria down there too.

SIRI. The cheapo March $1 calls are cooking. Thx, PD.

PharmBoy – HEB has been all downhill since we discussed (and I bought some) last month, should I bail here, DD, or just be patient?

 I’m bringing the CA Angels rally monkey out of retirement… we’re cheering for Mr. Stick to hit a final hour wild bull grand slam home run … chuckle…
 
rah rah Mr. Stick, rah rah Mr. Stick !!   Putting on my rally cap and getting my popcorn ready !!

AMZN. If I suffer the indignity of them hitting 85 tomorrow – after pimping the Aug 85 calls, what say ye? I wrote them against Jan 80s that I want to roll out and down (paid $14.90 a while back). Anyway, after hours question on what to do if it looks like I’ll get called. Tho I think they finish under 85 still.

Halejulia.  Broke even on my FAZ.  Sold half.  Now.. about that SRS…

Did anyone see that spike on SPY. The bid dropped to $100.69 and a gazzillion computers pounced and spent 6m shares pushing it straight back to $100.79. The stick save must be kicking in.

There is a great line out of a play (Sly Fox) that goes: "Never think too little of people when less can be thought."

MrM – if they move through 1.68 or so, they fall hard.  Announcement for their chronic fatigue drug is this fall.  I would not DD here.  I would step out at 1.80 or so.

Phil- If you had to guess, where would say AIG closes by options expiration?

 AIG just bounced off 30.6…. how about that target call made at my 2:07PM comment?!?… chuckle
 

AIG… I hear ya Phil…. Aug 35 for .50 is basically gone money… hence a roultette gamble…
 

but if AIG’s MMs juice the stock up to 40+ during a bear squeeze panic tomorrow, doing again as they have done twice this year, then the contract is a 10 bagger at 40.
 
It’s a go or no go, all or nothing kinda play.

DB, have you gone mad?  The stick has been at work ALL day!

Hi, Pharmboy, I hope that you are not annoyed by my keeping asking.  Up until now, I’ve been ignorant to the health care space and therefore haven’t read posts on PSW related to that space.
So, forgive me if this is already discussed: What do you think of VAR?  Looks like a market leader in their speciality (equipment for cancer radiation treatment)?

Phil – Any thoughts on why SIRI is running as if on steroids? Broke through major resistance at .6 . Is it just a short covering rally?
Side note – Just bought some UNG Oct 11 calls and then UNG decides to jump off the cliff. Already lost 10% on the calls.

 Phil, i think the ebook model is the future – i just don’t think that the publisher’s will dump amazon for apple.  But it will be interesting.  
What are your short term thoughts on BAC until earnings in OCT?

Expect the push to 1010 on the S&P, could this be the kiss goodbye



If you sell 10 USO $37 calls for $1 and USO closes tomorrow at $37.05, you will have $37,000 depositied in your account on Monday and you will be short 1,000 shares of USO at $37 that you were forced to deliver over the weekend.  That’s all – it’s really not a big deal.
 
Did you mean I’d have to deposit $37K into the account Monday?  What if my net liquidation value is only $10K on Monday?  I was thinking they’d require me to have the money to actually buy that many shares…but if they don’t…that’d be awesome.  Thanks

Phil, Folks,
Am now staring at my Aug $5 buy/write in TASR and thinking the Sep premiums look kinda dull.
Am minded here to roll the Puts out to Sep, and wait to try and collect perhaps .4 for the Sep calls next week.
Any thoughts pls?

MrM – cannot remember if someone here posted about CTIC, but their call volume is VERY high in the Sept, Dec and Mar contracts.  Since CTIC is in the same price range, I would possibly move over your HEB to them….I am going to buy in here at 1.67…I think the FDA gives a note on priority review on Monday or so, and that may help.  If tomorrow CTIC appears to close BELOW 1.63 or so, THEN GET OUT….

GS, think about what you sold: the right to BUY the stock for $37/share. So someone has to pay you $3700 for each call option you sold, if you are assigned, before they can get your stock. So they must give you the money and then they get their shares (which the broker lends you as in a short). So you don’t have to have the cash yourself (you’re not the one buying the stock!): it will be given to you first, so as Phil said it’s more of a hassle than a big deal. 
 
By the way, ToS has a $15 assignment fee, plus you must buy the stock, plus you get charged for the short position if you hold it, as usual. So what I don’t like about assignment is getting dinged with all the charges.

 Phil, i took care of a 390 pound 59 year lady yesterday who was getting a new knee.  she is on disablity of her weight and on medicare as well.  So i hope, Mr. Obama realizes that unless we bring down the costs by yes, rationing, very little will be achieved imho.  We can talk about fairness, morals,etc – but providing useless care is a problem.  These examples, too numberous to list are a total drain on the system and society.

 wooo hooooo… go go go AIG !!!
 
even GOOG is trying to break out than 461.7 resistance line
 
forget irrationally exuberant…. this is moronically orgasmic… LOL

Cwan – Varian has a broad swipe in the medical device.  I like them, but would scale in to a position, as they have moved up quite a bit in the past few months.  I don’t follow them as much due to them being a device co.

DIA- so now what- take out the putters- Sept 93’s; Any cover?

 AIG Aug 35 (IKGHI) is almost double at .90 bid… get off now if you don’t to puke and ride this wild and crazy bull

explore Stryker and WAT if you like device companies

MrM – another you could do is ARIA if you have not already.  I like them and they have a much better chance of success……

VAR/Pharmboy – Thanks!  Their options are quite dull.  I’ll keep an eye on it, and wait for a pullback.

Wow, at 3:35 FAZ had it’s highest 5 min volume of the day.  2 million shares traded.  Those 5 mins cost someone alot of money.

Wow; what a scam !

SYK & WAT / colberg – Thanks for the tips.  I’ll take a look.

 GOOG just lifted over 462… check off another intraday target call (at 10:59AM)… bada-bing bada-boom
Now if it can just hold and close above 462, I’ll be a happy camper

WAT has a little to much dependence on big pharma. SYK ok.  BSX would be fine as well….the CEO just bought a boatload of shares….

Cwan, Pharm has a good point on BSX except they play in the cardio and neuro market, this increase litigation risk, but good company long term

SDS, SRS both shorted into the close.  Looking for a down day tomorrow.  We’ll see.

Phil – re VZ; It’s been trading in a narrowing channel since 9/4/08…..looks like it’s going to have to do something different soon.  I had applied your buy/write/write to it, only had been timing the puts and calls to synch with the channel turns.  So far, it’s been a clock. 😉

UNG breaking down hard.

 whew…. what a day…. i’m exhausted

1008.92 high on the S&P they are either waiting to goose it in the morning or  thats all they got

GOOG volume highest in 15 days

What a spectacle this market is..  Oh well.  Got rid of the FAZ.  They gave me 3 minutes to dump at my breakeven point.  Who’da thunk I should have dumped all of it instead of just half.  It was an obscene display of lockdown today in both SRS and FAZ. 
 
Riding SRS naked (etf).  Time and money are on my side.

There is another medical equip company to watch for: THOR.  A friend of mine works there.  He told me that they have lots of cash and low debt.  One of their products is some kind of artificial heart for the termininally ill.  You want it because your heart is dying?  Sign the release paper, no lawsuits of any kind.  Take it or leave it.
The stock is a wild ride, though.  I keep watching it on the sideline.

PharmBoy – thanks, I dumped HEB (so it’s going straight to $20 tomorrow!) and split the proceeds across ARIA and CTIC; divide and conquer!

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