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Will We Hold It Wednesday – NYSE 6,900 Edition

Big test today!

The Dow failed to retake the upside of our band in multiple attempts yesterday but the NYSE held the critical 6,900 line which is our first real breakdown level to be tested.  As I said to Members in yesterday's Morning Alert, if the NYSE blows it the next critical line is Russell 575 and the Russell is, in fact, our weakest index already as they have blown their 5% level (off the top) of 589 (our watch level from Monday's Post) and now must retake 600 before we can call them turning up.

None of our cover plays triggered but they are still valid and we'll be watching our trigger points this morning.  We did place a bullish vertical bet on the Dow, just in case, as the bullish verticals don't suffer too much damage on a dip and we are still a bit bearish, even as we do test our 5% lines.  The 5% rule (drop from the top) levels for this pullback are Dow 9,600, S&P 1,045, Nasdaq 2,066, NYSE 6,840 and Russell 589.  Keep in mind that these are about 66% retraces off the last run from the 50 dma in early October and blowing those levels is a Fibonacci failure as well. 

As I mentioned in Monday's post (aptly titled "Is Momentum Shifting?"), 595 on the Russell WAS the 50 dma already so be afraid, be VERY AFRAID, if they can't recover as the Russell is our "canary in the coal mine" for the markets (as I warned last week).  Sorry to get all technical today but we only had our fundamental argument going for us for the past month so it is kind of exciting to see the technicals finally come together to prove us right! 

As noted on Trader Mike's S&P Chart above, we are aproaching an oversold level, due to the sharp drop to the 5% move and we already have our bounce targets set for Members and we have our upside cover plays lined up so we can take a quick profit and then get the hell out if we fail to break through our bounce zone.  Watching that stochastic indicator and how fast it moves from oversold to overbought will give us a good clue as to how real a move us is

The movement was all down in Asia as the Nikkei blew 10,200 and finally stopped falling at 10,050 with a weak bounce to 10,075 into the close, down 1.4%.  10,075 is right about 2.5% off the top of the Nikkei at 10,350 so we are right on track with the Nikkei so far and a bounce test at 10,130 is the next expected move (and notice that's the gap down after lunch).  The Hang Seng finished down another 408 points (1.8%) at the low of the day and yesterday was down 1.8% so we can assume that's the magic number for the Chinese trade-bots to kick in and hold each day.  This is, of course, great for our FXP play!  We have 700 more points to go before testing the Hang Seng's 50 dma at 21,000 while the Shanghai held it's ground after yesterday's 2.7% drop.

Shippers dragged down the Asian markets this morning as people finally noticed that all those trade reports actually indicated that nobody is actually shipping anything.  We thought this was a given as we got bored pointing it out 2 months ago but it seems to be surprising everyone else.  

Mitsui O.S.K. Lines dropped 2.2% and Kawasaki Kisen Kaisha slid 4.5% in Tokyo. STX Pan Ocean plunged 7.4% and Daewoo Shipbuilding lost 3.9% in Seoul, China Cosco Holdings gave up 3.8% in Hong Kong and Neptune Orient Lines fell 3.5% in Singapore trading.  Although Chinese shares ended higher, trading volumes were thin on concerns that Friday's launch of ChiNext, the new Nasdaq-style board, would have a negative impact on liquidity.  "I expect tens of billions of funds to channel into ChiNext. Many of these investors have higher risk appetite and make frequent trades. Their departure may have a sizable impact on the main board's trade volume," said Haitong Securities analyst Zhang Qi

EU markets are trading off about 1.5% as of 8:30.  SAP surprisingly lowered their outlook.  "While we are seeing signs of stabilization in the general environment, the market remains difficult. Third quarter software and software-related service revenues came in lower than we expected mainly because of a particularly challenging environment in the emerging markets and Japan," CFO Werner Brandt said.  Risk appetite in the major asset markets has been unwound for the last three trading sessions, and, with selling compounded by the biggest monthly drop in U.S. household confidence since Dec. '08, "we wonder if what is underway is the start of a more broad-based market reversal, or merely a temporary phase of profit-taking after a three-month rally," said Kenneth Broux, market economist at Lloyds Banking Group.

"It feels as if we are treading water until the release of the U.S. GDP figures. If we are to see the U.S. coming out of recession, it may give the whole market more of a feel-good factor, helping provide some impetus once again," said John Murphy, an analyst at ODL Securities.

That "feel-good factor" was the basis for taking the bullish leg of a Dow straddle yesterday as we are looking for a violent reaction to the GDP one way or another.  Even if we don't get it, we are early enough in the month where it's not too high risk to play both sides, especially with the hedges we have in place.  Into today's uncertainty we offset our slightly bearish virtual portfolio with the upside play and, if we move up today, we balance that with a play for a nice drop if GDP disappoints.  Call us market agnostics at the moment – we don't care as long as something happens in either direction…

8:30 Update:  Durable Goods orders did come in up 1%, which is better than expected by getting a cool reception nonetheless.  There seems to have been a whisper that they would be up 1.5% vs the 0.5% originally projected and that is just stupid as there was no way we could match the July and August Cash for Clunkers numbers.  Manufacturing seems to be expanding, helping lead the economy out of the recession. The Institute for Supply Management, a private research group, said its index of manufacturing activity showed the sector expanded a second month in a row in September, to 52.6. Readings above 50 point to expansion in manufacturing.  Also good in this report – Orders for nondefense capital goods excluding aircraft rose by 2.0% in September, after decreasing 0.8% in August.

The bad news in the report is that September unfilled manufacturers' orders for durables, a sign of future demand, fell 0.4%. That's the 12th drop in a row.  Manufacturers also kept cutting inventory, Wednesday's data showed. Manufacturers' inventories of durable goods fell in September by 1.0%.  Excluding the transportation sector, orders for all other durables increased 0.9% in September. Demand ex-transportation had fallen 0.4% in August.  So it's a mixed bag but certainly a positive and it should help boost that Q3 GDP number with 2.5% being the expected growth from Q2s miserable -0.7% performance. 

We still have New Home Sales at 10 am and there we are expecting just 450,000 homes sold WITH the government stimulus (which they just extended, thank goodness) and that's just 25 homes per day per state.  How many realtors is that going to feed.  Realtors and mortgage brokers are a big part of this country's "phantom unemployed" – people who still technically have jobs but are making less than half of what they used to make in commissions.  There are no reliable statistics to cover this but consider that we used to sell 2M new homes at an average of $260,000, which is $520Bn and a 6% commission on that was $31.2Bn in commissions for realtors alone.  This year we are HOPING to sell 450,000 homes at a median price of $179,000 and that's just $80Bn worth of home sales and, even if the realtors still get 6%, that's just $4.8Bn in commissions – quite a pay cut don't you think? 

Mortgage brokers and title insurance people are also part of that same package so that's 3 times that reduction ripples through the economy.  There are appraisers and surveyors to consider before we even get to the obvious construction workers, home builders, movers and yes, even the poor banks – all technically "employed" but making far, far less money than they did 2 years ago.  I know – YAWN – fundamentals… Please forgive me but sometimes I feel compelled to mention them

So we wait patiently for the GDP report and try to disengage our brains and stick to the technicals as it's so tempting to bet the farm on the farm being foreclosed otherwise. 

In a stark reminder of how some battered financial firms remain dependent on government lifelines, GMAC Financial Services Inc. and the Treasury Department are in advanced talks to prop up the lender with its third helping of taxpayer money, people familiar with the matter said. The U.S. government is likely to inject $2.8 billion to $5.6 billion of capital into the Detroit company, on top of the $12.5 billion that GMAC has received since December 2008, these people said. The latest infusion would come in the form of preferred stock. The government's 35.4% stake in the company could increase if existing shares eventually are converted into common equity. The willingness by Treasury officials to deepen taxpayer exposure to GMAC reflects the troubled company's importance to the revival of the auto industry (thanks, Between the Hedges).

Let's be very careful out there, what we're most worried about is what Pink Floyd called "a short, sharp shock" as some bit of data or earnings report can still send us flying off that cliff.  We are not building a very exciting base here and all the big volume has been down.  Until THAT trend breaks and we break back over our levels, it's the down side of the moon for the markets.


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  1. Good morning!

    Oh my, my - the Dow seems to be playing catch-up with reality this morning as they drop 60 points in pre-market after all that fake holding up the market yesterday.  Doesn’t matter what the Dow does though, they are miles away from their level test.  We’re still more concerned about what the NYSE does with 6,900.

    Oil was jacked up to $80 again, now back below $79, inventories at 10:30 but what the dollar does is more relative. Gold is $1,036, back near yesterday’s low of $1,033 after hitting $1,043 in Asian trading so they may still be bargain hunting or just panicking out of their falling markets (the Nikkei blew 10,200 and kept falling all the way to 10,000 as the Dollar couldn’t hold 92 Yen and wait until they find out we couldn’t hold 91 Yen this morning either).

    The Dollar is up against the Euro ($1.48) and Pound ($1.63), both back at yesterday’s lows, when oil hit $77.50 and it’s key to focus on oil’s relative move to the dollar so we need to keep track of those matching points!

    Last night, the ABC Consumer Confidence Poll was -51, down from -50, a three-month low and heading back toward its historical low of -54, reached in January. Only 21% rate the buying climate positively; ratings of personal finances are at 43% (14 points below average) and only 10% rate the national economy positivelyHo, ho, ho – Merry Christmas!

    Earnings are not that bad but the rails are all coming in with around 25% lower volume than last year and that is pretty much the whole story.  No matter what they tell you, no goods being shipped mean no goods in the stores to buy and most retailers are just burning off inventory and won’t be reordering until their shelves are empty.  That means it’s virtually impossible for us to have a good Christmas, even if people did want to buy but we may get a nice sell-off again and THEN a nice Q1 if there is actually a reason to restock so a tricky game to be played out over the next 6 months.

    A plan to let all companies (regardless of size) carry back 2008-2009 tax losses five years is picking up key support in Congress. The recovery act that passed earlier this year gave such a carryback – called corporate welfare by critics – to companies with gross receipts of less than $15M.  Those of you with corporations may find this useful!

    With a jump of five percentage points in smartphone market share to 30% over the past three months, Apple (AAPL) moves to within striking distance of Research In Motion (RIMM) at 40%, down one point. Not to mention iPhone’s astonishing 74% satisfaction rate, vs. 43% for BlackBerry.

    Until recently, conventional logic says, U.S. car buyers cared little about fuel economy and preferred big, gas-guzzling (profitable) SUVs. But now former GM economist Walter McManus says carmakers systematically dismissed research to the contrary: "Our job was not to seek the truth, but to justify decisions that had already been made."

    Notable pre-market earnings: ASH, BWA, CCE, CHINA, CNP, COP, EPD, GD, GT, HES, IP, IPG, JNY, LAZ, LVLT, MWV, NWL, NXY, NYB, OC, PEG, PX, Q, SAP, SEPR, SO, SPIL, SPW, UMC, WLP, WYN

    Notable post-market earnings: AEM, AFL, AKAM, AVB, BDN, CBG, CDNS, CERN, DRE, EQR, ESRX, FSLR, GNK, HGSI, HLX, LNC, LSI, NLY, O, OI, ORLY, RYL, STR, SYMC, TER, TRN, XL

    Wednesday’s economic calendar:
    7:00 MBA Mortgage Applications
    8:30 Durable Goods
    9:30 Hearing: Dark Pools, Flash Trading, etc.
    10:00 New Home Sales
    10:00 Metropolitan Area Employment
    10:30 EIA Petroleum Inventories
    11:00 Hearing: Executive Pay
    1:00 PM Results of $41B, 5-Year Note Auction

    Don’t forget, tommorrow at 8:30 am is the GDP report and we see a very high probability that they scam it above the very low 2.5% growth estimate (as that’s coming off a cumulative down 15% since Q4 ‘07 so 85% plus 2.5% growth is just 87.125% of where we were 2 years ago (see 2:57 member comment for details).

    Since we needed un upside hedge against the GDP and since Durable Goods may beat very low expectations of a 0.5% increase in September, coming off August’s AWFUL -2.4% (it’s hard to have another down month after a drop like that, unless Transportation really tanks us), we went with the DDM cover (ultra-long Dow).

    DDM $38 calls are $2.20 for the adventurous but those are a scale in as housing may take us down at 10 (so if we go up on Durable good, be prepared to take a quick profit at 10).

    DDM $37 calls are $3 and the $39 calls can be sold against them for $1.60 to create a $1.40 bull call vertical with a $2 upside (42%) if DDM just holds $3 (Dow 9,850). 

    These trades are the high part of a strangle on the Dow into GDP as we could move 200 points either way.  Since we were already down yesterday, it was decided we would leg into the long side first.  I’ll post up a short-side play as the market develops, hopefully we get the usual BS move up in the futures and the open to buy shorts into. 

    Same breakdown levels of:  Dow 9,650, S&P 1,020, Nas 2,075, NYSE 6,900 and Russell 575.  NYSE is in most danger of failing this morning.

    5% drop levelsare: Dow 9,600 (from 10,100), S&P 1,045 (from 1,100), Nasdaq 2,066 (from 2,175), NYSE 6,840 (from 7,200) and Russell 589 (from 624).

    EXPECTED bounce areas (20% of the drop) are Dow 9,696, S&P 1,056, Nasdaq 2,088, NYSE 6,912 and RUT 600.  Since only the Russell has fallen below the bounce area, they are the one to watch closely.  Notice NYSE held 6,950 so the Russell will confirm a bullish recovery more than anything else.  They NYSE bounced along 6,920 yesterday and that was the most bullish thing that happened in the market (and it wasn’t much).

    Still we are generally bearish and the DDMs are upside COVERS – keep that in mind and be careful out there! 


  2. That was my 7:09 am comment from the previous chat.  It was supposed to go out as an alert but didn’t so I’m trying again here (Matt is still sleeping but he’ll get on it soon).  Not much has changed since 7.  Durable Goods were a beat at 1% and +0.9% ex-transportation, which is what we expected as it gives the pumpers an excuse to take us up but I’m a lot more concerned with this news:

    MBA Mortgage Apps: Mortgage applications fell another 12.3%, following a 13.7% drop last week, even as the average rate for 30-year mortgages inched down to 5.04% from 5.07% a week ago. Refinancing was 16.2% lower.

    So it’s going to be hard to feel very bullish, no matter what they do.  Same plan as usual though, disconnect brain and watch the levels! 


  3. SAP off 7% so far. This is a big one.


  4. Phil,
    Irish Banks are plummeting.  Would you recommend buying long puts on AIB at this point?


  5. Government Sachs just cut GDP growth by about 0.6%  (3.3 to 2.7%).
     
    You know they know … just like the jobs.
     
    And remember, that is less than 1% growth Q over Q b/c that is an annualized number. 
    With "stimulus"  with clunkers.  Not impressive to say the least !


  6. There’s GS again with a revision to GDP data on the eve of the announcement.  They do this often with jobs data and are usually dead-nuts on.


  7. Phil, do you recomend AIB now as a new entry?


  8. Phil -
    On covers – what’s the rule for rolling them?
    Instead of DIA puts – I bought 111 SPY puts and sold Nov. 108 puts -
    have a 1/2 cover and just not sure when to roll the covers lower
    Thanks


  9. Phil I have yet to sell calls on the VZ I own – what do you suggest. Also where are we with the UYG puts?


  10. Good morning Phil Looking at MHP doing well so fare ,strangle April  short call 35/25 put 2.10 your thoughts thanks


  11. I am short a dec 100 call on DECK. I’m back to even almost after being down after the earnings bounce. Do you still like this play? 


  12. AIB/Seaquil – Only if you are already in it and want to protect.  Otherwise, as I said yesterday, it’s a general EU panic and probably just a good buying opportunity.

    GDP/Cap – for Q3?  They were psycho high with their estimates anyway (when they used it to goose the market a couple of months ago and I said they were on drugs then).  That’s what’s really disgusting about those guys, they make a ridiculous estimate to get the market to do what they want, then change it back to something more realistic the day before and "officially" they’ll say their estimate was 2.7% ahead of the GDP, as if the earlier, misleading estimate never happened.  YET NO ARRESTS WILL BE MADE!

    Dead nuts/SS – Gee, maybe that’s because they have a dozen guys on the inside who saw the report already….

    Cool, marked doing just what we thought but in a pretty messy way.  We’ll see how far the morning pump will take us and then we’ll see about some Dow shorts, maybe DXD or maybe just the DIAs…

    Someone should be glad I said no to X yesterday!   And this move is AFTER we slapped some protectionist BS on steel imports yesterday.  X right at the 2.5% rule at 36.50 so let’s watch that as a market lead.

    AIG/Tchaypov – No, I’d let it play out.  If the EU is after the banks, it won’t be in the BS-wimpy way we wrist-slap our banks.  The EU WILL break them up and slap major rules on them.   They told us that last year at a G20 conference and it seems they are not going to wait anymore now that we passed our very meek rule changes. 

    Rolling/Samz – Generally, you want to roll the covers lower when they have less than 1/3 premium.  That’s usually when the 2x you are going to roll to have max premium.  Generally, that is the point at which you want to have your eye on the trade and then watch to see if it’s getting better or worse for you. 

    VZ/Red – I’d do a partial sell of the $30s with this VIX if you can get .75+ for the Dec $30s, otherwise I’d go for 1/2 the Dec $29s for no less than $1 (now $1.18). 

    NYSE bounced right off target.  RUT 586 – nothing to do but whatch. 

    ONTY got cheap – Pharm, do we still want it?

    MHP/Yodi – That’s right on target and dead center but there are no Aprils are there?


  13. DECK/Roaster – Oh sure, I thought they might go up but not past $100.  You have to understand that the idea is to SCALE IN, which means you sell a little (1/4 is best) ahead of earnings and if they blow it, you make 100% and great, you are done.  IF earnings is good and IF we still like them short, THEN we adjust to a larger position into the excitement (Rule #1: ALWAYS sell into the initial excitement) and take advantage of a big premium sell in a 2x position.  If that one doesn’t work out (see AMZN) then we have to get defensive and just ride it out – IF we still REALLY believe we can recover over time.  So 25% of the time you win 25%, 25% of the time you win a 50% position and 50% of the time you end up in a position you have to work through but, that’s a full posiiton and if those pay off 50% of the time – it’s not bad..

    CNBC very excited about the rocket as it’s a great psychological image that gets people optimistic about the future.   It’s kind of funny to see the rocket, like the market, in it’s second consective day of launch delays…

    Good news:  Nielsen’s Global Consumer Confidence Index jumps 9 points to 86 from 77 in April, a sign consumers are shifting into recovery mode, firm says. Sales of fast moving consumer goods has climbed 2% in each of the last two months, while online recession buzz is at the lowest levels since January.  Why are they using April, that’s a bit misleading

    Bad news: Americans are growing increasingly pessimistic about the economy after a mild upswing in September, according to WSJ/NBC’s monthly poll. Fifty-eight percent think the economic slide still has a ways to go, up from 52% in September, while only 29% think we’ve hit bottom, down from 35%.

    Bad news:  RealtyTrac’s Q3 2009 Metropolitan Foreclosure Market Report shows foreclosures shifting away from previous hot spots toward areas that sidestepped the first wave. "While toxic subprime mortgages drove much of that first wave of foreclosures, high unemployment and exotic Alt-A Option ARMs are spreading the foreclosure flood to more metro areas in 2009," firm says.

    Current weakness in stocks "feels different to any of the pullbacks witnessed in recent months," analyst Cameron Peacock says, and suggests it might be time to begin booking profits. "We’re starting to see stronger value and volumes on the down days, which is encouraging for the bear camp and indicates a level of heightened conviction amongst sellers."


  14. New Home Sales in at 402,000!  That is a friggin disaster! 

    DXD $34s at $1.30 is the downside play to balance DDMs in the spread.


  15. Sorry Phil MHP FEB not Apr


  16. ONTY – scary in here, but 1/4 buy of shares being prepared to DD several times (let me reiterate SCALE IN).  Buy write 1/4 position here for 3.50 or better (3.4 would be great) by selling the $5 Dec.  We are betting that the stock will move as we get closer to a info date on their PIII data.


  17. PHil HOV sell jan 5 put at 2.10 your thoughts


  18. Phil HOV strangle short May 10 7.5/5 call put 2.25  break even 2.75/9.75 your thoughts


  19. GILD is starting to settle into a bottom (much like VZ did).  There is a bit more downside to go, but $39 is the 52wk low there (about 10% from here).  I am in the 41 Feb10, but will be also picking up a few 40 May10 and selling a few 41 Dec P to pay for my roll of Febs.  Phil may have a good bull call for them, as they are still ones to own.


  20. phil,
    whats with this rocket! its too big to fail!


  21. Not sure who is still in SPPI, but I am in the 2.5 Jan11.  They can be picked up for $2 now, 50c premium and one can sell the $5 Nov to offset it by 20c.  If they blow through $5, well, that is $$ in the bank.


  22. New home supply is 7.5 months, up from 7.3 months in Aug and the month is down 3.6% from August.  This is especially bad as this was the last month for the stimulus (although now extended) and they expected a surge, if anything.  Remember, we’re talking 402,000 homes for the YEAR and we have 50 states and 365 days so about 22 homes per day are sold in your entire state.   How is that going to feed the builders, the bankers, the brokers, the realtors, the movers, the surveyors, the furniture makers….  THAT is our real economy. 

    To some extent, used home sales, since we have foreclosures going for $500, are cutting into new home sales but that doesn’t change the equation for the builders, who have been going like gangbusters (XHB) and were up over 50% from July in Sept, now up 35% on a pullback. 

    V and AMZN still getting buyers, V at 52-week highs.  People who don’t buy homes have more money to shop maybe?

    NYSE blew 6,900 – keep an eye on that!  They can mess with the Dow, the Nas and even the S&P by manipulating a few key stocks (like AMZN) but the NYSE and RUT are hard to fool.

    Sector ETF strength early on: Semis– SMH +1%. Transports– IYT +0.9%. Semis– IGW +0.5%.
    Weakness: Coal– KOL -3.1%. Steel– SLX -2.3%. Homebuilders– XHB -2.1%. Oil Services– OIH -1.7%. Gold Miners– GDX -1.6%. Solar– TAN -1.4%. Biotech– IBB -1.2%. Energy– XLE -1.2%. Regional Banks– RKH -1.2%. Silver– SLV -1.1%.

    MHP/Yodi – Right on track and doing better than you think as VIX is inflating the puts and calls that were sold.

    ONTY at $3.77, May $2.50 puts and calls can be sold for $2.20, which is net $1.27/1.89 so better than 100% if called away and half price if put to you.  You can also be super agressive on a small entry selling the May $2.50 calls at $1.70 and the May $5 puts at $2.05 for a net .02/2.51 entry, which is still a 33% discount if put to you and figure if they go down to $1 and you DD, then you are right back to avg $1.76 anyway.  We will call this play "Onty Python" because it’s crazy and it might strangle you! 

    HOV/Yodi – Yes, despite evidence to the contrary, I do believe people will continue to live in homes in the future.  As a SCALE IN, I do like taking advantage of a bad report to sell the Jan $5 puts naked for $2.10 but I’m not seeing that price, I’m seeing $1.60 and I would hold out for $2 as it’s another one you may be doing a DD at under $1 and holding for a long time.  No to the short strangle, minimize your risk on the first entry.

    Sept. Metropolitan Area Employment: Unemployment worsened in 371 of the 372 metro areas followed by the Dept. of Labor, with 13 areas now above 15%Did I mention I like the DXDs?

    Houses Financial Services Committee signs off (49-14) on legislation aimed at ratings agencies, including barring them from consulting to companies they’re also rating, and requiring raters to have outsiders on their boards. The bill also enables investors to sue firms for failing to carry out their duties.

    Dow volume at 10:22 is 44M – Back to slow at the moment so this IS the easy to push up low volume move! 


  23. The market sucks; the consumer sucks; GDP sucks, homebuilding sucks …. what is one to do ?
     
    Buy AMZN of course.
     
    Seriously, everyone here should short 100 shares above 124 !


  24. Sept. Metropolitan Area Employment: Unemployment worsened in 371 of the 372 metro areas tracked by the Dept. of Labor, with 13 areas now above 15%.


  25. 2,000  $25 November call options traded on HIG. Reports earnings Nov 3. Phil, this may be attractive,


  26. Short Strangles/magret – if you hadn’t read yesterday posts, see it here, plus Phil’s comments prior to that post …


  27. Houses Financial Services Committee signs off (49-14) on legislation aimed at ratings agencies, including barring them from consulting to companies they’re also rating, and requiring raters to have outsiders on their boards. The bill also enables investors to sue firms for failing to carry out their duties.  MCO and MHP seem happy enough so I think the terms are not so onerous for them (as we expected).

    Too Big To Fail/High – The rocket rocket or AMZN or the Dow?  All too big to fail if we are going to keep this rally going.  NYSE looks relived to finally give up the charade and they are calling to the other indexes saying "Come on down, the water is fine down here."  That is what they always say in the movies just before all the kids get in the water and the one that went first gets eaten by a shark…

    AMZN/Cap – Bad plan for everyone to short.  They are still trying to shake us out, we don’t want to give them more incentive.  Check out the massive number of $105 calls sold (20,000) and 16,000 $100 calls and 12,000 $95 calls.  Until more of those people capitulate, they are going to keep trying to jam it up (by the way, rolling is capitulation to some extent as they just care about the front month). 

    Oil up 800K, Gasoline up 1.6M and Distilates down just 700K at the beginning of heating oil season.  Refinery utilization is 81.8% – After Katrina and Rita we were over 85%!  Demand is down 10% from last year (as I said Monday).  Oil gapped down to $78 at the NYMEX – that’s rare and ROFL you sons of bitches!!!


  28. HI Phil OIH  holding short 3 dec 125p and 4 135c  sold for 4.75 and 4.92 do you think I need to change some thing or if in daught do nothing? thanks present stk trade 121.10 


  29. AMZN $100KP – I am offering to buy back the Jan $105 puts for $2.50 (up 50%).  We will play this by the book and look to sell 1/2 (20) Nov $120 puts for $5 on the next pullback as we’d be happy to have to roll those down to 2x (the Dec $110 puts are $2.60) as that would wipe out the callers


  30. HGSI
    from Phil a few days ago just filled "even"
    BTO Apr16C STO Nov20C STO Nov17P


  31. Those 20,000 AMZN 105 calls need to be busted (diminished in value).   That is the largets open interest.   The largest put open interests are at 105 and lower.
     
    I’m in for my 100 shares; tough to shake me out on that.


  32. REITs getting whacked.
    Stifel tried to pump SLG this morning; that worked for about 10 minutes.
    Loving the REIT action.


  33. Even AAPL with its truly blowout numbers has given up all of its gains.  So has GOOG.
     
    Why does anyone thinks AMZN will maintain these truly insane levels ?
     
    I think now every company that has reported, good or bad, is now lower.  Except AMZN.  
    We will look back at this price and say "why didn’t we hit this big" … we know why; scared of the HAL9000 squeeze.
    But the rearview mirror will tell all.
     
    SPG just broke 66 to the downside.


  34. El Centro, Calif., and Yuma, Ariz., recorded the highest unemployment rates, 30.1 and 24.2%, respectively.
    Bismarck, N.D., registered the lowest unemployment rate in September, 2.9%, followed by Fargo, N.D.-Minn., 3.7%. We hope they they don’t just throw the unemployed into wood chipper there.
     


  35. G12 Market Pump:  Citigroup does an about-face on Target (TGT +1.2%), shifting to Buy from Sell and boosting price target to $61 from $44. Firm sees "significant upside" to EPS "driven by gross margin gains and productivity improvements," and believes Target "has a long runway of productivity improvements ahead, driven by improved labor scheduling, rigorous expense line reviews and increased management accountability, and in-store technology investments."

    I like TGT but I liked them much more at $40 and will again when they get back there.

    NTRI having a fabulous day (as we expected).  Endless celebrity commercials do work (see PCLN).

    HIG/Raul – We like HIG but they ran up way too far.  I would wait and hope they get back under $20. 

    OIH/Yodi – On target I think.  I don’t usually like the 1-month spreads as you lose value too fast so not as good of a win and also less time to roll if you are wrong (no time actually). 

    HGSI/Edro – I still like that one!

    Dollar down about half a point since we opened so that’s holding the markets up.  Nikkei futures don’t like that one bit as we’re testing 91 Yen and that index is showing below 10,000 now.  Russell has no doubts about heading south and just broke 1.25% at 579.25 and doesn’t look like it feels bouncy and the NYSE is at 6,850, which is their 1.25% mark.

    The Dow is still delusionally leading the other indexes and they are going to snap hard if we start failing levels. 

    5% drop levelsare: Dow 9,600 (now 9,850), S&P 1,045 (1,054), Nasdaq 2,066 (2,091), NYSE 6,840 (6,845) and Russell 589 (578, which is close to major failure at 575).

    Did I mention I like those DXDs?


  36. i know we are short ICE but it still seems to be hold up. Any thoughts on a fresh short here?


  37. Phil, your advice on a GOOG trade I am in.  I have one contract of each:
    Long
    Nov 510 Put at $13.59, now $2.80
    Nov 550 Call at $13.49, now $8.80
    Short
    Nov 530 Call at $29.21, now $19.80
     
    Looking for what I can do, other than kill it?  Maybe sell short a Nov 530 Call (now $7.20) and move the longs out to Dec, but that move to Dec is very expensive..


  38. Phil,
    Just started my membership yesterday.  Excited by your commentary so far.
    Bought the DXDs at 1.30.  Should I put in a stop loss somewhere?
    Frank


  39. AMZN in 100KP: Phil, i want to make sure I understand what you are suggesting. You will be looking to sell 1 Nov 120 put for $5.00 for every Dec 110 call that you own. Is that correct?


  40. Thx Phil. At what level would HIG be attractive? 4,000+ 25 calls now traded. Someone likes them.


  41. phil,
     ftse -2.16; cac -1.92; dax -1.98 all closed at daily lows


  42.  Phil,
    AKAM and FSLR earnings out tonight, any bearish play suggestions? I don’t think their numbers will be as strong as INTC/AAPL. Like Cap was saying, … except AMZN….


  43. AMZN – covered a chunk at around $120 yesterday, and just reloaded some at $123s.  This short position is getting uncomfortably huge for me.


  44. phil: any thoughts on the regional banks, specifically RF.  Been playing the downside on them for a little while now, but I still just don’t see many positives in that sector. 


  45. Phil,
    Do you see a 20% bounce from here, our must hold levels ?


  46.  AKAM, I was thinking of buy 21/19 bear put, and sell 20 put. This is an ‘emulation’ of Peter D’s SPX crazy play. 


  47. AMZN – Hang in there Cap!  Look how long it took AAPL to retrace.   8-)

    SRS up more than 5%, TZA flying, FXP past 5%, FAZ past 5%.

    NYSE blew it now, S&P next and notice the pattern that the indexes fall in the order of their difficulty to manipulate – that right there tells you the whole story

    POT $94, woo-hoo on that short play! 

    RIMM back near $60, one of the only big names I find attractive.

    ICE/Morx – I’d hardly call $103 holding up off $109 but I do like them to fall to $95.  Selling the $105 calls, still $4 is my favorite way to play as I don’t like paying premium.  You can cap margin with the $120 calls at .55 and it’s still a nice spread or you can sell 2 $110s at $2.25 to 1 Jan $115 at $4.20 but you have to be prepared to DD and roll, no worse than if the naked $105s go the wrong way on you.

    PEET on fire.  Between them and GMCR it seems SBUX must be cheap at $19 but their mall presence worries me.  Earnings are on the 5th and you can buy the $20s for .45 as a gamble and the 2011 $17.50/20 bull call spread is net $1.20 so a nice 100% gain if they make a buck by next year.


  48. Out of my DIA puts from yesterday afternoon, I’ll take the 10% and run in this market, but it felt good to have lots of coverage overnight.


  49. AMZN; that was a quick 3.5 point drop …. the computers got turned off !


  50. Bought AMZN 125 calls here for a day trade, that should help you out Cap!


  51. Geely preferred bidder for Volvo….The US is destined to become a thing of the past..:-(


  52. I’m feeling a little hesitant about staying too short here.  Call it distrust of the GDP # tommorow but I’m going to cover most of my shorts here for a possible bounce over the next few days.


  53. Kustomz – Isn’t Volvo Swedish originally?  I know it’s mostly Ford, bust still.  I find it sort of ironic that the least safe car company is buying one of the most safe.


  54. SPPI / Pharm – Holding this now. Will go down on this one with you. :D


  55. GOOG/Jordan – NEVER BUY PREMIUM!!!  This is what happens when you buy premium…  You paid for $27 of premium and sold $29 but that $29 was $20 more in the money than you and, even with GOOG at $544, you still have a problem.  Other than kill it you can hope GOOG plunges to it’s death but not much else.  Fortunately, you were net $2 credit and now it’s a $8 debt so not too terrible.  you can split the $530 caller into the $540 puts ($10.50) and $560 calls ($6.50) which turns you bullish to the upside and forced to roll if GOOG drops so not all that attractive with the market looking weak (although GOOG is holding up nicely and BIDU is being forgiven). 

    Welcome Flyingman (from Heros?)!  The DXD was a pair trade with the DDM plays, which are now nice and cheap with the $38 calls at $2.10 or the more conservative $37/39 bull call vertical at net $1.30 now.  Keep in mind that you can only make a max of .70 on the spread so it’s overall a bearish spread where we EXPECT the Dow to fall and put our DXDs in the money but, if it doesn’t – then we get .70 on the DDM spread to offset the loss on the DXDs.  The main point of the play is to hopefully get a big pop or drop off the GDP tomorrow and we cash out the winner and evaluate the loser for how we want to play the rest of the month.

    AMZN/Alllen – No it would be a 1/2 sell to replace the Jan $105 puts IF we can buy those back for $2.50.  See, it’s a series of events we’re looking for – a spike up to take out the Jan $105s, then a pullback to sell the $120 puts instead.  As we already made $2.50 on the $105s, we have a nice cushion on the $120s we sell so we don’t mind having a half sale, even though we are generally bearish.  Our hope then becomes that we get another silly run up to $125 in AMZN and then we take out the $120 puts for another $2 profit and, before you know it, we’re up $5,000 for the month on our short plays with plenty of time to go and do it again.  

    HIG/Raul – If they break over the 50 dma (with the market levels turning green) at $26 or if they test and hold the 50 dma at $16, then they are attractive.  Right now they are in no man’s land so we go by the general market weakness and stay away from bullish positions unless they are prices we REALLY regret missing in July. 

    EU down 2% – Thanks High!

    By the way, I’m out of here at 2pm today.   I have a series of meetings with VCs as we are looking to put together a holding company that will buy title insurance agencies and search companies that service them at some very attractive prices.  It’s an industry I used to own a company in and it’s a very exciting project.  If we get it rolling I’ll let anyone who’s interested here take a look but overall, it’s a classic roll-up where we merge a lot of struggling small companies (there are 45,000 title agents in the US) into one big one (and I already have the software to connect them all developed) while taking over their service companies (the business I used to own) and using our leverage to drive business into that segment.  Not only is it a nice, synergistic model but once we can service a large region in the Northeast, we become a valuable service provider for the banks (who need us to check all their foreclosures). 

    Exit strategy is either become an underwriting operation like FNF or FAF (10-15 multiple is average) or just sell out to one of them (I sold my last company to a division of FAF). Just so you know where I’m disappearing to…  The VC’s think I’m a genius because I was on the phone with them in November screaming to get some capital to buy FNF when they were at $7 (now $14).  They didn’t listen then but doors are wide open now.  I also screamed at people on this board to buy FAF and FNF at the time as those drops were insane (but could happen again if housing legs down).   Best possible time to do a roll-up if the housing market heads down again. 

    FSLR/Balance – They are like playing with a rattlesnake at the beat of times, especially around earnings.  I’d rather wait to see them fly up and then short the hell out of them.  AKAM should do well based on GOOG and other net numbers but someone doesn’t think so.  Nice $1.05 for $21 calls and you can buy even amount of Jan $22.50s for $1.15 or maybe 20-30% more of the longs if you feel bullish (watch the levels).

    ZION breaking down!  6,840 being tested on NYSE, RUT holding 575 so far.  Looks bad overall, copper failing $2.95, oil below $78, Gold testing $1,030….

    AMZN/Fab – That’s why they do this with the stock, they want to wear you down.  Just like the whipsaw action on the market is meant to wear the bears down and get them to give up before the big drop.

    Stop looking to regulation to fix the financial sector and let the unhealthy banks die. "Regulation tends to make problems worse rather than better," analyst Roger Nightingale says. But if we didn’t bail out the dying banks, to whom would bank executives turn to reinstate their swollen bonuses? 

    As predicted, GMAC comes to the market with a $2.9B, FDIC-backed debt offering. The troubled auto-lender – rumored to be in advanced talks for an unprecedented third government injection – is the only junk-rated company to have its rating (Ca) boosted to AAA through the FDIC’s TGLP, which is scheduled to end Saturday. Bookrunners: RBS, Citigroup (C), Deutsche Bank (DB) and Morgan Stanley (MS).

    Hurting AAPL today: Unsurprisingly, Google’s (GOOG) in today’s disruptive phone news: Verizon (VZ) and Motorola’s (MOT) Droid phone – positioned strongly against the iPhone’s (AAPL) features and network – goes on sale Nov. 6, featuring a new version of Google’s Android OS. The new Android also features a free turn-by-turn mapping service, undercutting TomTom’s $100 iPhone service and putting pressure on GPS hardware marketers including TomTom and Garmin (GRMN).


  56. LOL yes where but think about this GM bk Chrysler BK Ford holding on by a thread and China’s buying everything….The US has become a country of fat lazy people lead by the hand of Uncle Sham….That’s the problem with developed nations competing with the likes of China…the majority in the US are satisfied with what they have..Cable nice car and 2 week vacation every year…we are on the wrong path and its going to catch up with us (US)


  57. Regionals/Jbird – If they come down I like them but KRE is in the middle of a breakdown and you don’t want to be the knife catcher if we have another sell-off there.  I like RF and PNC and HCBK but I would like them better if they test the 200 dma for me first or at least if we see KRE clearly get back above their 50 dma on an upswing. 

    Drugs/JRW – Which ones are you taking?  20% bounce???  Do you mean 20% OF THE DROP bounce?  That would be normal and those levels are key once we test the 5% lines because, if they fail and we end up between 4 and 5%, it’s a very strong indicator of downside follow-through. 

    Bounce areas (20% of the drop) are Dow 9,696, S&P 1,056, Nasdaq 2,088, NYSE 6,912 and RUT 600.  Failure there for the RUT and NYSE are telling as are crosses by the S&P and Nas (both have) as that puts 4 of 5 indexes in the danger zone.

    AMZN/Mr M – Wow, do you read what we write here?  Sorry but that is a trade I massively disagree with unless you are buying at $121 for the bounce, in which case it’s great as long as you get the hell out if they turn south…


  58. Hi Phil Holding BAC Nov 15 p short rec .75 thinking of rolling to Dec 15p rec a total credit of .33 your thoughts thanks


  59. AMZN Puts: Phil, I missed selling the AMZN Nov 105 puts last Friday (as I think some others here did as well) and then it was too late after that. So I am beginning from scratch on the puts. I am short the Dec 110 calls. Given that, I am asking if the best plan is to try to sell 1 Nov 120 put for $5.00 for every short Dec 110 call that I have, or would it be best to use some other ratio? Thanks.


  60. Phil,
    Congrat! Having VCs excited under the current market conditions is an achievement by itself! 


  61. Phil, I need your help on my C positions.
    Long Jan 11 Call 2.5 @ .99 (now 1.8)
    Short Dec 09 Call 4 @ 1.16 (now .31)
    Short Dec 09 Put 5 @ .48 (now 1.04) (I bought back 1/2 @ .89).
    Thinking rolling him to March 10 Put 4 for 2x. Please advise.
    What is your take on C given all the rumor?


  62. Android blah blah blah…look at the the Pre and thats a nice looking phone with a great OS.. The company sold 823,000 smart phones in the fiscal first quarter.  LMAO AAPL sold more than 7 million IPhones….never heard anyone say…not buying the IPhone im waiting to get the new phone from Motorola


  63. Ahhh that explains a lot. Good luck with the VCs Phil.


  64.  AMZN - I’ve been away for awhile but yes, Phil, I’m reading the postings today. I’m just playing AMZN for a quick bounce over the next few hours based on your premise that it’ll keep popping until it shakes out the shorts.


  65. Hey Cap, if HK keeps going south at this pace we may soon get another chance to buy it at 22.50 where we did last round!


  66. Hey Phil, the FAS/FAZ experiment of shorting them both at 45 is starting to level off.  The pair got as high as 110, but now just 94.10.


  67. Bounce/Where – I agree.  Don’t forget the chart at the top of the page has us VERY oversold at the moment.  Primed for a bounce for no reason at all, best to be pretty neutral into tomorrow’s report and we’ll adjust when we have the facts.

    Noon volume 94M – a bit more than our usual low levels (and down again). 

    BAC/Yodi – Why not just be happy to make .75 if we hold up in November and roll if you have to?  You sitll have .60 premium on the caller and you WILL collect that over 4 weeks so you are essentially giving up .60 to get .33.  You can take out the $15 puts for .76 and sell 2x the Dec $13 puts at .43 and 1x the Dec $17 calls for .45 and that’s collecting $1.31 (+.55) and actually hedging your position somewhat. 

    Who is attracing bottom fishers (watching L2 movement):  ELOS, HERO, CMCSA, PAYX, SCHL, HMN, T, VZ, EBAY, MCD…  Not too many…

    Norway becomes the first European country to hike interest rates post-crisis, lifting its key rate by 25 bps to 1.5%. Governor Svein Gjedrem noted inflation is higher than expected, while unemployment was "considerably lower than previously projected," and indicated rates would rise gradually. On Oct. 6, Australia became the first G-20 nation to tightenKeep in mind Norway is a big oil exporter (2.2Mbd) with very few actual people living there (4.5M) so they are selling 2 $80 barrels of oil per family per day, that’s better than Alaska who give you $3,000 for living there - yeah, I’d be happy too!

    AMZN/Allen – So far, nothing has happend to get me comfortable that they won’t be falling back below $100 so a 1/2 sale is the most I would do other than day trading and then you don’t want to do it with the Jans.  I am much more scared of getting burned on the shorts than I am on the upside at this point. 

    Watch that RUT, very artificially flatlined at $576 for an hour now but it’s total BS I think as they try to pretend we can recover here. Dollar gathering strength and oil blew $78 on a gap down and gold right at $1,030 so all hell can break loose with miners and refiners and big oil and the small caps and the Nasdaq… you get the picture..


  68. Phil, I bought DXD 34 call with Delta 500, and bought DDM 37/39 spread with delta 190, is it mean that to ofset them correctly I need to buy twice as much DDM spreads?


  69. phil,
    what bs is going on with dow? every time it gets below 45 it get s pumped back to 40? whoops there it goes! they gave up!


  70. kustomz / US a thing of the past
    "It’s the sound of hobnail boots going up and silk slippers going down the stairwell of time "
    "


  71. AMZN – managed to get my breakeven point to $118 (who knows, we may see it before end of day!).  Not gonna let anyone / anything shake me out of this!


  72. KONG – I like it here at low $13s.. it’s the top China mobile Internet play after all.


  73.  Hi Pharm, I remember you said a last week you accumulating ARNA down here writing puts.  It’s down a decent amount today, good time to sell some more puts?


  74. phil,
    they are trying to spin this thing as some rotation from tech to dow???


  75. phil,
    what is this aapl magic number that will foretell mkt melt down as stated by cnbc as ‘coming up next’?


  76. JRW those wearing the hobnail boots are taking the elevator while those in silk slippers get pushed into the shaft

    This is pretty well controlled pull back…so far ..


  77. $rut breaking down!


  78.  Hey Phil,
    I feel like I am making a mess in my RIMM position. I have the NOV 65 puts, and I sold the Nov 70 calls a few days ago just to take some delta off the table and ride the downside. 

    Last night I put in an order to sell the DEC 75 calls to pay for the NOV 60 puts. It didn’t fill so I settled for selling the 70 calls. 
    So my position is Short: NOV 65 puts, NOV and DEC 70 calls, long NOV 60 put. Delta -11

    I made a mess of this. Any thoughts?


  79. Let me know where yours is Phil….


  80. Hi, Phil,
    Good luck with the VCs.  It sounds like a very exciting project!
    But, you won’t leave us, right?  We need you here at PSW!


  81. Pharm – you see NNVC. I was watching it but nervous abt buying it again. So it goes.


  82. HI Phil Here I like to have your advice as I am not sure what to do here Hold the BMS stock buy write stk for 25.94  now 27.00 sold Nov call for 1.60  now 2.10 should I close the deal or just let it be called away? thanks


  83. Phil / Drugs
    No drugs, just that it’s only 9:30 out on the coast and I evidently have NOT had enough coffee !!
    I have a rather large TZA position and was concerned about a bounce.


  84. Some big bets in SRS today.  Lots of bull call spreads as well as someone buying/selling 100 $13 Jan10 @ 3.4.  Nice 13/14 Apr10 spread for 15c.


  85. VCs/Balance – I was lucky enough to make my early investors 10x in my last company so they pick up the phone for me and then I was extra lucky in the fall last year to use my one phone call to tell them something (which they passed on) that would have made them a fortune if they had listened so now I get a bonus phone call where they take me very seriously and I’ve had to wait 5 years for my non-compete to expire (just did) and, even luckier, the market is almost perfect for what I want to do (which is similar to the thing I wanted to do last fall that they can clearly see would have made a fortune). 

    C/Wii – You made $1.30 on the long spread and you lost .50ish on the put side.  Why mess around if you are nervous?   There’s nothing to save but the two birds in the bush you are going to give up your bird in the hand for…  If you think you are going to miss something big, just take .18 of the .70 you made (about 20%) and put it into 1/2 x the 2011 $5/7.50 spread.  Then you have another $2.20 of possible upside while taking a .50 profit off the table.

    C 2011 $5/7.50 vertical call spread is a fun gamble for anyone at .35.  Pays $2.50 if C actually recovers (615%).

    Android/Kustomz – Well whenever you are the leader the media love to call the next thing to come along an XXX-killer.  Notice they finally gave up calling things an IPod killer but it took them a good 5 years to put that bone away, IPhone will probably get the same thing as will IPad eventually. 

    Thanks Kwan!

    AMZN/Mr M – NOT a promise!  That’s the attempt but they also attemped to shake us out of the market shorts all month (and a bunch of members quit, telling me I was too bearish and they were going somewhere where they could get more bullish picks) but it doesn’t work in the end and it will only take a downgrade from someone more prominant than me to send AMZN down as fast as BIDU so be careful.

    FAS/FAZ/SS – The best thing is we dumped out of FAZ at $20!  Also, the puts we sold made the whole thing work.  On the whole, it was a successful experiment – especially considering we couldn’t possibly have picked a worse time to enter it as the FAS went relentlessly up.

    DXD/Tcha – In theory, if you don’t make money on DXD $32s at $2.10 (now $2.50 so good so far) or the $34s (still at $1.40) then you should get .70 on the DDM spread, which means you just want to aviod losing more than .70 on the DXD side.  Also keep in mind that making 50% on either side is a great time to take it off the table as we could bounce the other way and get a double win.  If the pair is up 25%, that too is a good reason to take the money and run.

    RUT blew 575 – S&P next at the 5% line at 1,045 but already slipped below their bounce zone at 1,056 and the Nas is below bounce of 2,088 and the 5% line there is 2,066 – not too far now.  Dow still has a LONG way to fall to catch up.

    Dow/High – That’s just the typical BS that goes on when they are desperate to hold things together.  Check out this pumping action:

    Following Goldman Sachs’ (GS) cutback in GDP forecast to 2.7%, Morgan Stanley (MS) and Merrill Lynch (BAC) do the same: MS moves its outlook to 3.8% from 3.9%, and Merrill to 2.3% from 2.5%.

    More indication that extending unemployment benefits and the first-time homebuyer credit are coming, and as a package deal – as Senate Majority Leader Harry Reid says the combined proposal has wide support among senators.  Yes, MORE STIMULUS!!!

    Uh oh – Down we go — Again…


  86. Morx – too late IMO.  If you like penny stocks, I recommend VIAP.  I personally know the mechanism and they have some upside potential.  MrM can comment on that one as well.  I would wait to see if they pull back below 38c.  Sell at 50. Wash rinse, and put on your seat belt.


  87. Phil,
    Am I reading correct where you are anticipating a bounce on the way down at what would be the area for a 20% bounce up from dropping 5% from the top???


  88. wow, what a day to be too busy to trade at work!!  Damn!  Got caught catching a knife a couple times and am now ready to go short but don’t want to buy at the bounce either… this is very frustrating.


  89.  Alright, time to sell some WFR puts, perhaps 2011 10′s for 2$.  Not quick, but 2$ for 4$ margin – i think wfr has found a bottom at 12.5


  90. Feel the same way matt. Any good ideas on how to play that? Always can Buy A strangle with both calls and puts atm.


  91.  are we bouncing?


  92. Phil,
    I had sold CAL Dec $15 Puts at $1.60. Should I roll it  to a lower December strike or to a January strike?
    I also did a buy/write on GNW. Bought GNW at $11.30 Sold NOV  $12 puts & calls for $3.02. What should I do with it since GNW is now down to $8.50?


  93. phil,
    looks like they played the cnbc ‘magic support number for aapl’ to try and boost the s&p but it looks to be failing and now it could work against them. besides gs is probably short aapl anyhow!


  94. Jomama- Might be a while for 2$ on the WFR 2011


  95.  Looking to sell TIE puts as well.  going back to the well.  phil, thoughts on tie here?


  96. OIH- getting to like shorting this and out on the dip. Rolled up the puts as it went against me; sold some calls and puts to stem the bleeding. Still holding short 105′s. Will take out on a bounce or hold/roll. Made 20% on the puts; 50% on the short calls.
    It almost (repeat, almost) feels like I am getting the hang of this. Thanks, Phil there may be hope for me yet.


  97. KONG/Fab – Bigger than CHL?  They are up about 600% since fall, not my kind of play.   CHL getting interesting if they get back to $45 but the options are way too low to sell. 

    ARNA/Chen – Not while the whole market is tanking.   Every dip is not a buying opportunity, sometimes we need to watch and see where the bottom really is. 

    Spin/High – This is like when your 5-year old tries to lie to you and they just keep saying things to see what you are going to believe…

    AAPL/High – I think if AAPL can’t hold $180 it would be a strong indication that this market is hopeless as they CLEARLY are worth more than they were in September so if they are not worth $180, you have to question every stocks value since that last plateau. 

    5-year bid to cover was 2.63 bid to cover with $41Bn sold at 2.388%.  No Rick Santelli to give it an A today and it’s not an A anyway but it doesn’t suck so a non-event. 

    RIMM/Roth – Yes, stop betting against yourself!  KISS is a very good rule to follow.  Once you start layering in legs to balance delta like that you put yourself in a real corner.  Do you have an opinion on RIMM’s direction?  You sold (and basis numbers and quantity would really help here) Nov $65 puts and $70 calls in two diff months and you are long on a Nov $60 put.  So you have a bull put vertical spread at $65/60, which is now $3 and hopefully you are in for about $2.50 because you should always try to have a double to the upside in a vertical at least.  Then you have the short Nov and Dec $70 calls and RIMM is at $60 so I can’t imagine any earthly reason why you wouldn’t be at least taking the massive Nov profit off the table since there’s just .43 left.  That leaves you in a decent position as you can’t really lose more than $2 more on the put spread and your remaining caller is $1.65.  Other than the month difference, it’s fine and you can roll the put spread back to Dec if you have to and then let it play out.

    Balls/Pharm – You know where I have them!   8-)

    Project/Cwan – Not leaving but maybe morphing hedge fund into kind of a holding company a la Berkshire so a little trading, a little lending a little buying of value companies for the long term.  Right now I have to leave a little early to see the guys with money but once I’m the guy with the money, people will have to meet me for dinners or weekends. 

    BMS/Yodi – It’s a month to expiration and you are on target, what is the worry about?

    TZA/JRW – Oh you have to take short-side money and run with this triple test!  You know we will get bounces off those levels, especailly the S&P.  We can get back into the short plays AFTER we get rejected or recross bounce levels on the way down.


  98. Short Plays – Phil I have SRS Jan 11 calls and own FXP shares.  Would you close or cover any of those positions?
    Thanks.


  99. Sell-side volume still big on the major indexes. We can’t go up until they finish and the robots are able to take over.
     
    While we wait, a nice little read from Kunstler this week:
     
    http://kunstler.com/blog/2009/10/self-jiving-nation.html


  100.  Thanks Phil, I’ll be a bit more patient on ARNA.  


  101. AMZN, up 20% and out on the daytrade.  That was fun!


  102.  U.S. Treasury debt prices pared gains on Wednesday after an auction of $41 billion of five-year Treasury notes priced at a higher-than-expected yield, which is generally seen as a weak sign for an auction.


  103. IF they beat the revised GDP # or a package deal get passed in senate, will it mean a bounce or continuation of the Bull run as market cheers the stimuli.


  104. KONG – CHL has been stuck because of increasing competition from China Unicom and China Telecom.  KONG is more of a pure mobile Internet play.  Not cheap at all, but I think it can revisit $14s between and earnings on 11/11.  Its earnings growth is primarily driven by mobile games.  Good only for a trade.


  105. EricL, are you liking C strangles/straddles yet?


  106. Thanks for the help phil, really appreciate it. One more thing, when would be the best time to roll my 60/65 vertical in RIMM?


  107. SRS/Pharm – That is still my favorite play.  They could look like FAS if things start to fall apart. 

    Bounce/Aclend – It’s a 1% bounce (20% of the 5%), just to make sure that’s clear.  The bounce is off the 5% levels:  Dow 9,600 (from 10,100), S&P 1,045 (from 1,100), Nasdaq 2,066 (from 2,175), NYSE 6,840 (from 7,200) and Russell 589 (from 624) to Dow 9,696, S&P 1,056, Nasdaq 2,088, NYSE 6,912 and RUT 600.  This is how you need to think of them, 3 of 5 red is BAD.  The Dow certainly can and should be ignored if it’s by itself as it’s a stupid index and is only significant because everybody follows it.  A finish between 4 and 5% down is bearish and indicates likely 2.5% follow-through but if we hold 5% the next day, then a turn is probably in but we don’t get bullish until we see 3 of 5 over the 4% line again.

    Frustration/Matt – Plenty of room to fall if we don’t hold our levels.

    WFR/Jo – The lower they go the more I like them.

    CAL/Jlui – A little early to worry, if they don’t come back in a couple of weeks you can roll to the Jan $14 calls at .85 and Jan $12.50 puts at $2.  GNW that could have been adjusted earlier but you owe $3.60 on the puts so not a big deal and you can roll it out to Jan $9puts and calls for about $2.90 when you have to. 

    TIE/Jo – Falling knife man!   I do like them long-term, maybe just offer $2.50 for the 2011 $7.50s and, if you get that, sell the Jan $10s for .50 or 1/2 the Jan $7.50s for $1.50 (which you can roll up to 2x the March $10s). 

    OIH/Pstas – Glad to hear it.  Lots of small, quick wins is so much less stressful than trying for one big one.

    Shorts/BGB – I would certainly take some off the table if you are up nicely. Try to be pretty neutral into the close as the GDP could take us 300 points either way.  Fundamentally, we should be going down but that is just a way that we know to load up at the top.  This is not the top, this is 5% off the top and, so far, 5% was as good as it gets for a down move since July.

    1:30 Dow volume 130M – A bit too big for the stick it looks like. 

    GDP/Lynn – Good point!


  108. Chen – sorry, missed the post on ARNA….yes, $4 Dec make a nice entry.  If you are more aggressive, $5s.  I am in $5 Nov P and literally, tons of shares…..or just buy it here and sell the Dec $4/5s.  Nice 60% if called away.


  109. Morx - I’ve been accumulating VIAP over time, in for .30 average. But I don’t play in and out like PharmBoy, it’s a buy and hold Hail Mary in my Roth for the long term.


  110. Now I see Phils comments, but I still think they are fine here.  $400M for a company that has an obesity product.  If I could buy for $800M and I was big pharma flush with cash, I would.  They are holding out though for a better price.  They were $20 a few years ago…..oh how times have changed.


  111. ssdirk,
    I’m in a few short C straddles, but went largely delta neutral buying back some 5 strike puts. I am actually tempted to start adding more here with IV ripping higher. So yes, but also cautious and won’t let the delta run too high (which it can do quickly if you’re short a lot of these and the stock is falling). I was thinking I’d sell some (Jan 4 and 5 straddles) into the close.
     
    C may be in bigger trouble than they let on (given their recent action in credit-cards, e.g.) so something to be wary of here.


  112. If NOK cant find a way to take market share from AAPL, wouldn’t worry much about MOT…might pressure RIMM more than AAPL


  113. Hi, I still don’t quite get a clear opinion after reading the above about FAZ, SRS, and TZA. I have a lot of them, should I sell here or hold on?
    I thought the market has more downside….but Phil seems to suggest someone to run with profits? but Phil also said he still likes SRS? confused.
    Pls clarify


  114.  Cool, thanks Pharm!  I’m gradually wiggling in.


  115. lynn,  Phil is suggesting taking some short profits off the table. If you’re in doubt, you can always move to a larger cash position and wait. That’s what I’ve been doing, FWIW.


  116. Hi Pharmboy, can you explain what you said (quoted below) for a beginner?
    "Chen – sorry, missed the post on ARNA….yes, $4 Dec make a nice entry.  If you are more aggressive, $5s.  I am in $5 Nov P and literally, tons of shares…..or just buy it here and sell the Dec $4/5s.  Nice 60% if called away."
    do you mean buying $4 call? but you also say $5 nov P (p=puts?)


  117. Thank you EricL


  118. Roll/Roth – When you really have to give up hope.  Since you sold $70s you can roll to the Dec $70/65 spread for $3 (about even) or the Jan $65/60 spread, also about $3.  You need to keep an eye on these and what your roll cost would be each day and, if you feel it’s going the wrong way on you – then THAT’s a good time to roll, BEFORE it gets bad.  Obvously, you’d love to be in the Dec $65/60 spread even as you can win both ends there (if RIMM behaves) and that spread is now $2.80 so you may as well offer for an even roll and if you get it, you can then relax a little.

    C/Eric – Yes they may actually go down and, if they do, then we could drop the whole market 20% very fast so all should beware of that and have some disaster protection in place (I wrote a whole morning post on this a while ago but don’t remember – someone remind me tonight and I’ll do it again but I have to go right now).  

    Ultras/Lynn – You should take some profits and let some run.  I have FAZ $21s that are up 200% but 1/2 are already off at 100% so I’m up 150% on the whole position and I take another half off here and get 125% off the table and leave 25% to ride but that 25% is 3x more than I started with (.85).  I can move that $2.65 to the Dec $21/24 bull call spread at $1.20 for the $3 spread on 2x and take another .25 off the table and now I’m in a well-covered hedge that can make me another .90 (100%) per original share.  So the concept is lock in gains when you can.  There will always be another trade to make tomorrow if you have cash but nothing for you if you are locked into a trade that whips the wrong way on you.

    And, with that warning, I am out of here – Try to hold those 4% bounce levles guys.  Mr. M – you are in charge of buying stuff if we get close to 4% to stop the rally!  8-)


  119. lynn2long / TZA
    That was me, I just sold 20 K TZA to get a little more neutral into tomorrow. SRS is a longer term play and somewhat disconected to the stock market in general.


  120. Lynn – sell the $4 Dec P on ARNA for 60c.  Just a 1/4 or 1/2 entry on the number of shares you WANT to own.  IF you want 1000 shares, sell 2-5 Ps.  If you are more aggressive, sell the $5 Dec for 1.4.  Requires margin in retirement accounts. 


  121. Sound familiar?

    Yields on benchmark 10-year Japanese government bonds reached a 2-1/2-month high on Wednesday as investors fret about the likelihood the government will sell a record amount of bonds after the Democratic Party-led government’s budget requests for the fiscal year starting in April jumped to a record high.
    Prime Minister Yukio Hatoyama told lawmakers in parliament that the government would do its utmost to limit bond issuance and maintain the trust of the bond markets.
     
    But economists say this goal is in doubt as the Democrats haven’t made enough spending cuts to offset the costs of their ambitious programmes to support the household sector.
    http://www.reuters.com/article/companyNewsAndPR/idUST33373520091028
     


  122. Two other small biotechs that are getting attractive again are ARIA and CRIS.  Let’s see where things settle in the coming weeks, but for those home runs, these are the two I (and many) like.  CRIS is in bed with Genetech (Roche) and ARIA with Merck.


  123. Clear on the percentages. What confused me was calling it a bounce off 9600 (5% rule) even though we haven’t hit it yet. So, you anticipate support at the bounce level (20% of the 5%) PRIOR to the actual bounce and you use the 3 of 5 indices at those levels as the trigger for bullish/bearish. Correct?


  124.  Pharm, would appreciate your opinion on STEM. 


  125. AMZN IV still very high. Selling the Nov. iron condor of long 115 put and 125 call, short 120 put and call for net 4.25 risks $75 (max loss) for a shot at a flatline in case they somehow keep it up. I’m doing a few of these in conjunction with another bear position, basically as a small hedge against the bear position.
     
    If AMZN does start to make a bigger move, I think I’ll be able to get out of the condor with just a small loss.


  126. Rimm heading into heavily oversold territory


  127. Also selling a few GNW 9 strike straddles for 2.10.


  128. Got in those condors. All AMZN options, puts and calls, are up .20+ in this condor with the stock UNCH, so great time to sell it.


  129. Not as familiar with STEM nor any of its competitors.  Stem cells are the wave of the future if us scientists can figure out how to …..  raising capital for further corporate functions ! 12.5/share, so can be bought for a discount from the fundies!!!


  130. cap,
    I sent an e-mail to your blog site, let me know if you don’t get it


  131. Phil, any plays on Garmin, the one killed by the Android?


  132. Woops, 1.25/share on STEM…


  133. ssdirk, In case you’re still interested, I’m asking .79 to sell C Jan. 4 strike straddles now (they are lightly bearish at this price). I’m only selling about 10.


  134. DXD - bought some here for overnight, so that should get you guys a stick save.


  135. VZ filled that gap formed on 10/6 – 10/7.  Now, let’s see if they can hold it.


  136. Taking TZA profits and loading up on EDZ for the Asian follow through tonight.


  137. MrMocha ….  yes; watching energy and HK.
     
    Nibbled at some stock right here at 24.40;  also looking at selling 22 puts for 50 cents  (nice play but little upside).


  138. Thanks for the heads up on C EricL.  I like the trade.


  139. My SRS 25/26 April Bull call spread went for 5c…..now we can break down.


  140. Look at the 30 candlesticks for SRS and FAZ with volume.  Pretty sure we just bottomed.


  141. JRW III … did not get an email — where / how did you send it.
     
    send to capcube@gmail.com


  142. Truly amazing that AMZN is flat and at $122 !!


  143. Filled DDM bull spread for 1.2.  I think Matt is correct on the bottom (For today!). 


  144. Will we get short covering into the close ahead of GDP; or more selling ?


  145. Check out those AMZN condors Cap. They either hold it here or they don’t. If they hold it, the condors win huge. If they start to make a big move, buy out that side. I mean, $75 risk.


  146. Well blow me down and call me winded!  No bottom!


  147. 3 of 5 have broken support and the S&P 500 , oops, now 4 of 5 have broken support.


  148. cap,
    Sorry, thought I was sending it to your blog, it’s in your e-mail now.


  149. A stupid question on TOS’s platform:  How do I know if I am borrowing money due to leverage?
    I have another account at Schwab.  It shows CASH / MARGIN as two separate items.  For example,
    Cash $10,000
    Margin $4,000
    ——————
    Cash Balance (cash avail. to withdraw) $6,000 (=10,000-4,000)
     
    So, if Margin is greater than Cash, then I must be borrowing money from Schwab.
    Does TOS show such information?  It does show "Buying Power".  But that doesn’t answer my question.


  150. phil,
    me to merrel lynch drops gdp estimates!!!!!!!!!!!!


  151. Matt, I presume you are just loving this!


  152. High,
    You think it’s a head fake to bankrupt the last of the bears ?


  153. Peter D, RUT is down over 3.2%, and with VIX up 9%, I clearly entered a day (at least) too early on a RUT Nov 630/550 short strangle.  You said in your post yesterday that the escape route is to roll the put leg down ATM 3 or 4% for the same money.  My question is whether to wait til the put leg gets close to ATM to roll, or take advantage of the volatility and roll sooner?  I’m looking at rolling the Nov 550 P to Dec 520 P, is there any benefit to waiting a little longer to pull the trigger?


  154. What do you folks think of the McClellen (sp?) Oscillator which shows us as extremely oversold at this point.  Would you stay short into tomorrow?


  155. GS trying to cover their arse, back in August GS needed to pump the markets

    from August
    Dollar dipped to a fresh nine-month low against the euro on Wednesday as economists at Goldman Sachs raised their forecast for U.S. real GDP growth to 3% from 1% for both the third and fourth quarters of 2009

    chances are GDP comes in closer to 2.5%


  156. I am slowly entering the DDM just now. Bought the $38 call for 1.80. hope you re right on the bot.


  157. Hey Phil, not actively trading these days…. I see SRS has found pretty stable ground the last few weeks…. if we get a run in SRS…. what is the potential…. maybe when you get time you can give a brief explanation of your understanding of the 3X ETF or whatever exactly it is…. I’m averaged down at $17 and hoping I can atleast make a little something…. thanks….


  158. Close at lows: ugly. In some SPX condors now too: too risky for a naked short strangle here but too tempting not to sell premium.
     
    cwan, you should have something that says ‘option buying power’ in the upper left, and if you click on that you can see your ‘stock buying power’ which is your margin for stock. No margin for options unless you have portfolio margining, I believe.


  159. Eric/AMZN – "If they start to make a big move, buy out that side."
     
    How do you know when to take them out?


  160. blair,  you have to make a judgment call, but I’ll be watching for momentum to build in one direction.  You don’t have to front-run it either:  If AMZN falls to 110, say, I’m pretty sure the call side would still have much more than .75 premium left to take, and would feel comfortable buying out the puts at that point. But of course there is still going to be risk.


  161. Lvmoda: Its a tossup. If the put side gets in more trouble, the VIX will remain high. Its always easier to roll a put. I hold a similar position, and I don’t roll until they get me at the money.


  162. fslr is down 15% after hours


  163. yipee!


  164. CERN in-line but guides slightly lower which should be perfect for the 75 put calendars.


  165. Eric/AMZN – Just to be totally clear, you mean buying out the short put and letting the call spread ride to lose premium? Sorry for the beginner question, I’m an iron condor virgin.


  166. Hi Phil I hear the comments in respect of C  9th of OCt I traded 100 2011  call verticals 5 long and 7.5 short  as well hold  short 100 march 2010 5 puts sold for .55 now .47 besides that sitting still with 1300 stock what ideas do you have should they go down the tube ?


  167. Thanks, Barfinger.   That’s what I’m thinking to do.  Waiting may also allow an increase in the vix, as well as making for a better adjusting trade on the Call side as well.  


  168. blair, Right, if AMZN goes down. If you’ve sold a condor, the call side is your bear trade and the put side is your bull trade. This is reversed if you’ve bought the condor. So you’d buy out the put side to get more bearish.
     
    Just to be clear, the likelihood of AMZN sitting here for the next four weeks is very low, so this trade really only makes sense as a hedge against an existing directional bet. (Plus the fact that anyone buying it risked $425, mostly extrinsic, to make at most $75, which seems like an insane trade, and thus a good sale.)


  169. Eric – Thanks! I sold it to offset a losing put vertical. It brought the theta of the overall position down significantly so I have more time to work it out. I was also playing with the TOS analyze tool to see how different changes affect it.


  170. FSLR – Down to 128 AH after their earnings. Beat earning estimates by 5c but revenues down.


  171. RUT/lvmoda, just got back online.  There is a benefit to wait for that roll as you are still OTM.  Although RUT chart looks ugly, it has dropped more than other indices (9% in the past 7 trading days), so we are waiting for a small bounce of 2% or so.  Even with a small bounce, the Nov PUT would loose its value very quickly as it’s OTM and there is less time to expiration.  Then we can roll next week, assuming no it wouldn’t continue to drop more than 3%.
     
    So the next order of business is to roll the RUT Nov 630 CALL to 620 CALL for a credit, then look to double down at Nov short 530 PUT and short 610 CALL.  We’d then have 530 and 550 short PUT,  and 610 plus 620 short CALL.  The PUT value is inflated due to the quick drop today, so we are trying to sell the additional 530 PUT into the excitement.  If RUT recovers, the VIX would drop and we are gaining on the short PUTs, and we are also betting that it won’t be back to its high of 625.  All this assumes that we have the margin to cover the play.
     
    If you are an experienced trader with good market timing, you can buy back the Nov 550 PUT on a further drop, and resell it for a higher value.  Note that this is dangerous if you are not experienced.


  172. I encourage anyone interested in REITs to read the conference call transcript at Seeking Alpha for BXP.   Very enlightening stuff.
     
    Briefly, BXP reports that leasing velocity has improved somewhat better than their expectations; but challenges remain; and they in particular have very high quality assets.
     
    Mort Zuckerman, however, is still quite negative about the economy and the near and medium term outlook overall.
     
    Like I said, a good and instructive read.
     
    http://seekingalpha.com/article/169664-boston-properties-inc-q3-2009-earnings-call-transcript?source=yahoo&page=1


  173. Mort Zuckerman
    Well, good morning, everybody. I think you’ve heard a comprehensive discussion of the various real estate markets. I will just spend a couple of minutes on the overall economic environment, which I think, still remains problematic, at least as far as my own assessment is concerned. We do, I think, live in a very strange time because of huge budget deficits; we have interest rates that are continuing to go down, by and large; and we have unemployment that continues to go up. I don’t think we are out of the credit crunch. I think the unemployment numbers are going to be very, very serious through the next year. I think they’re going to dominate the politics of the Congressional election. I think the Obama Administration is going to lose not only political prestige, but I think, they will lose a large number of seats in the House and a number of seats in the Senate.
    One in every three homes has either a family member or a close friend who has lost a job. We have not seen unemployment numbers, if you add them all up, really in 70 years in this country, the ostensible unemployment number rate is about 9.8%, although I think it is inching up. Quite high of an unemployment rate would take that total up to 17%, the other 2.5 million people who basically are around the economy but not looking for a job – they’ve given up or decided to become full-time parents. But add it all up together, and we are close to a real unemployment rate or part-time unemployment rate of close to 20% with the average work week down to 33 hours, the lowest it has been in 60 years.
    And I think companies are not going to be hiring if they can possibly avoid it. They’ve learned to operate with fewer people; they’ve learned to operate with fewer discretionary costs, sadly including advertising. And I think they are going to stay pretty much with that kind of an approach because nobody has any great deal of confidence in the economy going forward. The stock market has really done well because – not so much because of revenue increases, but because of cost reductions. And that’s helped, but it has not dealt with the issue of declining home equity values and still stock portfolios that are below where they were 18 months ago.
    And I think we are still faced with a major-league credit crunch particularly affecting credit cards, both to individuals and to businesses. And I just can’t see yet to where the components are that are going to bring about a major transformation in the economy. I think we are in for a couple of years of a very slow economic times and nobody quite know what’s going to happen. I happened to have been on the pessimistic side of things for the last several years, for which I have to say I’m quite grateful. I remain relatively pessimistic to know that the administration and the Congress are all struggling with the issue of unemployment and nobody has any easy answers.
    The administration has lost a great deal of credibility in terms of dealing with the Congress because of the failure of their stimulus program which has created unbelievably small amounts of additional employment compared to the dollars that were spent, and nobody wants to take another bite out of that apple. So, how will this affect us as a real estate company?
    Well, I will just again reiterate the reasons why we here – we are in the markets we are in and with the kind of buildings that we have in those markets. We are still basically in supply-constrained markets. Cambridge is an example; even Boston is an example. Certainly, Midtown Manhattan on the east side is an example. Washington is always an example. Downtown San Francisco has always been an example as well for various reasons.
    I think, to the extent that there is activity and there is a lot of activity. We are going to do relatively well because we have, in almost all cases, office buildings that are at the top end of the market. We are not escaping the decline in rents, as Doug indicated, but when rents do go down in these buildings, a lot of other tenants, when they have a chance to move into them, really look at them very seriously. I think we are going to show very good progress.


  174. Holy Cow, what a day! 
    Is FSLR $129?  ROFL!!!!!!!!
    OIH $118!   VLO getting cheap fast.  Glad we re-entered XOM puts now….
    VZ up 2.5% – gotta love that. 
    AKam very nice! 


  175. Apple’s astounding 4th quarter fiscal results (reported Oct 19th) and its climb past $200 per share comes in stark contrast to Research in Motion’s (RIM) earnings reported September 25th. Their stock is now trading 20% lower than it was a month ago and the outlook for the future appears grim.
    At least part of RIM’s decline can be attributed to the surge in popularity of Apple’s iPhone and other smartphone devices. A recent market research report from Gartner predicts that RIM’s market share in the burgeoning smartphone segment will shrink from a 20% unit share today to a mere 12.8% at the end of 2012. According to Gartner the BlackBerry will be leapfrogged by the iPhone, Microsoft Windows Mobile, and Google Android platforms in three years.
    http://www.toktumi.com/voipnews/blackberry-doomed/