Sign up today for an exclusive discount along with our 30-day GUARANTEE — Love us or leave, with your money back! Click here to become a part of our growing community and learn how to stop gambling with your investments. We will teach you to BE THE HOUSE — Not the Gambler!

Click here to see some testimonials from our members!

Friday – Is the Dollar Going UUP?

Is it time to buy the buck? 

As noted by Andrew Wilkinson on Wednesday, there was a huge volume surge in UUP call options, the ETF that tracks the US Dollars index value, ahead of the FOMC statement.  155,000 November call options were bought at the $23 strike level and another 155,000 were purchased at the December $23 strikes.  The November calls came in at around .15 and are now .25 (up 66% in one day on UUP) and the December calls were executed around .25 and are now .40 (UUP up 60%) – this is not bad for a day's work but was it just a day's work or are we betting on a trend?

As you can see from David Fry's chart, it's not just the 300,000+ options (controlling 30M shares) that have been trading bullishly around the dollar – there has been a stunning surge of volume buying that has built up since mid-October as the dollar index skates along our own target low of 75.

So strong was the demand for shares of UUP that we noted in Member Chat that the PowerShares DB US Dollar Index Bullish Fund (UUP) was halted pending clearance of their request to register another 100M shares "in order to meet investment demand." 

There’s been a lot more interest in this ETF because investors are using it as a hedge on the dollar,” said David Stec, an ETF options trader at Group One Trading on the Chicago Board Options Exchange floor. “Yesterday, with the amount of options volume they saw, they probably have to add some shares. The ETF is based on the dollar versus a basket of currencies, so if there aren’t enough shares it might trade at a premium.”

The Dollar trading at a premium?  Surely you can't be serious!  Well, I am serious and don't call me Shirley…  While this may be contrary to what you've been hearing in the MSM, where dollar bashing has become a popular blood sport, it's the main reason we've been having trouble buying into this commodity-led rally, which has been primarily based on the 15% pounding the Dollar has taken since March.  As I often point out to members, if you adjust the S&P to reflect a real currency, like the Euro or the Yen, then you'll find that our "spectacular" 60% rally in the S&P since March is really just a 27% rally and looks like this to a foreign investor (S&P value converted into Euros):

Even mighty gold, which seems unaffordable to impoverished Americans at $1,095 an ounce (where we shorted the gold futures just this morning), has still not retaken it's highs against the Euro from March and is, in fact, over 4% below that level:

So let's say that gold can climb another 5% to $1,150 before European and Japanese traders see it as a double top.  That's why we went short on gold as very much ado was made about nothing when India purchased 200 tons of gold from the IMF this week.  India is only buying at the "top" when priced in Dollars – as priced in Rupees, India is paying 20% less than they would have last year, when a dollar could buy you 39 Rupees (now 47).

Sadly Americans are fairly clueless about currency conversion and the gold bulls prey on that ignorance and put up all kinds of charts and draw trends and attempt to baffle you with statistics because they can be fairly confident that not for one moment are we going to step back and look at things from a global perspective.  Oil is scammed in a similar fashion but, unlike oil – the gold market is heavily dependent on physical demand and they can only drive up the futures as long as they have fresh suckers to reel in but the price of gold collapses like quite the house of cards as soon as anyone tries to unload their shiny bits of metal.

That's why you see non-stop advertising telling you to buy gold coins as an investment.  The speculators need someone to take physical gold off the market, just like the Krugerrand craze that was used to drive up the price of gold.  That's why India's purchase was such a relief and sent gold up 7.5% in the last 5 sessions – there had been a fear that the IMF would have to sell gold on the open market.  China was originally targeted to be the gold buyer but the Yuan is pegged to the dollar and China had no interest in paying such a ridiculous price to store gold while India's currency is just rolling off their 2-year high and they are using gold to lock in their gains.  

As Goldman Sach's head of commodity research said on Wednesday:  "It's not a weak dollar that's driving up crude prices – it's higher oil prices that are driving the dollar down, sending metals and softs soaring.  Oil represents 40-50% of the U.S. current account deficit, so a higher oil price represents an outflow of dollars that pushes the currency lower."  Goldman is, of course, one of the most despicable commodity pushers on the planet and I will detail this weekend how the global population is having their pockets picked in the great global oil scam but Currie does get to the heart of the matte – there are NO fundamental supporting the price of oil, gold or any of the other racing commodities, this game is all about the weakness of the dollar and heaven help them if that play begins to unwind and they try to exchange their black goo and shiny bits of metal for a very scarce supply of dollars. 

Scarce dollars?  What is this guy smoking, you may wonder?  Well, this is something we've been tracking since July and here we have a chart of the M3 money supply that clearly shows that, since July, $750Bn have come OUT of circulation, reversing over half of the run-up in dollar float that begian last year with the passage of the TARP spending, that took M3 from 13.5Tn to $14.5Tn over 12 months:

"Hey wait", you may say, "this is not what they've been telling me on TV".  No, it isn't.  That's because the $2Tn that was injected into the economy wasn't injected into a healthy economy, it was injected into a badly damaged economy and $1Tn of that money has already been used to repair the damage (mortgage defaults, credit-card defaults, derivative losses, Madoff scams) that has already been done to the system. 

The very notion that putting $2Tn into the economy causing you to immediately have $2Tn of surplus cash to spend assumes that there was no need for the money in the first place.  That's like saying that you have a car that needs 1 quart of oil (TARP I) and you put in two quarts of oil – how much oil will be a surplus?  Obviously the answer is one quart and that, of course, assumes you don't have a leak or are not burning off a lot of oil as your economic engine continues to smoke.  Unfortunately, the commodity bulls have the sheeple (who are terrible at math) convinced that there are two EXTRA quarts and that those quarts will somehow breed and multiply and create a third quart of stimulus until the world is simply awash in dollars and the only thing we will be able to count on is their black, sticky goo and shiny bits of metal to save us.   What nonsense! 

Like an accident victim needing a blood transfusion, this economy NEEDED $1,000,000,000,000 just to stay alive last year.  Whether or not the additional stimulus was really necessary remains to be seen but the fact is that, as clearly illustrated on the above chart, the "excess" supply of dollars is being sucked up at a rate of $150Bn a month since June.  The prior administration pumped the money supply up from $7Tn to $13.5Tn over 8 years and caused a MASSIVE commodity (including housing) bubble that burst with great fanfare last year.  Just like any balloon, the economy expanded as money was poured into it, giving us the illusion of strength right up until the moment it burst.  Now we have taped up that balloon and we are trying to reinflate it but that doesn't mean we are going to go right back to push it to the breaking point again does it? 

What's really funny about gold in all this is that there are 5Bn onces of gold in the world that have already been mined, and pretty much all of it is still in circulation as gold is not generally destroyed.  In the past two years, the "value" of that gold has gone up from $3.25Tn ($650 per ounce) to $5.5Tn ($1,100 per ounce), a gain of $2.25Tn or pretty much ALL the money in the world that has been created since that time.  That would, I suppose, make sense if gold was the only thing on Earth we spent money on but (funny thing) oil went up too – from $45 a barrel last fall to $80 a barrel today.   Now oil is a little trickier than gold because we actually use it but let's say that we consume 85M barrels of oil a day globally so a $35 increase in the price of oil costs us an extra $1.1Tn a year and, even better than that, the 2Tn barrels of oil that are in the ground gained $70,000,000,000,000 in value or 1.5 times the entire global GDP. 

Isn't that fantastic?  I'll bet you never realized how rich we were that we could afford to spend $72.5Tn on just oil and gold this year.  Kind of puts that piddly $700Bn stimulus into perspective doesn't it?  Of course, oil and gold weren't the only commodities clamoring for those "extra" Trillion dollars – the entire CRB, valuing oil, gold, copper, lumber, food etc rose 37% since March.  20% of the global GDP ($45Tn) is spent on Food alone so that 37% of $9Tn or a $3Tn bump in your annual food bill to go with the $1.1Tn bump in oil prices and another $1Tn spent on industrial metals (although no one is actually buying cars or houses, so that impact is limited). 

Where is all this money coming from, you may ask?  Well, as I said yesterday, this money is not excess money at all, this money is being squeezed out of the pockets of the labor force, who have been forced to accept not only the same pay but LESS pay in dollars from their employers, driving their standard of living down a stunning 12% in just one year while their corporate masters make stunning "productivity" gains as they get much, much more for much, much less.

What happens if these workers wise up and ask for money?  That would create a demand for dollars to pay them with as the 10.2% of the US population who are now officially unemployed would themselves require $500Bn of those scarce dollars in order to go back to work.  A simple 6% raise given to the working population – just enough to get them 50% of the way back to their 2007 standard of living, would suck up another $1Tn of global "surplus." 

An ounce of gold is only worth $1,000 if you value 20 of them more than you do a new Toyota.  An ounce of gold is only worth $1,000 to a person who values it more than a month's worth of food for his family.  An ounce of gold is only worth $1,000 if people have nothing better to do with $1,000 than buy a shiny bit of metal.  If your boss decided to give you an ounce of gold this week instead of your paycheck – what would you do?  You would go change it for dollars!  What then, is more "valuable"? 

So it is not the dollar itself that is worthless, rather that a lack of competition for available dollars has driven the price of commodities sky-high along with a prolonged attack on the dollar by the commodity pushers, who also happen to be the currency pushers, who also happen to be the experts the MSM turns to when trying to make sense of something as complex as International Exchange Rates.  Once there is a real demand for the dollar – whether is is to buy labor or machines or cars or refrigerators – suddenly the "value" of black sticky goo and shiny bits of metal will normalize and don't forget that a resurgence in the price of US real estate can also pull dollars away from our runaway commodity sector.

Sadly, the majority of our market rally is based on commodities and it's very likely that, priced in dollars, that stocks will find equilibrium closer to that 27% up level we see for the S&P priced in Euros than the 60% level we're currently at priced in dollars.  Let's say we level out at the 40% line, which would be right about 940 on the S&P and 9,650 on the Dow – not too far off from where we are now and, if we can hold that line against a rising dollar, then we may be able to rotate out of this mess but only if commodity prices come down to reality and stop sopping up all of our global liquidity. 

Non-Farm Payrolls were a slight disappointment this morning with 190,000 jobs lost but it is the 10.2% unemployment figure that is spooking the markets.  Fortunately we went bearish into yesterday's hyper-active close as I said to members at 3:40: "Boy I just cannot bring myself to sell a DIA put!  I figure a 100-point pop into the open will cost .50 and then I’d have to pay .50 to roll up to the $104 puts and sell 1/2 the Dec $100 puts for $2.60 (now $3.05) so that’s my plan – risking a 20% loss on the DIAs to leave the Jan $103 puts naked overnight.  Still only about 55% bearish with that but I just can NOT get behind this very low volume move today."

As we expected, October hourly earnings are creeping up much faster than expected (0.3%) as we are have very likely reached the end of the productivity gains (which were for Q3, which ended in Sept).  We still have Wholesale Inventories to look at at 10 and we'll see how much credit consumers lost at 2pm.  Next week there is not much data and we are not going to be greedy on our short plays unless we see some volume conviction to the selling. 

Our upside target levels remain as they were all week: Dow 9,962, S&P 1,066, Nas 2,097, NYSE 6,955 and Russell 580.  Those will determine how we feel going into the weekend but I am pretty sure that 55% bearish will be the answer unless we get a huge sell-off that we want to cover. 

Have a great weekend,

- Phil

 


Tags: , , , , , , , ,

Do you know someone who would benefit from this information? We can send your friend a strictly confidential, one-time email telling them about this information. Your privacy and your friend's privacy is your business... no spam! Click here and tell a friend!



Comments (reverse order)


    You must be logged in to make a comment.
    You can sign up for a membership or log in

    Sign up today for an exclusive discount along with our 30-day GUARANTEE — Love us or leave, with your money back! Click here to become a part of our growing community and learn how to stop gambling with your investments. We will teach you to BE THE HOUSE — Not the Gambler!

    Click here to see some testimonials from our members!


  1. Down we go it appears. And to think I wasted time this morning trying to figure out which stocks to go long.


  2. "Health care employment continued to increase in October (29,000). Since the start
    of the recession, health care has added 597,000 jobs."

    Wow.


  3. Just realized that those XLF puts I was bidding on were actually filled AH at 4:11 yesterday for 2.32. Nice.


  4. Interesting you mention the rally in something other than USD. I track this live at http://nexalogic.com/spx.html   The "rally" is an illusion in many other currencies. SPX year-to-date is *down* in CAD, AUD, and BRF and many others. You are right, people in the U.S. do not have a clue on this.
    Phil, on UUP, those call buyers already doubled or tripled their money. However, the sellers need to hedged themselves by buying shares. However… there are not enough shares, thus PowerShares has to issue more of them. This is what they call "t meert investor demand" Hah! Be careful!
    Those sellers are likely unhedged (and someone about to lose their jobs).


  5. BOOOOYA!  Down we go!  Congrats to the brave bears who held overnight in the face of yesterday’s onslaught.  8-)


  6. Don’t get too excited about the downturn, we’ll see what holds….  Meanwhile, I couldn’t be more thrilled that my instincts were right yesterday when I just could not find a reason to cover the DIA puts.


  7. I feel 10.2% unemployment will make people anxious and good luck with that second stimulus. Timing is not good for ANY major reforms :(


  8. Aren’t we now way above the "worst case scenario" for the famed "Bank Stress Test" that Turbo Timmy scammed on everyone?  Man, the way they leaked that thing out was ridiculous.  Bad memories.


  9. The "war" on unemployment is one worth waging, unfortunately, this will not be the type of war that will get much support on the right…..


  10. Don’t get too excited about the downturn, we’ll see what holds….
    What are the levels today Phil?  Any different from yesterday?


  11. looks like somebody wasn’t happy abt the CROX results. Any adjustments?


  12. Phil,
    Maybe some carry traders are using UUP to hedge….I’m having a hard time understanding the premise for a stronger dollar. OK,  the currency in circulation is contracting, isn’t that contraction more than offset by the contrcation of the real economy?  Where is the demand for dollars coming from? I admit its a mystery to me…


  13. Still looking to retake Thursday’s close if they want to look bullish:  Dow 9,962, S&P 1,066, Nas 2,097, NYSE 6,955 and Russell 580.   SOX 300 is needed to the upside too – we were so close and yet so far yesterday!

    We’ll see what price we get on the DIA puts, we still want to sell the $99 puts as a 1/2 cover for $2.50 but they closed yesterday at $1.26 so a tough sell. 

    Volume is key, if this is just a low volume sell-off or if oil retakes $80 or Gold gets over $1,100 then it’s business as usual and we’re going to have a big rally. 

    That would be ridiculous, of course but ridiculous is normal in these markets isn’t it. 

    AMZN got a big Bernstein upgrade to $160 so a nice opportunity to short at $124 if you are extra brave. 

    Lack of jobs is keeping the dollar down as it looks like we need a lot more stimulus to jump-starft the economy and we plunged to under 90 Yen on that NFP report.  Still I think the dollar dump has run its course but this is a very tricky spot to play so be very careful out there. 

    There’s nothing wrong with cash as that too is a bet on the buck! 


  14. Anyone know anything about PARD and ONTY? They’ve been up,up,up last couple of days. I know people are anticipating PARD data before Nov expiration but not sure what’s driving ONTY


  15. SRS 11 Nov09 C are holding 38c…and have been for 2 days.  Milking it or is this an epic tale waiting in the wings…Have a nice weekend all, heading out to Napa.


  16. Presto!  We’re green.  All better!  Well, they are in the business of selling hope.  So if there isn’t any.. just jam things up to manufacture it!


  17. why AIG selling on such good earnings


  18. Just unbelievable what is happening to the dollar.  These crooks will sacrifice anyone or anything for their personal gain.


  19. Japar – nothing on ONTY that I can see.  PARD is the classic pump into data release that I have noted here many times.  Once there, I would get out or sell the amount that allows you to get a ‘free’ ride.


  20. Phil
    I have been selling naked puts for some time on BA, and it has been very profitable. I like the company and would like to enter some new plays, and thought I would ask how you would play BA at this time. Thanks!


  21. lynn, the consensus estimate for AIG was for double actual earnings.


  22. Seriously, how can the stock market go up on this kind of news?


  23. Phil, I’m still stuck in my TZA and short the 14 calls.   at this point, I feel like just waiting and then selling December and then January, and keep selling covered calls until I can collec tthe money that I’m down mark to market right now.  To do anything else, except doubling down, doesn’t make sense. and yes, it’s a bad trade, and I’ll never do covered calls on these 3 x etfs again… just want to survive this one, since I have 4000 shares of it.  ideas?


  24. Phil,
    When do we roll the AMZN calls from Nov.
    I have the Nov 105 calls from pre earnings sold at $2.
    I have Nov 115 sold at $12 and Nov 120 sold at $7.


  25. PARD / Phil – Holding as per what you said earlier (Bought stock at 6.85, sold Nov 5 Put/Calls for 4.75). Given the current run, stock is now at 8.15, Nov 5 Put/Calls are down to 4. Almost 100% profit. :D
    What do you recommend to adjust this position into the data release (when’s that - 3rd week of November?)


  26. I think Phil’s exactly right that it’s all about levels right now. Bulls need a close 1072 first and then 1082 to break the developing H&S pattern. The latter would be very bullish. If they can do it, fine. But I want to see it first — still plenty of weakness here.


  27. AMZN – broke out!


  28. Tracking/Raul – Any time you notice something interesting please do point it out.  I only check those once in a while…

    Wow, same old, same old and we’re back to watching our upside levels. 

    Signs of improvement have emerged in most major economies, with a marked recovery in the U.S. and Japan, the OECD says. But it warns signals of expansion should be interpreted with caution, because it’s unclear how much of the measured increase of economic activity is due to a true improvement, and how much is due to a drop in long-term expectations, against which current activity is measured.

    UBS out with a bullish note this morning: "In our view, a large correction remains fundamentally unwarranted. We find little evidence to support the assertion that the 2009 market rally represents a liquidity-induced ‘bubble,’ or that the recent spate of market choppiness is a function of over-valuation."

    FSYS still flying.

    Woops, 10,000 yet again!   S&P over 1,066 is to be taken seriously, especially as the RUT and NYSE look like they are going to make it unanimous.  At this point, it’s 5 of 5 or nothing though.

    CROX/Morx – Yes but I haven’t really looked yet.  Over the weekend I will be rebalancing.   I’m really pissed about AMZN, just when it was beginning to improve too!

    Dollar/Boonie – There is a pool of dollars in a global economy and it can only go from one place to another.  Oil alone is sucking up $2Tn a year that we are burning so we have to print $2Tn to stay even there.   That’s the flaw in the entire global system that caused the bubble to pop, we inflated the money supply by $7Tn 8 years and sent all of it overseas in the form of a trade deficit.  Our own economy was propped up on nothing because no sooner did we buy a house or a car or whatever than the dollar we gave to the US corporation went over seas, leaving no cash support under our own market values.  Not only did we not attract foriegn investment but we actively spurned it during that time (this was not a mistake we made in the 80s when our real estate crash hurt Japan far worse than it did us) but we also kicked "illegal" immigrants out of the country, reducing the need for 1% of US housing and removing 3M US-based consumers – all kind of silly when you look back at it. 

    So the World is flooded with dollars and they can’t spend them here so they do have nothing better to do with them than exchange them for other currencies and shiny bits of metal and black sticky goo but that’s where oil is helpful as they burn up the oil too and those dollars buy no lasting assets so next year they need $2Tn more.  This party can last as long as US workers are willing to reduce their standard of living at this drastic rate but if they wake up and demand more money – the whole thing falls apart as this country doesn’t have enough money to pay them and that will create a dollar shortage as companies have to choose bettween buying copper or paying the guy who has to fit the copper pipe…

    PARD/Japarik – It does look like they are anticipating news but these things are totally rumor-driven and they can fly down just as quickly and often do as rumors of an approval on Monday turn into rumors that they are being turned down on Wednesday and that rumor is supported by the "fact" that the approval didn’t come in Monday, as expected. 

    Wow, gold punched $1,101.80 just then and then flew back down.   If I had a trade bot this would be great but a human can’t trade fast enough to catch these whips. 

    AMZN punches a new high too.

    AIG/Lynn – Very complex to read.  

    Sept Wholesale Inventories down 0.9%.   That’s what they wanted to see as they are still on the theory that lower inventories will absolutely lead to production increases (as opposed to many we have destroyed demand long-term). 


  29. AMZN going nutty on another sky high upgrade.     Henry Blodget lives !


  30. I have no opinion I have no opinion I have no opinion I have no opinion…… Damn! its not working…..


  31. phil,
    you can almost see the action real-time now on aapl. pump the dollar and sell the stock under the cover!


  32. SBUX – if you’re in Phil’s trade of the NOV 20s at .45, they’re now $1 so you should consider following his ‘sell half, let the free half ride’ rule right here.


  33. Wow – RIMM just keeps getting knocked down -
    MOT and droid – doing even worse


  34. GLL – hammer forming at the bottom.  Usually a sign that it will go UP!  Buying a few 10/11 Jan10 bull C spreads here.


  35. CROX not looking too healthy


  36.  BAC buy write …. Sell May 15 calls and puts for 4.55 …. what are your thoughts ?


  37. now the new unemployment ‘peak’ is to be 11% but it just doesn’t matter, somebody will buy stuff won’t they?


  38. AMZN – The short Jan $105 puts stopped out at $2.50 (up 50%).  AMZN at 5% rule for the day and burning the shorts off their run down to $117 yesterday but we’ll watch it closely now

    Dow volume at 10 just 35M, under 60m at 11 means we still have no conviction to the move up. 

    BA/Gel – I still like the naked put selling until the prove they can hold $52.50.  As long as you are committed to own, there is nothing wrong with a short straddle of Jan $50 puts and calls for $6 and you just need to buy the 2011 $40s, now $12.60 for no more than $14 if they head higher

    DXD $32s for $1.15, were $1.60 yesterday and $2 the day before so offering $1.10 and looking for $1.50.

    Up/Sthom – Well it was scheduled to go up regardless of the news.  What matters is what happens after lunch, when all the big guys finish their strategy meetings and issue marching orders for afternoon and Monday stance (the big guys don’t come back until Monday lunch).   Don’t forget this is our last data point until next Wednesday so a lot of pumpers are operating under the attitude of "is that all you’ve got?"

    TZA/Dman – OK, today I won’t say I told you not to mess with them….  You have about $50K tied up and you down about $5K so not a crisis if you don’t mind sticking it out long-term.  The $14 caller still has .55 all premium but now you can sell the Dec $11 puts for .70 and plan on stopping out at $12 as you can always buy back in with Apr $9s at $5 or less so you’re not going to get burned on the upside and, if it’s put back to you at $11, that’s net $10.30 and you’ve saved yourself $1.70 of downside while wiping out the caller so if you were originally in for net $13, stop out at $12 and get put back in at net $10.30 then you are back in for about net $11.30, which is still more than 10% lower than we are now.

    AMZN/OncM – If we give up on the VIX making a comeback, I’m looking at splitting the Nov $105s ($16) to the Jan $125 calls ($9.50) and Jan $120 puts ($6.90) so we move to more of a targeting strategy, hoping they more or less flatline into next earnings.   Maybe we will do Dec $125 puts and calls first to burn off that premium…

    PARD/TRAD – I was hoping there’d be some panic selling back near $5 but the Dec $7.50 calls and $5 puts are $4.50 so we can pick up another $1 or so by doing that roll once the premiums are gone. 


  39. I’m using this pullback to buy more Munder Net Net!!!! 


  40. PARD / Phil – When do we want to roll to Dec? Next week or the opex week? If I remeber correctly, their data was coming out the opex week, is that right?
    PARD/TRAD – I was hoping there’d be some panic selling back near $5 but the Dec $7.50 calls and $5 puts are $4.50 so we can pick up another $1 or so by doing that roll once the premiums are gone. 


  41.  Phil,
    Do you think we’re making a bearish head and shoulders formation on the S&P? It could be very bearish.


  42. CAP….henry bloget lives….LOL……when some one values their job….they show up early ….stay late ….spend less time at the water cooler…..work head down butt up…..especially when said worker has debt…..10.2%….now added weeks of benifits…..it will breed complacency….


  43. Wheee!  I love this ride! 

    LOL 1020 – welcome to my world…  8-)

    SBUX/Mr M – Actually my rule for that would be "take the 100% gain and be happy you greedy asshole – it’s only friggin’ coffee."

    BAC/CMC – I think you may be able to get them cheaper but fine for a scale in as long as you are willing to ride out another financial scare. 

    Unemployment/High – There’s a reason they were able to ram extended benefits through the Senate with a 98-0 vote and then a day later have the house go 90% for it with no changes so Obama could sign it today.   Remeber we were looking at numbers that showed 1.5M people’s benefits would run out by Xmas?  Now they’ve shoved that under the rug for another 20 weeks.  79 WEEKS of unemployment – they totally knew this was coming on Wednesday and that’s why that bill was such an emergency with not one Republican speaking against it.  They can spin whatever they want but 10.2% is catastrophic unemployment – it’s that $150Bn a month bleeding in the system that no amount of liquidity is going to correct. 

    MNNAX/SS – ???

    PARD/Trad – Well not when the putter still has .50 of premium, that’s for sure.  Hopefully next week they get real. 

    Head and shoulders/OldG – Didn’t you see the chart yesterday?  That was perfect as he laid out the whole "humpy thing" pattern perfectly.  Seemed right on the money to me.  8-)


  44.  Phil,
     
    I didn’t see the chart. Does this mean you think it’s bearish? And where is the chart?


  45. Phil – time to buy back the short DIA DEC 99 puts (1/2 cover) from yesterday – or what’s the play today on covers?


  46. Good Morning Phil
    AMZN I held April 105put short and 130 call short rolled today to April 115 put s and to 135 call short Your comments please


  47. Wow, it’s another profit day for GS.  It was too obvious that they were surprised by the gap down open as they were probably have a bullish positioning at yesterday close.  So up we go for 1/2 hour for them to unload the long CALL and sell the short CALLs, and also got rid of the short PUT and buy the long PUT.  For the technical trader, they probably had to buy when it went green, then bam, down we go.  Very nice!


  48. oldgoat
    The last time we had this chart formation was 7/10/09, 20% ago.


  49. MNNAX/Phil – Yes…I figure since analysts are upgrading stocks to P/Es of 95 (AMZN), it must be 1999 again.  BUYBUYBUY… 8-)


  50.  Phil,
    What’s your take of why with such poor unemployment # that the opening 1 hr there’s still so much buying? And then all of the sudden (with no known external triggers) that we have this drop? Is the ‘pro’ jacking up the price so they can sell?


  51. shane,
    when workers work longer and harder (out of fear) and no share of the productivity increase is passed on to them nor is it reflected in the unit selling prices of thier products then the economy will not grow and it just becomes bottom line window dressing! great for the stock market fat cats and bad for the rest of us.


  52. Phil,
    Holding 200 SUN, sold 7 Dec 30 P and 3 Dec 33 C. What are your thoughts?


  53.  JRW,
     
    Thanks, would like to hear it from Phil and would like to see the chart he refers to.


  54. balancenv,
    for one good reason just plot $xde for the day and 1 min increments! then overlay the dow!!!!!!!!


  55. Does the reality of 10.2% (more to come) unemployment, mean that another stimulus package is coming?


  56.  Well I think Peter D explained it well! 
    BTW, did you sell 1/2 of your crazy SPX for Nov?


  57. I can’t believe I didn’t go short SPY at 107.20++  


  58. Repeat post of Crossing Wall Street’s chart from yesterday for OldG:

    November 5, 2009 See a Pattern?

    Here’s the S&P 500. I think I can make out a pattern of four rising humpy things. I have no idea what it means, but there you go.

    image868.png

    If the current humpy thing doesn’t pass the last humpy thing, then that probably won’t be good*. Unless of course, there’s a new and higher humpy thing. Bottom line: It remains to be seen.

    * This how all technical analysis sounds to me


  59.  Phil,
     
    Thanks!!


  60. Oh no, please no more stimulus package.  House price is still high, and I do see inflation in food and baby products.  The Infamil formula milk is still the same price per box, but the box size reduced from 24 to 22 oz, a 9% inflation!


  61. Hey how come no ones focusing on positive news, who cares about unemployment…AIG making cheese

    Troubled insurer American International Group /quotes/comstock/13*!aig/quotes/nls/aig (AIG 35.63, -3.65, -9.30%) said it swung to a third-quarter profit of $455 million, or 68 cents a share, from a loss of $24.5 billion, or $181.02 a share, in the year-ago period. On an adjusted basis, net income was $1.9 billion, compared with an adjusted net loss of $9.2 billion in the third quarter of 2008. Total revenue rose to $26.05 billion from $898 million. AIG was forecast to make $1.20 a share

    Its a g-d damn miracle….Wirtschaftswunder


  62. This is our Obama is gonna speak some BS rally; and then back down we shall go.


  63. Phil FLSR Holding short Nov 135 p and 175c sold for 3.70 and 6.48 shall I roll to Jan lowering the puts and  calls your advise pls


  64. balancenv, my Nov SPX crazy play is 3/4 gone.  Took 1/2 profit for the vertical on the same day that I mentioned in the chat, then another 1/2 two days ago.  VIX has dropped too, so I bought back to close 3/4 of the short strangles yesterday.  Not taking chances with another possible drop, and potential shooting up of VIX.  With 7.5 trading days to go to SPX expiration (Thursday close, 11/19, assuming 11/11 is a holiday), I’m comfortable with 1/4 position, and may close out mid next week as those OTM shorts may get very close to zero.


  65. Barney Frank … he is never wrong ….never …. just ask him …. and you have a lot of nerve for asking


  66. Highlander ….working out of fear…..economy will not grow ….that is why this recession is like no other …like Phil has stated there is no need for more ….most workers are working with no increases in wages and saving what they get it will put this recovery on a long hold…….30 years ago ….you did not buy a tv on credit …..you bought a house …..and maybe a car ….now people pay interest on every thing……the only thing people do not have is the …kinder ?


  67. Barney Frank doing his Ray Charles impression on CNBC!!


  68. Phil, do you keep your DIA puts naked? if yes, when you plan to cover 1/2?


  69. DIA/Concreata – I’m surprised we can’t get the roll to the Jan $104 puts forr .50, that probably means the puts are in demand despite the VIX falling 2.5% today.  I’m eyeing the roll to the March $102 puts, now $6.65 and I think for $1.10 that’s a good roll (sacrifice $1 in position and gain 2 months) so we’ll see if it fills.  As to cover, volume is sill low 62M at 11 and NYSE and RUT are under our targets (6,955 and 580) so the plan is moving to the March $102 puts, 1/2 covered by the Dec $99 puts at $2.50 if we break over AND HOLD THEM FOR MORE THAN 10 MINS

    AMZN/Yodi – I don’t know what you came in at but it sounds like a good adjustment, taking advantage of the move up and I don’t see AMZN going much below $110 unless the market really falls apart.

    GS/Peter – This should be a $100M easy for them, lots of spreads to scalp by causing panic in both directions.

    MNNAX/SS – Sadly, you are probably right.  I would point out that 1999 didn’t really end well but that would be silly…

    Buying/Balance – The only way to keep up those productivity numbers and keep down the labor costs is to keep people starving and 10.2% unemeployment keeps people starving and scared – a great combination if you are a proud member of the bourgeosie.   As an investor, you should be thrilled that MCD can cut wages and benefits and hire MBA’s to flip burgers and know that the $35,000 manager, who runs the store can effectively threaten to fire the $20,000 workers and keep them there busting their asses 24/7, keeping the operation as "efficient" as possible. 

    SUN/Jomp – Ouch, I wish you had asked yesterday – we were done with them ages ago.  There’s the proof of the fact that oil is mispriced, the pure refiners are getting killed because they can’t pass through the price increases.  They took a huge one-time hit for shutting down a refinery so they will recover one day but not for a long time.  You can roll the Dec combo to the Jan $28 puts and calls so don’t worry too much unless it looks like it’s getting away from you.  You can always sell one Dec $22.50 ($6) for each 2 Dec $33 puts and just keep a tight upside stop on the $22.50s.  As they have a really high delta, you may pick up a couple of bucks to help pay for the roll while you wait for the $33 premium to expire. 

    10.2%/Rich – Most likely.  You can’t just let unemployment get to 15% (see also charts in yesterday afternoon post) it’s a catastrophe and leads to all sorts of cascading failures.  What’s really dangerous is how fast unemployment is climbing – sure Spain has 15% unemployment but they built that up over 10 years, not 18 months…


  70. Phil: what is chance that my FAZ stock, base 28.53$ will go green ? I am tempted to take the loss as it looks that economy will improve further. Your view ???


  71. Phil,  I sold GDX $46 calls yesterday……as a general rule when do you reccommend rolling….


  72. i agree, peter D. I waited long years to buy a home instead of renting….but they are killing my plan because there’s few inventory here in San Diego and prices are still high. I missed the real foreclosed homes last fall thinking this mess is going to get worse. But somehow now, no inventory.
    and meanwhile, food is getting more and more expensive.


  73. Kustomz – Cheese and Barney Frank :)


  74. Watching Transports for the real turn down


  75. Yeah, Phil, it’s $150M for GS.  Just look at the SPY 5 minutes candle chart.  There were 5+ "shooting stars" at the top, guess who’s selling, and lots of "hammers" and "prodding" candles at the bottom, buying to cover shorts for profit, and panic buying for the general public.  Now the action slow to a crawl as the traders already left for the day with the profit locked in.  Mine also locked in, so I’m off for the day.


  76. Why is CAL up 5% today? Not that I’m complaining (but my putters sure are)


  77. Oops, just see the post from lynn, so one more post.  I’m speculating that many of the legislatures who voted to extend the tax credit are landlords, who couldn’t bear to see more correction in price and not knowing much about re-creating a mini housing bubble, and more importantly not knowing maths.  In California, a $60,000 per year income per household cannot affort a $300,000 home.  6% interest is $18,000 (assuming no down, or loss of income for deposits), tax is $3,300, principal is roughly $1,800, totaling $23,100 per year for housing alone.  Proping up house prices only helping the rich.  If we wait long enough we might see a W correction in house prices.


  78. Phil,
    I took out a bunch of TNA and UWM at the open thinking they would try to take out 1082 on the S & P today rather than risk a geopokitical event over the weekend. Thoughts ?


  79. AMZN. Believe “bloddget” and crew are back. 160, I guess, that would put in marketcap of Government Sachs. So does that mean goog 700 / gs 250 / dji 12000

    this seems like wall st insider( planning ) at it’s finest


  80. Phil: DIA puts: is it jan 103 ???, no cover,


  81. Phil, Dollar,
    I’m not sure the American worker has the leverage to demand higher wages any time soon, (but the UAW rank & file did reject the Ford contract proposal so what do I know?).  I would think that other forces would push Treasuries into higher yields sooner, forcing some discipline, but I also thought that should have happened to greater degree than it has already. Who would want U.S. debt at these rates? Maybe we’ll get a stronger dollar now that the FED is cooling off the purchases.  I remember during the Volcker regime, I walked two blocks from my house and purchased a retail bank CD paying 12.25%.  Everything was going up then, we had real inflation in the midst of a very poor economy.  The economy feels worse now but your dollar can buy more house, clothes,…(but not oil, gold….).  So there are conflicting forces at work.  Demand/confidence/credit destruction vs Liquidity pumping and happy talk. Until we show some fiscal and monetary disclipline, It seems to me like the dollar is doomed.  I hope I’m wrong.  Thanks for your thoughtful commentary.


  82. boonie 
                  12.5 % yes I locked money in for 5 years ….looking back those were good moves….the US dollar effects so many other industries in other countries …..so it is a global problem…..


  83. Hidden inflation/Peter – Oh yeah, there’s a ton of that going on.   Builders are making much smaller lots too so you get less home for your buck. 

    AIG/Kustomz – Yeah it’s great to be an insurance company where you get to book your wins as profits and your losses are paid by the taxpayer…

    FSLR/Yodi – You bet them bullish?  How am I supposed to help with that???  They are a terrible and dangerous stock to play in either direction but they do pay a good premium so you can just roll the $135 puts ($17.20) to the Jan $110 puts at $10.20 and the Jan $130 calls at $7.10 but they could bust out in either direction so be careful. 

    FAZ/RMM – Well you can still sell the Jan $21 calls for $4.10 andf the $19 puts for $2.25 to drop your net to $22.18/20.59, which seems better than eating $7 just because you are frustrated.  Even if they head down, you can keep reducing your basis over time and use FAZ as a hedge against bullish financial plays long-term.

    GDX/Margret – Certainly not when they are almost 1/2 premium.   Generally you have to look at your escape route, which would be the Dec $49 calls at $2.45 (net .20) and if that is a target you think will get blown out, then maybe sell some Dec $45 puts for $2.05 but, otherwise, don’t worry unless that roll spread gets away from you.

    Keep in mind that the bull premise is 10.2% of the people who don’t have jobs and the 90% of the people who are making 12% less will, in fact, buy MORE oil and gold than people did last year.  You can have short-term "inflation" based on speculators pumping money into commodities but, over time, you need actual demand to catch up and that means the average person has to WANT to take $1,100 out of their pocket to buy 1 oz worth of gold jewelry.  This is how everything collapsed last year – it’s one thing to horde oil off shore in tankers and bid up the gold in your vault to $1,500 per ounce but if you can’t eventually find real buyers who will take it off your hands, unless you have a use for the gold then you have a big lump of shiny metal when what you really need is money for gas to fill up your Hummer. 

    Unfortunately – it’s a long process and, like oil at $140, we can take it to seriously ridiculous levels before things calm down so short-term bets are NOT advised.  How quickly can we go back to whipping out $100 bills to fill up the gas tank?  That’s the bet oil bulls are making as $3 a gallon is already $60 for a tank…  Gold is no different, how many gold chains does a rapper need at $1,100 an ounce

    Good move Peter – Later! 

    NDAQ coming back nicely.

    CAL/Kwan – Sell-off was crazy overdone and rising Trans lifts all ships (or planes) even though it was sent up by rail (what a confusing sector).

    Ultras/JRW – Don’t forget the RUT is our most "real" indicator so it’s going to lag when we hit resistance levels at the best of times.  I can’t see playing the ultras higher until we get a clear break over our levels because they get so savaged on the way down and a very sharp correction is still looming.

    AMZN/That – They need people to buy AMZN, it’s their best selling story and if they can get you to buy AMZN at a 100 p/e, then Cramer can get on TV and start telling people how companies with 50 p/es are undervalued.  Don’t foget the Gang of 12 bought a lot of tech on the way up and they engineered a mega-squeeze on AMZN but it’s not about AMZN, it’s about all the other crap they need to unload and toi do that they need the Nasdaq to look like oil and gold.  There’s nothing new here, it’s the same old playbook they usually run.  This week it was CSCO earnings allowing them to pump up the Nas back to 2,100 and they will be damned if a little thing like 10.2% unemployment is going to interfere with their plans.  Remember – There’s always a bagholder who believes that there’s a bull market somewhere….

    DIA/RMM – Jan $103 puts, looking to roll to March $102 puts for $1.10 and THEN looking to sell 1/2 Dec $99 puts for $2.50 or better.


  84. Peter D
    not sure if there’s a W housing recovery. but it sure is EXPENSIVE renting in San Diego too. Stock market is too crazy so i may just give up and put money down and buy a home since the govt seems eager to help us. Yes, there are lots of rich ppl in San Diego who’s buying with cash whenever a foreclosed house comes on market and pushed my offer out.
    I may just move to Indianapolis. enough ranting here. sorry for cluttering this comment area.
    So ur out of most of ur short position?


  85. Phil, about a sharp turn in market. if todays unemployment doesnt do it, what will? as you said, there are few data in coming wks which makes market easier for them to push up (of course they can push it down too if GS is positioned in such way)


  86. Phil: on DIA puts: thought you add on 1 month, now you plan to add 2 ??? why ?


  87. Phil: yes, yes, there are no FEB dia options yet .


  88. Phil, what are your thoughts on the CVS sell off – overdone or falling knife.  I realize they lost some big customers at Caremark division.  But stock buy back and flu season should be good for them?


  89. Volume anemic thanks to the Yankee parade


  90. kustomz, computers don’t care about the parade.
     
    MA starting to run so I’ve sold put verticals over my long put calendar position and added to the put calendar position. Result is roughly the same delta but nice upside cover in case they break out.


  91. lunchtime pump. Well, I suppose it is friday so the afternoon is out.


  92. Phil Holding Jan p long at 5.86 and 1/2 dec 99p short @ 2.60 shall I follow your last advise?


  93. Sorry Phil we talking about DIA


  94. Dollar/Boonie – Rates aren’t going to go up if nobody wants to borrow.  You can buy an IPhone for every day of the week but until you buy 1,000 of them it doesn’t make up for one person who doesn’t buy a house.  Also, check out this chart (and there are lots of good charts here for housing).  HOW can housing EVER get back to the prior levels if the equity people require to buy the homes with is down 50%?  What is the plan, allow 5% deposits – the opposite is happening, banks are requiring 20% deposits so the homes CAN’T be sold unless they come down 50% in value to match:

    When interest rates were 12%, houses were very cheap (2-3x income) and even then they weren’t selling.  A family with a median income of $45,000 can theoretically afford $1,250 a month for a home and that’s IF the current tax incentives etc are in place.  That caps the max price of a median home at $150,000 and we’re  still about 20% too high.  If rates go up to 10%, then the average family can barely afford a $100K morgage. 

    None of this stuff is inflationary.  Focing people to choose between eating and staying warm is not going to send them running out to buy a new gas guzzler but, as I said before, that doesn’t mean they can’t rope in enough suckers to take oil back over $100 and gold to $1,500 before someone notices the economy ground to a halt again. 

    Speaking of reality – Copper is back to $2.95 again, rejected off $3 this morning.  Oil is $77.28, silver is $17.40 and gold is $1,095. 


  95. Look at MOT and RIMM, they herd everyone into going long MOT  then kill the shorts in RIMM you got to love it


  96. Hey Pharm…. Here is one for you – Northwest Biotherapeutics, Inc. (NWBO) currently traded OTC. I just bought 5000 shares. This company is on the way to be the new DNDN on steroids. They have multiple cancer drugs in the pipeline, that follow the same approach as DNDN, including those for liver, brain, lung, pancreas, prostate and ovarian cancers. Their cap is only 50 mil, as compared to DNDN @ 3 bil. This could be the big one – if one’s temperment can take the anxiety during the wait.


  97. We need some volume to slam this pump job lower; they can hang up here all day w/ HAL until volume kicks in.
     
    I think shorting SPY here (stock or options will pay off !


  98. SNDK – currently $20.83 just below the 50 dMA of $20.89. Options volume with over 500 traded is Nov $21 Put AND Call!
    The Nov 21 Call is about $0.83 and the Put $0.95. Obviously at expiry, only one of them can be assigned.
    So considering Buying the stock here and selling both the $21 Call & Put. Is that a good trade with 2 weeks to expiry of the options?


  99. hi  phil: Still catching up from being out of town. I’m long C  Jan. $5 ,2011 calls at $.99. Did you recommmend any put sales of C recently?  How about selling  the  June 44 puts for  .$60 ? thank you
    dfflam


  100. Turns/Lynn – I think that it’s going to be all about a bad data point like a bank going under or retail sales looking very bad or a REIT going bust, something that slaps people in the face and wakes them up, like the .com busts did in 1999.  Pretty much the .com boom ended when Y2K didn’t happen and all those programmers suddenly had no jobs.  Our Y2K is the constant promise of more and more stimulus and the "impending collapse" of the dollar.  If the dollar doesn’t collapse, then a lot of bets get unwound and we have major pricing corrections.   Europe had AWFUL retail sales yesterday and ours are pretty dellusional as well so what does Asia have to be so happy about – the entire tech improvement can be traced back to more smart-phone sales but new phones for everyone are not going to turn around the global economy. 

    Fannie Mae (FNM) plans to tap emergency funds for a fourth time this year, bringing its draws of taxpayer money to $60B. According to an SEC filing late yesterday, Fannie will seek $15B in Treasury financing after posting an $18.9B Q3 net loss. Analysts say the GSE will likely tap its entire $200B lifeline, and may still need more.

    Also buried in Fannie Mae’s (FNM) SEC filing yesterday was that it agreed to sell $2.6B in unused tax credits to unnamed buyers, and received approval (.pdf) for the deal from its regulator, the FHFA. The Treasury is thought to be leery of signing off on the sale, reportedly to Goldman Sachs (GS) and Berkshire Hathaway

    DIA/RMM – Well, first of all there are no Feb puts, second of all we are likely to be forced to sell Dec and you should know not to be comfortable with a 30-day spread and third of all – it’s insurance and we plan to have it on forever so if we can roll out 2 months for $1.10 then we know we only need a few successful short-term put sales to pay for it. 

    CVS/Jo – I like them down here and they held up from yesterday.  You can sell the Jan $28 puts for $1.15 or you can buy the 2011 $25s for $6.85 and sell the Dec $30 calls for $1.15 and the Dec $29 puts for $1.10 and that’s net $4.60 on the $5 spread which you can roll along over time.

    Poor RUT just can’t keep it together over 580…

    DIA/Yodi – If you are using it as insuance yes, the idea is just to keep in a good position if we ever do have a sharp sell-off that burns your longs so you have a source of cash to reposition. 

    Buying bandwidth: AT&T (T) completes its planned $945M purchase of Centennial Communications, following yesterday’s FCC approval with conditions (.pdf) including limiting contact with competitor America Movil. The deal expands AT&T coverage in the Midwest, Southeast and Puerto Rico.

    Boosting commodities:  Zhou Xiaochuan, governor of China’s central bank, says pressure to let the yuan appreciate is "not that big." Zhou was arriving at the G-20 meetings in St. Andrews, where it’s expected that finance chiefs will push Asian countries to let their currencies appreciate. He added that asset bubbles are not as serious a problem in China as economists say.

    More Stimulus:  In a brief reaction to a "sobering" jobs report, President Obama said he’s examining new measures to spur growth and ran off a list of five: road/bridge investment, energy retrofitting, additional tax cuts for businesses to create jobs, boosting credit to small businesses and support for exporters.

    More Banks going under: A new rule that caps the interest rates paid to depositors by banks deemed "not well capitalized" will likely accelerate the rate of bank failures. The cap – 0.75% above the U.S. average – is meant to prevent weaker banks from driving up costs for the rest of the industry.

    SNDK/M2 – They are not paying you enough to compensate you on a stock that routinely moves 5% a day. 

    C/Dflam – The only play on C we really like at the moment is buying those 2011 $5s and looking to sell the $7.50s to make a .20 spread and then just ignore it for 6 months


  101. Phil,
    I’m looking at UNG now at 9.50.  Apr 10 buy/write? Or naked sell putsand calls? or nogo?


  102. Another mass shooting; this time in Orlando, FL office building; Not Good.


  103. Gel, is that you making NWBO jump?  What is your bull case for this stock?  Thanks!


  104. The Goldman Sachs manifest as cybernetically enhanced humanoid drones of multiple species, organized as an interconnected collective, the decisions of which are made by  LLoyd Blankfein, linked to subspace domain. The Goldman Sachs inhabit a vast region of space in the Delta Quadrant of the galaxy, possessing millions of vessels and having conquered thousands of systems. They operate solely toward the fulfilling of one purpose: to "add the biological and technological distinctiveness of other species to their own" in pursuit of perfection. This is achieved through forced assimilation, a process which transforms individuals and technology into Goldman Sachs, enhancing, and simultaneously controlling, individuals by implanting or appending synthetic components.

    To hell with levels, they control the levels. These guys talk about levels like they are actually determined by rationale in this GS fabricated world


  105. Nassim Taleb, on a panel with IMF Deputy Managing Director Takatoshi Kato, loses his cool: "Before the discussion he gave us a PowerPoint lecture showing the IMF projections for 2010, 2011, …, 2014. I could not control myself and got into a state of rage. I told the audience that the next time someone from the IMF shows you projections for some dates in the future, to show us what they PROJECTED for 2008 and 2009 in 2004, 2005, …, and 2007."

    UNG/Flying – I’d just sell the naked puts because I’m worried UNG will fall further as nat gas storage is at record highs and if we have a warm November, they are in big trouble.

    Shootings/Cap – People are being driven to the breaking point and the holidays are just around the corner.  Maybe all this IS good for AMZN as I’ll be keeping my mall time to a minimum between NRA members and flu carriers…


  106. SAO PAULO, Nov 6 (Reuters) – Brazil’s central bank offered to buy dollars on the spot foreign exchange market on Friday in an ongoing effort to boost international reserves and soak up greenbacks pouring into the economy.
     
    The bank has bought about $21 billion on the spot market since May 8, including about $6.7 billion in October, to soak up dollar liquidity and prevent further appreciation of Brazil’s currency, the real.
     
    Brazil’s currency (BRBY) was trading 0.12 percent stronger at 1.72 per U.S. dollar shortly after the central bank’s announcement.


  107. Gee, oil creeped down 3.5% for the day to $76.85.  That’s fun!

    GLL Dec $10 calls are .95 and are .60 in the money so a good way to bet on a gold sell-off to match oil


  108. boy, this is some choppy trade for such light volume.  Times must be getting a little harder.. even for the crooks who run this show.  Time to collect some more from the pigeons.
     
    For the life of me I can’t understand what tax credits Fannie has to sell?  When was the last time they made any money?  And I think the government should block both GS and Warren from buying them out of principle.  Warren said he doesn’t pay enough taxes anyway.  Guess it’s different when it comes to his business.  And considering the pittance GS paid last year in taxes, they should be assessed a special windfall tax this year and in no way shape or form be able to buy some deflated tax credit… or the next mad man with a gun is going to take it out on them.


  109. kustomz, I finally figured it out- GS is the Borg


  110. HMY Jan $9 calls at $2.20, selling Jan $10 calls for $1.55 and Jan $9 puts for .45 is net .10 with a $1 upside at $10 and HMY put to you at net $9.10 (now $10.74) if they fall below $9 (down 20%).  This is a good way to offset bearish gold plays as HMY (and most miners) is very undervalued if gold sustains this move up.

    Similar play with ABX (who we never mind owning long-term) with the Jan $37.50 calls for $5.70, selling the Jan $40 calls for $4.20 and the Jan $35 puts for $1 is net .50 on the $2.50 spread and net cost of $35.50 if put to you 15% below the current price.


  111. UNG is a great investment (short). If gas prices do not move, it is guaranteed to drop 15-20% every month as they get to buy fewer and fewer contracts with every rollover.


  112. stockbern you probably thought i was off my rocker ;-) …..just poking fun at GS


  113. John Reed apologizes for his role in the creation of Citigroup (C) – of which he was a key architect – saying banking needs to be compartmentalized "for the same reason you compartmentalize ships … If you have a leak, the leak doesn’t spread and sink the whole vessel." He adds that repealing Glass-Steagall in 1999 was wrong.

    Vermont Sen. Bernie Sanders introduces legislation that would give Treasury Sec. Timothy Geithner 90 days to compile a list of banks, funds and insurers deemed too big to fail, and then break them up within a year.

    Tax credits/Matt – I know, that is such crap.  What that means is that some businesses make money and some businesses lose money – fine.  But now we are going to take the losses from the businesses that lose money and use them to excuse the taxes of the businesses that make money which further incentifies companies like GS to destroy competitors like LEH because not only do they gain all the clients but they also get to take their tax losses.  BRILLIANT! 

    Levetfup1106

    Levetfdown1106


  114. NWBO/MrM…I must confess, I made it jump a little, as I placed a limit order at !.13 and had to wait a while to get it completely filled.
    The company is following the DNDN model, but as opposed to their limited approach, has multiple drugs in development, all cancer vaccines. The research firm RNCOS, Inc. projects a 30% growth over the next few years in Vaccines for cancer. resulting in a projection of 1/4 of the total global vaccine market. With 12 mil new cancer patients expected annually, immunetherapy will be prominent. Regarding prostate cancer, 11% of patients make it to 3 years, however clinical trials of the Northwest vaccine reveal 64% make it to 3 years. The FDA has just given clearance to conduct large Phase 3 trials. Their brain survival cancer drug DCVax has similar positive results. Since this company has multiple drugs in this area, their chance for success is enhanced. This company is stiil a Wall Street unknown, and I think their stock price could explode. DNDN will continue to progress, but on a percentage basis, Northwest has a better matrix. I’m curious what Pharm thinks.


  115. Phil any thoughts on some silver miners (SSRI, PAAS) …silver hasn’t yet risen as much as gold. SSRI reported  3Q earnings today. They are down 2%. They seem to be in a $17 (support) - $23 (resistance) channel over these last 6 months.


  116. UNG is a great investment (short). If gas prices do not move, it is guaranteed to drop 15-20% every month as they get to buy fewer and fewer contracts with every rollover.
     
    The current roll spread on nat gas is about 8%, and UNG now seems to use futures for only about 50% of its exposure, so I think this figure has come down closer to 4%?


  117. Any ideas on NOV DXD 33s calls that I bought @ $1.15 a couple of days ago?


  118. The number of German companies filing for bankruptcy protection was up 12.3 percent on the year in August, even as the economy slowly emerged from recession, official data showed Friday.
    http://www.businessweek.com/ap/financialnews/D9BPU55G1.htm


  119. Funds invested in commodity indices amounted to $134.5 billion at the end of September, up 14.8 percent from $117.2 billion at the end of June, according to new data from the Commodity Futures Trading Commission (CFTC).

    Total funds have shifted away from crude, refined products and wheat towards natural gas, copper and silver. While the shifts are marginal, they suggest an ongoing restructuring of index holdings.
    The percentage of funds allocated to WTI (U.S.) crude was cut from 25.9 percent at the end of June to 24.7 at the end of September, with an even sharper reduction in allocations to gasoline (4.5 percent to 3.9 percent). Investors also cut allocations to the troubled CBOT wheat contract (4.0 percent to 3.3 percent).
    In contrast, allocations to cheap natural gas futures rose (8.1 percent to 9.3 percent) as did allocations to sugar (4.0 percent to 4.8 percent), copper (3.1 percent to 3.6 percent) and silver (1.5 percent to 1.9 percent).

    At the start of October, Deutsche Bank announced it would cut weights for corn and wheat in some of its funds, while adding new contracts for natural gas, gasoline, silver, soybean oil, zinc, cocoa, coffee, cotton and cattle. The intention was to create more diversified indices while also complying with limits in corn and wheat.
    http://www.mineweb.co.za/mineweb/view/mineweb/en/page67?oid=92016&sn=Detail


  120. Phil, how those short ultras calculated? if assets will go much higher, I hope they wont go to negative number


  121. This is amazing; they held the market up until the end of the Yankee parade, which just ended w/ SPY at 107 +
     
    Let’s see if we get sell off now !


  122.  EDC up over 160% YTD


  123. when u say GLL dec $10 call , u mean buy the naked call, no underlying etf stock, right?


  124. the bots will not let this market go RED.


  125. Loook at BIDU move.  Time to short or set calls?


  126. Loook at BIDU move.  Time to short or set calls?


  127. Loook at BIDU move.  Time to short or set calls?


  128.  Lynn/GLL yes , he means to buy the GLL Dec Call Option at the $10 strike price.


  129. Silver/Magret – That’s funny as I was just looking at ZSL (ultra-short silver) for a buy/write as you can buy it for $4.75 and sell the May $5 puts and calls for $2.30 for a net $2.45/3.73.  So the question for me is how high do I think silver can go?  to knock a 200% ultra down 20% we assume they only have to go to $19 so I’m a little worried about that.  SSRI, on the other hand, doesn’t seem to be able to make money despite silver being back near it’s ’08 highs, when they lost .16 anyway.  Their forward projections (making .94) are based on silver holding $15, something they haven’t done for more than 6 months – ever.  Silver is an industrial metal and 10% of industry is shut down so I’d stay out.

    DXD/Emc – If you are worried over the weekend (now .80) then you can sell the $34s for .50 and that drops you to net .65 and you can ride out a move against you.  If you are unwilling to ride out a move against you, then you need to get out now and you can either cash out and take the loss or move to Dec $33s at $1.55 and sell the Dec $35s at $1.05 which drops you down to net .85 on the $2 spread. 

    Germany/Kustomz – The best quote I read yesterday was from from Pragmatic Capitalist and bears repeating:

    Myth: There are signs of life in the retail sector.

    Reality: October auto sales in the U.S. did pick up from September’s abyss, but this was still the eighth worst month in the last 27 years. And yes, it does look like U.S. chain store sales are going to come in somewhere between +1.0-2.0% year-over-year. But beware. This actually says more about the detonation that took place a year ago — the “base” for the year-over-year calculations — than anything truly robust at the present time.

    Also, don’t forget that these are YoY same store sales from SURVIVING retailers. Thousands have gone bankrupt in the last year, for example Circuit City, which for sure has helped BestBuy’s activity, and there are countless other examples. So the data, for lack of a better term, are distorted and tell you very little about what consumers are doing in the aggregate

    The same can be said for these record IBank earnings and record bonuses – They are making 50% more because their competition is making 100% less.  Meanwhile, the actual economy (overall activity) is down 75%.  If your town has 5 car dealers then 4, then 3, then 2 and then 1, at some point all those guys go through a brief surge in sales as their competition is elminated.  But it’s a town of 1,000 and each dealer employs 50 people then your unemployment goes from 5% to 20% by the time there’s one dealer left and then who’s going to be left to buy the cars?  

    Commodities/Kustomz – That’s interesting, thanks!

    Ultras/Tchay – I think mostly they adjust by EOD to the move of whatever they are tracking.  Since it’s a percent move, negative is not possible but they do get to a point where they become untradable (as FAS and FAZ did) and then they either implode or reverse split. 

    Parade market/Cap – Yeah, just 100M at 2pm, very low day again. 

    GLL/Lynn – Yes, that one is just the call naked.   You can offset $1 of those with .10 of one of the long plays. 

    BIDU/Nolsrul – Just a little too risky on that one.  They are nowhere near as overpriced as AMZN and AMZN just goes up and up. 

    GE up 6% today, back over $15. 

    Gold buyers have sent the metal to a nominal all-time high of $1100 today, and Treasury buyers have kept yields subdued – a rumble between inflation views that shows how investors radically disagree on a host of questions right now.


  130. How many banks will the FDIC take over tonight? 4,6,8 none?


  131. kustomx, thx for the PBR note on the 5Tcf discovery. The world is awash in natural gas it seems. The planet will deflate…
    BTW, PBR is only the 13th best performer Brazilian ADR on the NYSE YTD (+100.0%). The top is a big builder (+255%). (charts at http://nexalogic.com/latin.html, for all latin-american ADRs).
    Laws of gravity will apply eventually.


  132. Phil, I have an order to sell Dec. DIA puts @2.5 to cover 1/2, question: if DIA wont sell of today, do you recomend to execute this order at price what I can get at the end of day or hold it till monday


  133.  TZA into the weekend ?   Dec 13 puts are 1.6 …. we have held up here since mid-day on no volume and IWM is negative on the day with SPY and QQQQ’s positive.


  134. Watching Cramer for some "Cramer-Inverse plays. Boy! Is he a dork or what?


  135.  Dec 22 UUP calls are 1.00 with UUP at 22.92 ?   No premium at all ?   Am I looking at that right ?   Are we bullish on the dollar ?


  136. AMZN was about to crack yesterday before Bernstein strategic upgrade.  Even Cramer couldn’t get excited about it today.


  137. This looks like the market finally breaking the intraday trendline …. if it does, down we go; at leats to 1060.


  138. SBUX still going up, greed was good there! 

    Banks/Kustomz – I’m guessing high, say 7 as they seem to take over more when the market is doing well and people are distracted.  

    Overall, I am deeply concerned here.  It is worrying to be bearish but we still haven’t beaten 580 on the Russell or 6,955 on the NYSE and is that really too much to ask?  The S&P is barely holding 1,066 and XLF is pretty pathetic at $14.29.  Qs are right on the fence at $42.50 but if we beat all those levels in the next 90 minutes on a spike up should that be a reason to change our minds and flip bullish?

    I don’t want to layer up bearish, 55% bearish is fine as it’s more a matter of principal at this point.  We had some bullish plays yesterday for a breakout but I still want to stress that it’s important to have some disaster protection if you are bullish, these are the plays from last Thursday, and we’re up about 150 dow points since then so you can see how they are doing:

    SKF was played as a Jan $29/33 bull call spread for $1.  That spread is now .60, (now .75) that is pretty cheap insurance for 2 months since it pays + $3 if it hits.  SKF dropped a lot since then but we suffered little damage and the new play would be the Apr $23/26 spread for $1.20 (now $1.30).  That one has "just" a 150% upside but has the distinct advantage of already being $1.93 in the money.  And yes, we do want to roll the Jans, this is .20 per month disaster protection that pays $1.80 in case of emergency – if you are not making much more than .20 per month on your bullish plays, then your bullish plays suck!  

    DXD Jan $35s are still $1.90 (now $1.60) but now I would rather have the April $30/33 bull call spread for net $1.20 (still $1.20) (notice a pattern?) and that one is 100% in the money already and pays 150% if DXD simply holds $33 through Q1

    SDS Dec $39/44 bull vertical was $2, now $1.50 (now $1.20) (again you can see the pattern) but now we have the March $37/42 bull call spread for $1.80 (now $1.60) with a nifty 177% payout if SDS heads up 7% (3.5% down on S&P).

    TWM is a little different in that it’s very low ($30.42) (now $30.22) and was $116 in March and $132 in November and that was coming off the low $40s so this thing is good for some serious gains if the market dives.  Here we can look at something a little more speculative like and Apr $33/38 bull vertical for $1.20 (still $1.20) and that one pays +316% but, of course, you plan on losing the $1.20 unless the market does fail

    See how these work?!  They provide huge leverage on small moves down but even with the Dow going 1.5% against us they are holding up very well.  If you are looking to take one from scratch and you can drop your vertical $1 for the same net price, that is a much better way to play but these are great ways to hedge yoursef against catastrophe is you are bullish and would like to guard against a big move against you and also they make nice speculative bear plays if you need those.

    Counterintuitive as it may seem, the liquidity outlook fed by "Bubbly Ben" will keep favoring the risk trade, says the Pragmatic Capitalist, charting the historically reflationary environment. "As Keynes famously said, markets can remain irrational longer than you can remain solvent."


  139.  have this feeling that some type of calamity will occur over the weekend


  140. SBUX – Here is a chart from about 20 minutes back showing it going above the double top.
      http://finviz.com/publish/110609/SBUXc1dl1438.png


  141. DIA/Tcha – I think EOD we need to be in the March $102s, 1/2 covered with Dec $99 puts, regardless but that is my 55% bearish stance, so it depends on your overall portflio of course. 

    TZA/CMC – I think Dec is fine as long as you are willing to roll with it.  We can assume that there will be some resistance back at the highs so it’s not too likely we get blown out to the upside but if we do get an upside breakout, then we don’t want these anymore (not that I believe in an upside breakout, of course).

    UUP/CMC – The dollar isn’t supposed to move more than a nickel a week, these things are just not designed for this kind of volatility.


  142. It looks like someone is buying alot of Nov 5 puts on PARD, with 2 weeks to go and stock over 8.00 – does someone know they will fail? Makes no sense.


  143. How in the world can there be this much composure with the markets at 10000? HOW?


  144. Hi Gel1 someone is pumping your stk NWBO from 1.11 to 1.25 in two hours!!!!!!


  145. Phil,
    any thoughts on shorting COST?


  146.  Thanks … I like the TWM vertical bull play … got that at 1.20 and filled quite quickly


  147. MET was the seller of the properties, kudos to them for selling at the top

    At the height of the real estate bubble in 2006, an investment group led by New York City real estate firm Tishman Speyer Properties and BlackRock Realty Advisors paid $5.4 billion for a pair of gigantic Manhattan apartment complexes known as Stuyvesant Town and Peter Cooper Village.

    Some of the biggest equity investors in the deal are public pension funds that manage retirement system benefits for millions of government employees.
    Florida’s State Board of Administration had put $250 million into the project. It has already written off the entire investment as a loss.
    California’s two largest government pension funds, the California Public Employees’ Retirement System and the California State Teachers Retirement System, invested a combined $600 million. CalSTRS has also already written off its $100 million stake.
    Tishman, by comparison, stands to lose much less. Its share was $112 million, less than 2 percent of the purchase price.

    http://www.google.com/hostednews/ap/article/ALeqM5i8sBMF1Qlss0y1mFe4EdQFOquBsgD9BI75DO0


  148. PARD/Jomp – Someone could just be gambling on a negative announcement over the weekend.  People have theories like good news comes during the week, bad news on the weekend so shorting the weekend and getting out if no bad news can be fun if you think it’s a pattern. 

    Composure/Kustomz – On who’s part?  It’s been here for a while now so no big deal really.  I think the bears don’t buy it at all and the bulls are patiently waiting. 

    COST/Maxt – No, I like them too much to short them but I wouldn’t buy them either.  It is very likely that they are getting burned by gas prices, it’s a major swing factor in their earnings as they have very low member pricing and often get caught on the wrong side of that trade (but it’s kind of a loss-leader).

    Consumer credit: Falls for a record eighth month in a row, $14.8B in September to $2.46T, 4.7% below the year-ago figure. Economists expected a $10B decline. The drop led once again by a drop in credit-card debt, which fell for a 12th month, $9.9B to $889B. Nonrevolving debt fell 3.7%, $4.9B to $1.57T.


  149. Out of TNA, UWM……+3% on the day; going short now for the weekend.


  150.  DIA …. if I am opening a new position in DIA, what should it be …. I feel like I need some protection to the upside since most of my positions are bearish.


  151. NWBO/yodi… Must be Mr.M, buying before it gets out of range.


  152. Composure/Kustomz – On who’s part?  It’s been here for a while now so no big deal really.  I think the bears don’t buy it at all and the bulls are patiently waiting. 

    VIX is useless


  153. UUP – bought the Jun23c and sold tje 22c for a nickel.


  154. UUP-that is the november22


  155. Gel - NWBO is not me, I accumulate speculative biotechs in small regular bites on downticks, never on hype days.


  156. Speaking of small biotechs, PharmBoy wazzup with ARIA? I’m glad I stayed in and did a DD at 1.80.


  157. John Reed apologizes for his role in the creation of Citigroup (C) – of which he was a key architect – saying banking needs to be compartmentalized "for the same reason you compartmentalize ships … If you have a leak, the leak doesn’t spread and sink the whole vessel." He adds that repealing Glass-Steagall in 1999 was wrong.
     
    Hey!  I said that first!
     
    …this is one wise man,
     
    Vermont Sen. Bernie Sanders introduces legislation that would give Treasury Sec. Timothy Geithner 90 days to compile a list of banks, funds and insurers deemed too big to fail, and then break them up within a year.
     
    On a weekly looksie.. the DOW is great, S&P so so, NAZ sorta and the RUT not so much.  I guess with today’s sensibilities, we can’t expect to rocket up after a pullback like we did just over a month ago.  Now, we are ‘earning’ our way up using those handy carry trade dollars.  Short half and put the rest in the market.  That’s how we make the coin!  
     
    Bourbon anyone?


  158. Its like having a tummy ache and not knowing you have a serious case of diarrhea until you sit on the bowl….hahaha dont ask


  159. Phil,
    % Bearish ?   I need to know how many shares of TZA to buy.


  160. is fslr put worth buying?


  161. DIA/CMC – You want a bullish Dow position?  How about Jan $97/99 bull call spread for $1.30, that pays .70 (53%) if the Dow doesn’t dop below 9,900.  UYG is not a bad all-purpose upside play at $5.39 and you can sell Jan $5 puts and calls for $1.20 for net $4.09/4.55 so a nice 20% downside cushion and a 23% payoff if the banks don’t collapse by Jan

    VIX/Kustomz – Actually those .80 $25 VIX puts rand up to $1.30, they are a nice way to hedge a bounce when the VIX is high. 

    Burbon/Matt – Sounds good to me! 

    Now the voices behind the unemployment numbers: In interviews and conference calls, execs are staying defensive and are likely to be slow to hire in coming months – though at least talk of coming layoffs is down. The chart continues to indicate a long way back.

    Not much strength into the close and keep in mind this is doing wonders to flip us from oversold to overbought (we hit neutral yesterday).  So we went from being March levels of oversold on Monday to overbought on Friday on an up 300 move in the Dow.  That means that 300 more points would probably put us insanely overbought, which is how I can decide now that I’d be willing to stick with and roll DXD call even if we hit 10,200 on Monday...

    Bearish/JRW – Still 55% too risky as they could gap us up over the weekend. 

    FSLR/Lynn – They are too dangerous down here.  Usually we short them at $160 and go long around $80 – the middle could go either way violently on you.


  162. Phil will you be selling any AMZN puts today (as a hedge to the calls already sold)


  163. Phil: I felt strongly the market will finish down toDAY, LIKE SO MANY TIMES, IT GOES THE OTHER WAY.
    should I just go contarian than what I think ?


  164. Missed much of the day and things are exactly where they were when I left, except BIDU, AMZN, MA are all ripping (the latter pushing toward its ATH).
     
    I’m liking my MA trade here because I’m long 210 Jan/Nov put calendars and short the Nov. 220/230 put vertical in a 2:1 ratio. The position is bearish but only slightly down today as the 230 puts get smoked on the run-up and corresponding IV drop. I could ride this stock to 300 and still keep the position going  by selling one-strike-wide put verticals all the way up, while rolling my longs up and out with the credit collected from those sales.
     
    Going to look for other spots to run this kind of trade next week if we keep pushing up; basically selling put verticals on top of OTM put calendars.
     
    Other bullish plans for next week are to get long momentum names that have had good earnings but are off their recent highs, like AAPL, GS, and GOOG. This is IF we continue going up, which I’m still not convinced we’re going to do.


  165. sure Phil. I just thought the chart seems like they have more downside to go, esp the didn’t join the board market bounce, the more sure they will join the market down


  166. Phil,
    have a question about long diagonal strategy:
    yesterday you suggested SPWRA trade, where you sold ITM calls (half of long ) and put – I liked this idea,
    but today CVS trade: you sold vertually ATM calls and puts (same amount as long LEAPs),
    How you make these desigions? is it Greaks? Technicals? Fundamentals?


  167. On the somewhat positive jobs front, temp worker payrolls rose for the third month in a row, by 34,000, the biggest gain in two years – which may be a sign of companies dipping their toes in the hiring water while they’re unsure demand will stick. (Employment highlights)

    Wow, you would think that the trade bots are designed to hit my levels!  Big push into the close gave us exactly 580 on the RUT, and 6,957 on the NYSE and they nudged the SOX back to 301.  S&P is just a touch over our level at 1,069 and the Dow is no worried at 10,023 as is the Nas, way up at 2,112.   Still not bad as I’m less than 30 total points off the levels we set as upside targets on Monday.

    As I said, touching the top of the range isn’t something to get all bullish about but 55% bearish into the close still feels risky doesn’t it? 

    Volume was super-low today so a meaningless day overall and we’ll have to see what Asia can do with it on Monday.

    Have a great weekend,

    - Phil


  168. Just saw the consumer credit numbers. Each month we’re told we’re about at the bottom, then it goes lower.


  169. Phil, the fact that the trade bots hit your levels so often leads me to believe you may have written some of their code :)


  170. HI Gel 1 Your NWBO trade smells a bit like Octupusy !  1.50 now not bade at all


  171. is it good to plan on TZA call option at least for a quicky trade if S&P hit 1080 next wk (at the head and shoulder formation?)


  172. If anyone is interested there’s an airshow this weekend at Homestead Florida
    http://www.wingsoverhomestead.com/


  173. AMZN/Foss – No, I’m hoping that upgrade just has the same effect as the last few and burns the shorts for 2 days and fizzles.  The roll I’m looking at for AMZN right now is to sell the Apr $105 puts for $6.60 and the Dec $120 calls for $10.75 so we move our caller from $16 of intrinsic value to $10 in premium and still generally bearish.  The only bad thing about that is we may wipe out the caller in Dec but we’d have a long wait to get rid of the putter (but still we would be much relieved!).  If AMZN goes up $10, then we should get the same $6.60 for the Apr $115 puts and we’ll be able to sell the Jan $120s for $20 so that’s not a terrible fallback if we get burned next week, which makes it something we can hold on for over the weekend. 

    Contrarian/RMM – You (and I) are thinking logically and yes, to some extent you need to think like Alice in Wonderland and just do the opposite of what seems sensible.  Of course that’s no way to trade so I’m just treading water on the way up and using quick profits to roll longer put positions higher and higher.  If they never pay off, then we end up around even and well covered for the breakout but if it collapses, then we make a killing on the drop and THEN we can look for bullish plays.   Go back and look at the buy lists from March and June – If you buy on a real dip, you make huge money with no hassle – compare that to the struggle we had last year trying to ride out the relentless downturns.  Better to wait for the right opportunities. 

    MA/Eric – That one is huge!  I guess cutting $15Bn of consumer credit is GOOD for credit card processors.  Who’d have thought?  That’s the problem with this market – in a real market, we’d be shorting the hell out of MA with their 40 p/e and the government looking to crack down on excess fees and up 10% this week but noooooooo – we’re too worried they’ll go to $300 for no particular reason and that’s what let’s people manipulate these stocks with impunity. 

    FSLR/Lynn – Oh I think it’s much more likely they see $100 before $130 again but they are a very dangerous, very manipulated stock.  Fundamentally they should be shorted to $40 long-term… 

    Decisions/Tcha – Yes to all.  It depends on how sure I feel about the bottom and what looks like the best bang for the buck trade that is least likely to get us in trouble.  SPWRA is pretty bullish with the short straddle just there to pay off our long premium for the most part but is pretty much just a bottom call with a little hedge. 

    Code/Ocelli – I have consulted on coding for trading programs.  That’s where I came up with the 5% rule.  I realized that all these different people designing all these different "unique" programs by committee pretty much ended up all doing the same thing in the end.  One guy may be bullish and one guy may be bearish and one guy may plug in Fibonacci numbers and one guy may follow Elliot Waves but, in the end, they all give it over to code monkeys and they interpret the data and, most importantly, ROUND off here and there and once you start rounding you start getting whole numbers and then, no matter how the program was written, there is a person who ultimatley makes a decision and they start seeing whole number patterns and they key off that and then a bunch of chart guys notice convergence and they start playing for that which reenforces the "feeling" the guy with the program had and so on and so on….  

    Still, the key to the whole thing is that it’s still an art of sorts.  Like you have to look at the S&P chart from March and throw out the entire move from 750 to 666 as a meaningless spike but I’m willing to use 750 as a base because it’s 1/2 of 1,500 – which was the legitimate top of the S&P but it took all the way until 900 (20% up from 750) became a point of contention in May for me to be comfortable that I was right about 750 in March.  That also makes 1,000 on the S&P super significant as it’s 33% down from 1,500 and 33% up from 750 so we had a clear breakout signal in June and we’ll have a clear failure if we slip below it this month – which is still what I suspect. 

    Today was worst volume since we topped out on 10/19, which I think was Columbus day so extra slow. 

    TZA/Lynn – As long as you are comfortable day trading it.  It’s not really about the S&P though, you want to watch the actual Russell and the Russell hits 50 dma resistance at 595, which is also one of our key resistance points so IF they should happen to touch that level THEN TZA would seem like it is worth a toss PROVIDING the other indexes haven’t already clearly broken up and the RUT is just catching up. 


  174. Eric… Don’t ever believe the consumer credit numbers, or the unemployment numbers. It’s all BS. It is the same BS that these government parasites recited in order to get elected, or hired as experts. .Do you believe unemployment is 10-11 %. ?  -  I believe it is closer to 17%. The mistake they make is that they believe the populace is stupid and uninformed – but it is the inverse.


  175. thanks Phil, you are super thorough in your thinking. i am going to investigating into your sell call, sell put, spread strategies and read that option trading book, as well as what level etrade allow me to trade, or else i need a new broker account.
    thank you for being patient with me as a newbie here, not just a newbie. a total beginner


  176. hey everyone, before I forget, but Monday is November 9th which is the day Steve Myers, a 20 year commodity trader and carry trade believer, singled out as being ‘significant’ in terms of a correction.  It just dawned on me this afternoon so I thought I’d share.  I don’t know how someone can pick a day for something to happen.. but he sounds pretty reasonable in his analysis.. and then just throws it out there.  See for yourself.  Have a good one.
     
    http://www.grainbeltcommodities.com/research.aspx?blogid=60


  177. Gel 1,
    The reason they feel the populace is studid and uninformed is that it is true in my opinion.


  178. Nov. 9 is also the date Robert McHugh picks as a siginificant turn date.  But the turn could be either up or down. 


  179. Jomptien
    Yep, you might be 100% right… If someone expouses BS and is ignorant and percieves they are brilliant, then when they decide they have a calling to SERVE in the government in order to make life better for everyone, then only those that are equally, or far more stupid, think they are superior and enthusiastically vote them into government office. I guess the bottom line is – the idiots deserve to be serviced by idiots, as that was their choice. 


  180. not only are there lovely stories about market manipulation by GS, but now our friends at GS have reportedly received part of their H1N1 vaccine before many hospitals and apparently have decided to keep it. Of course they are all at high risk and deserve it before many other high risk people in the area (sarcastic font). The best and the brightest……..I can think of much more appropriate descriptors. It doesn’t get much more disgusting IMO.


  181. Barney Frank back in the news (always in a good way).
     
    Seems his boyfriend was busted in 2007 for growing marijuana and having bongs and other drug paraphenalia at his Maine house.  Barney Frank was also at the home at the time of the bust, but curiously he was not arrested.  Barney of course knew nothing about anything going on all around him.
     
    Barney of course is also a sponsor of a bill decriminalizing marijuana use in certain instances including so called medical marijuana.
     
    Man, you cannot make this stuff up !
     
    BARNEY !


  182. Hey Phil…..you were only off by 3

    Four new closings put US bank failure list at 119

    http://www.reuters.com/article/governmentFilingsNews/idUSN0621065920091107


  183. Gel 1, Yes they say we get the govt. that we deserve.



  184. Make that off by 2

     

    By Dakin Campbell

    Nov. 7 (Bloomberg) — UCBH Holdings Inc.’s United Commercial Bank, a San Francisco-based lender with $11.2 billion in assets, was seized by regulators, becoming the 120th U.S. bank to fail this year.

    http://www.bloomberg.com/apps/news?pid=20601087&sid=ayPwsBV1DI3c&pos=3


  185. Phil – Regarding VIX puts and calls: I have not traded either of these before, so I am hoping that you might be able to clarify/simplify a couple of things for me. 
     
    According to CBOE’s site VIX options are cash settled options …
     
    Nov09 OpEx is in 11 days;
    On Friday VIX closed at $24.19; 
    The Mark at the Nov09 $22.50 strike is $0.35;
     
    If I sell a Nov09 $22.50 put for $0.35 and the VIX moves below $22.15 at expiration what exactly transpires? With options on equities, when a stock closes below the strike price on expiration day the stock gets put to you and money is removed from your account. However with the VIX there is no underlying equity to be put to you, so I am a little confused as to what actually happens.
     

    Similarly, if I buy the put (mentioned above) and the price moves as stated above what do I gain?

     
    Additionally, is it best to unwind your position before expiration? 
    Also, are position "roll outs" allowed?


  186. Good morning! 

    Barney/Cap – Oh my gosh he smokes POT!  Now I will totally change my optinion of him – especially if he grows his own and doesn’t even contribute to the economy by buying from a dealer – that sort of behavior must be stomped out at all costs – quick, get my jackboots!   Thanks for that brilliant coverage on Fort Hood, though – I just couldn’t find a good way to pin this one on Obama without you…  8-)

    5 Banks/Kustomz – I occurs to me that they may be closing banks as fast as they can given the staff available – must take a team of a dozen people to close each one and the FDIC is very low on funds so I wonder how many people they can deploy in a given week…  Since the process is so secretive, we have no way to know how many banks are on the standby list.  There were just 25 failures last year and this year they are over 10 a month so this could well be as fast as they can go and they are just doing triage on the ones that will fail first.  If this gloomy theory is correct, then Thanksgiving should have over 10 closings as they are likely to take advantage of the extended weekend to catch up. 

    VIX/Diamond – There are no VIX securities to own.  The VIX is like betting over/under in Las Vegas, it’s a cash payout if you win and you need to pay out if you lose.  I’ve never taken one into expiration.  The price of the contracts have little to do with reality, it’s kind of like pari-mutuel wagering at the horse track where you are generally getting odds that are based on which way the other bets are being placed at the moment.  So the way I play the VIX is by assuming 30 is too high and buying puts at 30 and 20 is too low and buying calls at 20.  At 24 I don’t bother as it could go either way and it’s much more fun to bet when you have a better than 50/50 chance of winning.

    What is interesting about the VIX right now is that the VIX is at 24.19 yet the 30 calls are .50 while the 20 puts are just .10 so there’s a 5x difference in sentiment that the VIX goes up (and that would be the market going down) in the next two weeks.   That may be because bulls are using the VIX bets as cheap insurance against a downturn but it’s interesting either way.  I would think, statistically, that selling the 30s naked for .50 is a good bet but, since I do think we may have a catastrophic crash, I wouldn’t want to add paying off a VIX caller to my list of worries. 

    Since the longer calls tend to hold their value very well, the Dec $30s ($1.25) can be used to cover the Nov $30s (.50) for a net .75 spread, that’s not a bad way to play it and then you have upside protection for next month.


  187. Here’s a great point made by a commenter on Seeking Alpha in response to a gold bug who said that if he had held on to $100 in 1980 ratther than buying gold he’d be much worse off:

    Fair enough to point to gold as a possible investment. But you have to compare investments then, not just raw dollars.

    Lets do a comparison then on $100 at 1980 as you suggest.
    1) Gold
    - Average price of gold in 1980 per historical chart was: $594/oz. Therefore for your $100 you would get: $100/594=.1683501 oz.
    - Today your .1683501 would be worth: .1683501 x $1096.90 = $184.66
    2) Almost any high quality stock
    2.1) GE – Jan/02/80 price of GE =$48.75 . Therefore for your $100 you would get: $100/$48.75 = 2.051282 shares of GE.
    - Stock splits in GE: 1983=2:1, 1987=2:1, 1994=2:1, 1997=2:1, 2000=3:1 Therefore, just your stock splits alone would result in:
    2.051282×2=4.102564 x2=8.205128 x2=16.410256 x2=32.820512 x3=98.461536 shares of GE today
    - Therefore 98.461536 GEx $15.33 closing price today = $1,509.41
    - Now consider the GE dividends from 1980 to today. They ranged from $0.015/share in 1980 to $.31/share lately. So assume an average of 1/2 the range or about $0.16/share quarterly since 1980.
    That would be: $0.16 x 4 quarters x 29 years x average of 50 Sh = $928.00
    - That gives you a GE total of $1,509.41 + $928.00 = $2,437.41 for the 29 year investment of $100 in GE.
    2.2) And you probably could show much the same for many other stocks as well.
    3) The comparison in total for your 1980 $100 US dollars.
    3.1) Gold for your $100 in 1980 is now worth = $184.66
    3.2) GE shares for your $100 in 1980 is now worth = $2,437.31

    So you can go ahead and argue all you want about how valuable your Gold is, but the facts clearly show that almost any decent dividend paying stock would absolutely KILL your gold investment. In short, you can keep your 1980, $100, .1683501 oz of gold. Meanwhile, I will cash in my GE dividends and stock at $2,437.31 and buy $2,437.31/$1,096.90 = 2.2219983 oz. of gold. Thus I will have 2.2119983/.1683501oz = 13.19 times as much gold or return on investment as do you gold bugs. So if you think that’s a good investment, then go ahead and keep buying more gold. Meanwhile the dividend stock buyers will keep outperforming you 10x over for decades to come. Probably even treasuries or low risk bonds would have far outperformed your gold investment, but too lazy to go through and do a comparison on that.

    This made me think of something else.  Perhaps it’s not the dollar and global currencies that have decoupled from reality but gold itself that has gotten irrational

    As I said this morning, at any given time, an ounce of gold is only worth something to someone who doesnt’ need something else more.  Gold in an of itself doesn’t perform like a stock, which is one of the reasons it makes a stupid long-term investment.  As you can see from the GE example, GE pretty much reprices what they sell against gold every year – if there is inflation, they simply charge more and the company makes more so gold can win in the short run, as it’s constantly being repriced but a good dividend-paying stock is likely to win over the long run. 

    You hear stories all the time about people who’s grandparents had 100 original shares of IBM or AT&T and then they find out that, through splits and whatever, that they are worth $1M.  You never hear a story about a lady who’s grandmother spend $1,000 on gold and is now a millionaire… 

    But, what this got me thinking is – When currencies WERE based in gold then gold had to accurately reflect the liquid value of the exchange for goods and services and for the better part of 100 years, that price was $10-$30 an ounce.  In the early 70s, Nixon took the dollar off gold and gold spiked insanely to $800, 25x what it was 10 years earlier.  Did the dollar lose 96% of it’s value in 10 years or was gold just stupidly priced? 

    So this is an interesting thought – the only reason gold (or oil or whatever) CAN be priced so high is because you DON’T have the ability to exchange them for hard goods and services.  If you went to your doctor last fall and a vist cost you 1/4 ounce of gold ($200) do you think he would accept 1/10th of an ounce of gold for your visit today?  Maybe it’s not our currency that’s decoupled from reality but commodities


  188. Good review of "This Time It’s Different":
     

    The basic conclusion that is reached in reviewing so many instances of financial crises is that one of the psychological attitudes that is present in case after case is that those in authority tend to believe that their situation is unique; that “this time is different.” And this hubris contributes to the crises that follows because it lends credibility to the growth in confidence that the good times will continue to continue.

    Reinhart and Rogoff start right out with the following statement: “If there is one common theme to the vast range of crises we consider in this book, it is that excessive debt accumulation, whether it be by the government, banks, corporations, or consumers, often poses greater systemic risks than it seems during a boom.” However, “Although private debt certainly plays a key role in many crises, government debt is far more often the unifying problem across the wide range of financial crises we examine.”

    The problem is that it is not different. The growing level of confidence, at some time, collapses. “Economists do not have a terribly good idea of what kinds of events shift confidence and of how to concretely assess confidence vulnerability. What one does see, again and again, in the history of financial crises is that when an accident is waiting to happen, it eventually does.”

    Perhaps more than anything else, failure to recognize the precariousness and fickleness of confidence—especially in cases in which large short-term debts need to be rolled over continuously—is the key factor that gives rise to the this-time-is-different syndrome.”


  189. Hi Phil great explaination on the VIX but finall you sell the Nov 30 call for .50 and buy the Dec 30 call 1.25 being a debit of .75 did I understand this correct ? Thanks


  190. Important to note that a day the Dow went up 17 points on light volume worked off 1/2 of our remaining ovesold condition (now just -13.19 on the ocillator):

    Notice we kind of look like late June at the moment and that would be perfect as we’d love a sell-off into Nov expirations (2 weeks) and then a nice, silly Santa rally so we can go to cash for Christmas.  David Fry’s commentary on the day:

    Let’s see, everyone was hoping for a good employment report but instead we got a stinker and the stock market did what?!? Yeppers, it rallied. This is where logical and rational thinkers become lost like Alice. For us it’s been “don’t go down that rabbit hole”, just stand aside and let Da Boyz have at it.

    RBS economist Stephen Stanley wrote today’s employment report was “a mild disappointment”. It’s easy to say with his firm and others, plied with cheap money from a generous Fed. And, that’s really the issue. The liquidity bubble for Da Boyz is creating a stock bubble. Like all bubbles it will have an ugly end. But with cash and bond yields low, going for higher returns in equities is an easier; “make hay while the sun shines” choice. So, spin bad news and go for returns in stocks.

    The weirdest thing about today was retail stocks leading markets higher. What will unemployed consumers shop with and where? Beats me, but companies like Macy’s were upgraded today in anticipation of favorable holiday shopping data or at least a really good Thanksgiving Day parade.

    Volume was light like all the dip buying we’ve seen over the past few months. Breadth was mostly flat.

    Good article on total lack of enthusiasm over the Droid.  If this is an IPhone killer, it’s going to be a very slow death:

    So I embarked this morning to the Palo Alto Verizon store, hoping to use a Qik live stream to capture the festive line of Droid fans sure to be present. After all, Verizon customers have plenty to celebrate — though they’re on the nation’s best network, they’ve long been burdened with an underwhelming selection of phones. This is the first time they’ve had a chance to pick up a device that’s a viable alternative to the iPhone. And with Verizon’s marketing onslaught over the last few weeks, not to mention the generally very positive reviews, I expected the turnout to be good. Not Apple good mind you — no marketing push can match Steve Jobs’ mystical mind control over a rabid fanbase of millions. But this was the heart of Silicon Valley, where gadget geeks flourish.

    Alas, it seems that my expectations were unwarranted. I walked up to the Verizon store no later than 6:20 AM, forty minutes before the 7:00 AM opening time (three hours earlier than usual in light of the big day). But no sooner had I arrived than I began to question my still-groggy mental state. The Verizon sign was directly above my head. There were five or six employees buzzing around the well-lit store, two of whom were decked out in bizarre Droid-branded outfits, complete with black leather vests. But the street could not have been more empty.

     

    The door cracked open. One of the employees, perhaps concerned by my confused expression or excited that someone had actually shown up, had come to talk to me. Yes, I was in the right place. Yes, they were due to open in a little more than half an hour. And yes, they too had expected more than one person to be standing in front of the store at this point. The door closed again.


  191. VIX/Yodi – Yes, it’s buying the Dec, selling the Nov for the .75 spread and we are hoping that the .50 in two weeks loses more value than our $1.25.  On a move up, we also hope that we can get out without too much damage – the closer we get to expiration day the better off we are on that spread.


  192. Phil – Hold AMZN short $120 DEC call (sold 5.22, current price 10.85). Your comment yesterday – are you suggesting this for my position? Also, could you explain how you calculated moving caller from 16 intrinsic to 10 premium – didn’t get that. Thanks
    "The roll I’m looking at for AMZN right now is to sell the Apr $105 puts for $6.60 and the Dec $120 calls for $10.75 so we move our caller from $16 of intrinsic value to $10 in premium and still generally bearish.  The only bad thing about that is we may wipe out the caller in Dec but we’d have a long wait to get rid of the putter (but still we would be much relieved!).  If AMZN goes up $10, then we should get the same $6.60 for the Apr $115 puts and we’ll be able to sell the Jan $120s for $20 so that’s not a terrible fallback if we get burned next week, which makes it something we can hold on for over the weekend"


  193. Phil – Also, what are your thoughts on buying long dated options on higher interest rates US and Japan. What do you suggest?


  194. Hey Phil, check your email when you have a chance. I sent over a PDF screenshot of that thing you asked me to do…


  195. Phil,
    I know this is a broad and simplistic question which you hate and love to make fun of, respectively, but I’m hoping you can help get me out of my current rut. If you had 100K and wanted to make 7.5-10% over the next 3 months, is there a reasonably probable way to meet that goal? I was hoping that the 100K portfolio you set up would do that and I have been following that to some degree as well as some of the other trades you suggest as well as some of my own but now it seems like I am "jumbled up" and my portfolio is scattered. Obviously, we need time to unwind some of these trades but I am trying to step back and think, "If I could start fresh, what would be the plan?" I think part of this is just the psychological aspect of uncertainty weighing on me but I also am trying to figure out why I am not meeting certain goals. I think I have a propensity to take on too much risk which is self-defeating when I would be satisfied with moderate returns for now (2.5% month).  Am I being unrealistic? What do you think?


  196. Phil – I have a similar question. I have some cash lying around and would like to park it somewhere and get decent return over the next few months with minimum risks (I think even <5 % is fine). Have
    What do you recommend?


  197. AMZN - check out these insider sales.  Note that CFO Thomas Szkutak unloaded 70k shares last week and has only 46k shares left.


  198. Fabergas … can you blame him for selling ?